Latest / Real Investor Radio Podcast / Ep40 | Josh DeShong - Trelly Wholesaling Platform, Industry Optimism, & Securitization Trends

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Ep40 | Josh DeShong - Trelly Wholesaling Platform, Industry Optimism, & Securitization Trends · Real Investor Radio Podcast

• Craig Fuhr (00:13) Welcome back everyone to real investor radio. I'm Craig Fuhr with Jack Bavier from the Dominion Group. Jack, good to see you again. We've been talking with Josh DeShong. If you have if you missed the last episode, I would encourage everybody to check it out. Josh is a real estate entrepreneur in the DFW area. And we've been talking about his businesses, big wholesaling operation with Myers Homebuyers. Jack BeVier (00:20) Absolutely, absolutely. Craig Fuhr (00:38) not Smitty sells shitty houses. It's Myers home buyers. And we'll get back with Josh in just a second. But Jack, I wanted to talk to you quickly because last week you were in Vegas. Dominion Financial was obviously at the National Home Builders Conference. But you mentioned as well that you were at the structured finance conference. During the break here between episodes, we were talking with Josh about securitization. Dominion obviously went through a securitization first, I believe you said, Jack, a couple years ago, we talked about sort of the pain and pleasure of that. Maybe you could jump in to tell us what you learned. You know, what's what's going on in capital markets at the structured finance conference? Jack BeVier (01:23) Yeah. So it was really interesting. I mean, basically the structured finance association does a conference, uh, once a year in Vegas and thousands, thousands of guys in blue suits show up from New York and converge on, uh, converge on in Las Vegas and hang out. There's a bunch of conferences and a big exhibit hall and, um, our bunch of breakout sessions. Yeah. But mostly it's a big opportunity for everyone to do a bunch of face to face meetings with. Uh, all the big banks are there. They have tons and tons of rooms. Um, you know, J P Morgan and Goldman Sachs and city and credit. Sweece is now Atlas and all those folks have, have, uh, have rooms there. So it's a good opportunity for us to, uh, meet everybody who's deploying capital into the, both the single family rental, the DSCR loan space. Uh, so all the loan buyers are there. Uh, the rating agencies that rates, uh, some of those deals are there. And as well as a warehouse lenders for kind of larger lenders that are, uh, lending to private lenders secured by fix and flip loans. And so one of the really interesting, timely things that happened, uh, just before the structured fans conference was that, uh, TORAC did a rated, did the first rated. securitization of RTL loans, so fix and flip loans. And for those that don't know, Torac is an aggregator of fix and flip loans. They also buy DSCR loans. And so they, what was really interesting about this is that all the previous securitizations that have happened, which have been, I think, happening since 2017 or 18, uh, Kiavi really started that as well as Torac was an early issuer. Um, but those have all been unrated deals. So what that, what, why that's important. is that, you know, if one of the rating agencies and you only really need one is willing to put a rating on your securitization, that opens up the market for those bonds to insurance companies who have mandates, insurance companies and pension funds who have mandates that to buy securities that are rated. Many pension funds and insurance companies are not able to from a regulator point of view, the regulators won't let them. buy unrated deals, unrated securities. And so that makes the market thinner, which makes pricing a little bit higher for the bond issuer, which makes pricing a little bit higher for the ultimate borrower who's borrowing that fix and flip money. So it's seen as more risky. I think that that's not an illogical comment, but... Craig Fuhr (04:04) Is that because it's seen as more risky Jack? Jack BeVier (04:16) it's actually more of a regulatory issue. And the, you know, the, the inference is that, Hey, if, if it's, if it's really safe, then why wouldn't the rating agencies issue, uh, you know, issue a rating, right? Well, it can be really safe, but the rating agencies just don't have enough information yet on how it's going to perform and how it's going to perform in stress tested environments. And I think that's really been more the driver for fix on the fix and flip side is that. Craig Fuhr (04:19) Mm. Mm. Jack BeVier (04:44) Um, back in 2018, everyone was like, Hey, yeah, this is like great paper. Everyone feels really good about it, but we're just seeing how, you know, but, but we haven't been, we don't have any data on how it's going to perform under stress test. And now we've had two stress tests, right? COVID and then a 400 basis point, 500 basis point increase in interest rates. And so now really it's only one rating agency. DBRS, uh, has, has enough data that they got comfortable issuing a rating. to the TORAC security, the TORAC RTL deal. And so it's good for the industry as a whole because with more access to capital from pension funds and insurance companies, that money ultimately is flowing down to Main Street and that should decrease the cost of fix and flip loans in the long run, which obviously that's great for everybody. And so that... that deal priced a couple days before that SFA conference. And so that was a big talk of the conference was, you know, Hey, you know, who's gonna who's gonna go next? Torex and an aggregator of loans, they're not a direct originator. And so as you know, is key obvious and originator or some other originator going to go next? To do a rated deal? There's a lot of annoying. details, the differences between an aggregator doing a securitization and an originator doing securitization. So there's a lot of question marks still there. And so that was a lot of the topics of conversation out there, but it was great because from a, uh, it priced pretty well at price. Like I think it was like weighted average 225 basis points over the two year treasury, uh, for almost 90 % of the capital stack. So like pretty high leverage at fairly reasonable credit spreads. which again is good for the ultimate borrower as that that cost of capital decrease should be able to be passed through to the borrowers. So that was a really interesting topic there at the conference. And then. Craig Fuhr (06:50) Jack, what was the size of that deal, do you know? Jack BeVier (06:53) I should know that. I think it was around 200. Around around, I think it was 175 million. I think it was 175 million, yeah. Craig Fuhr (06:56) stumped. I love when I stump them, Josh. It's always the best. Okay. Josh DeShong (06:59) It's rare. Jack BeVier (07:04) Um, so, you know, they're big, you can't, you can't cost effectively do a securitization at really less than 125. Like 200 is kind of the real number you want to get to. So this was even relatively small for, uh, for securitization, particularly a rated one. Um, the other interesting, uh, kind of feedback from that conference was that, uh, the credit spreads on non QM securitizations are tightening up as well. And so that's good for DSCR rates. Uh, the tighter the credit spread on the non QM securitizations, the lower the rates that lenders are ultimately able to pass through to borrowers. And so while the five year treasury has not been cooperating, given the PCE report that we talked about last episode, um, credit spreads are starting to come in a little bit. So there was kind of like a, just a general optimism among, among the blue suits, which was, you know, good to see, cause hopefully that means that all of us will have a lower cost of capital on a going forward basis, but still. Craig Fuhr (08:01) So when you speak of credit spreads jackets, it's the five year plus that spread that the the aggregator, right. Jack BeVier (08:06) which is the ultimate, yeah, which is the ultimate, ultimately the nominal rate to the borrower. So like if you're being chart, you know, if the five years at 5 % and, uh, and your interest rate on your loan is 7%, well, that's a 200 basis point, 2 % credit spread. So yeah, super interesting conference. And then, cause I hadn't eaten enough and drank enough, uh, at in Vegas for those two days, I stuck around for an additional two days, uh, because the national association of, of home builders conference was, uh, was, was Tuesday, Wednesday, Thursday. And I'd never been before. Oh my gosh. I highly recommend. Josh DeShong (08:36) Oh man. Craig Fuhr (08:45) You mentioned, I was absolutely shocked at your exuberance when you came back over just the quality of the people in the room, how well it was attended. And it was Dominion's first time at that event, right? Jack BeVier (08:58) Yeah. Yeah. And it was really good. I, uh, it was fun just, you know, cause we're in the construction and renovation business ourselves, just walking around the millions of square feet of exhibitor halls. It was crazy, dude. I'd walk into a room and I would just start walking down an aisle and five minutes later, I'm still walking. Like just didn't stop. Just, you know, I think the thing must be a quarter mile long. It's it's wild. And there's three, there's four of them. There's four different halls. So it is humongous. I had never been to a conference so big. And it's nothing, it's 90 % uh, like suppliers and vendors, uh, folks showing what the latest and greatest in building technology is more cabinets than you can shake a stick at. There were these guys that had these doors that were like eight feet wide and 30 feet tall. And they had like 15 of these doors that you'd put in. I don't know what ungodly, you know, $30 million house or whatever, like you're, you know, opening the door to a fricking castle. Um, Craig Fuhr (09:55) and they just decide to bring those to the convention hall. Josh DeShong (09:55) That's cool. Jack BeVier (09:57) Yeah, yeah. And they were like, they were literally building their displays. It wasn't like, you know, you go to one of these like, you know, real state or finance conferences and like, everyone's got their booth and like the fancy booths have like a little overhang. Now these guys were built like physically building with like two befores and hanging tape, you know, hanging tape, mudding drywall and painting. There was this one across from us that had a, like this humongous water feature that they built like before the conference. It was, you know, whole, whole nother level of conference. You know, the builders are like, hold my, you want to see a display? Hold my beer. I'm going to, I'm going to build you a display. Um, so it was really quite an experience. Josh DeShong (10:30) Wow. Craig Fuhr (10:37) So Jack, I once attended a, it was the International Tobacco Association, it was really like a cigar conference in that hall. Now, imagine 1 ,500 guys blazing up cigars, right? Because they're just giving them out like they're candy. It was one of the coolest things I've ever attended in that same hall, which is insane. Josh DeShong (10:49) That's awesome. Craig Fuhr (11:05) And the displays for these companies, you know, they're, they're, they're mass. They're like a city, you know, like Perdomo has a city of a display. It's not like, you know, a booth. And so I totally get it. You can really get lost in the place as well. But what was your takeaway, Jack? What'd you learn? Jack BeVier (11:21) Um, just a high level of optimism, frankly, at both, I would say, uh, well, I'd say a cautious level of optimism, but definitely optimism at both conferences. Um, both were extremely well attended. Uh, and it seemed like people were making money, you know, there was a lot of, a lot of folks there, a lot of smiles, a lot of, you know, a lot of exuberance. So, uh, I think that the, you know, there's definitely the sentiment that, that. The country needs more houses and that someone needs to finance those houses is like a strong underlying theme at both of those places. Craig Fuhr (11:56) Good news for our listeners. So let's bring back in Josh DeShong. Josh, it's great to have you back, man. Thank you for taking the time. We you know, we obviously know how busy you must be. But Josh DeShong (12:07) Absolutely, I appreciate it. I appreciate it. It's always good to catch up with you guys. Craig Fuhr (12:12) So man, we talked at length about Myers Homebuyers and your wholesaling operation on the last episode. If you're doing any wholesaling at all and you don't listen to that episode, you're really missing out. So go back and check that out. But man, you've developed this marketplace for wholesalers called Trelly. And... My guess is that it was partly out of necessity, partly out of the fact that you're kind of a self -ascribed, you know, techno geek, which I love. You mentioned your first computer. I can't imagine that it was a Tandy TRS -80, which I think was my first one for Radio Shack Jack. So... Josh DeShong (12:57) That's great. Craig Fuhr (12:59) I'm so old, man. I'm the oldest guy in the building for sure. Jack BeVier (13:03) You wanna have an Atari competition later? Atari tournament? Josh DeShong (13:04) Oh, all day, let's... I mean, but I think everybody's played Atari. I think even my kids have played an Atari at this point. Craig Fuhr (13:05) Yeah! Jack BeVier (13:13) Yeah. Craig Fuhr (13:15) best. So, Josh, talk about Trelly, the genesis of the idea, you know, how it really fit in with sort of how you're made. And, you know, we'll just jump into all of the details of it and where it is today and how your 20 ,000 folks that are investors that are transacting with you are doing great deals on Trelly. So let's see, let's get into like the very beginnings of it and how it how it sort of came about. Josh DeShong (13:45) Yeah. So, you know, I built a pretty big real estate team at Keller Williams and I have an obsessive personality. So I obsessed over, I obsessed over everything about real estate, real estate teams, real, the evolution of the real estate agent. I would, I, again, I'm a little bit of a geek, so I kind of would look into the history, how You know, the National Association of Realtors formed and when, when the real estate commissions formed, why did they form, et cetera? And, um, I, I, I had this massive history coming from that, that business and done thousands and thousands of transactions. And, um, at this point, I started to realize something really interesting. And that was that real estate agents had started wholesaling like a lot. Um, and, and, and that. Craig Fuhr (14:40) Mm -hmm. Josh DeShong (14:42) pattern has not slowed down, it's only sped up. I also saw real estate agents commission getting compressed in the traditional brokerage model with your open doors and your offer pads. So it started to kind of seem like there's this, oh, and then I realized, I did some more research and I realized that... There's over a hundred thousand people in the United States that wholesale real estate. That's a substantial amount of people and that's a really hard number to peg. We had to do a tremendous amount of research to get to that type of a figure. But there's like this massive... Craig Fuhr (15:13) Mm. Josh DeShong (15:32) marketplace that already exists, it's just fragmented. It's inefficient. It just, it hasn't, it's been around though. It's been around for 30 years. It's nothing new. Um, wholesaling is a, is a pretty, it's a pretty standard thing. And especially in your commercial real estate world, right? So, um, it, it, it seemed like, okay, there is not a really good place for wholesalers and investors. You know, the MLS and Zillow, Zillow doesn't solve the same problems. The MLS, the real estate agent process, it doesn't solve the problems that the investor faces. The problem the investor faces is speed and ease of access to the deal. Especially if they're trying to, like downtime on your capital is a really, really bad thing when you operate a flip business. And so I would do deals to keep my crews busy. I would do deals to keep my capital flowing. Um, even if it didn't necessarily always make sense. So by buying from wholesalers, it kept my, my transaction flow, it kept my return at as high as it possibly could. Right. So realizing like, okay, there's actually this need for, for efficient wholesale operators. Um, at first I thought they were bad, you know, I think there's, there's a company Sunday, uh, that has that. is wholesaling, but they're like the anti -wholesaler wholesaler or something. And their whole mantra is like, wholesaling is bad, sell through our platform and we'll get you the most money possible. But what was interesting, we tried running a similar unique selling proposition to that, a similar USP to that. What was interesting is... those homeowners didn't value the extra of $10 ,000 or whatever in the same necessary, like in the same way you would think that a traditional homeowner that would go retail would. Those people wanted ease of access. They wanted something that was simple, that was fast, right? So you have all these different problems with a traditional real estate transaction and going the traditional route, and it's making this wholesale environment grow faster and faster. So, Craig Fuhr (17:32) Hmm. Josh DeShong (17:51) So there was a couple issues that we had had as well. One is we sell most of our properties via a highest and best period of time. It's usually five days once we go under contract with that property. Originally we were doing text messages was how investors were submitting their bids on property. So we needed, we had a problem of just having the lax of days. Craig Fuhr (18:12) We had a problem with the... Josh DeShong (18:16) practice in terms of how we wanted our investors to submit their offers. And what was happening too is, you know, three salespeople would all have bids. One of the salespeople was best friends with the acquisitions person, and then they would get together and they would talk about like, Hey, what was the highest bid that came in? Blah, blah, blah, blah, blah. By, by, by putting it on this, this open platform, bids can come in at the last 30 seconds of the highest invest period, right? Craig Fuhr (18:18) one of our investors in the office. And what was happening is, you know, three salespeople would all have this. One of the salespeople was that friend of the acquisition person, and they would get together and they would talk about like, hey, what's the higher bid in front of other products? By putting it on the... Josh DeShong (18:43) So we had that problem and then we also kind of sat back and said, look, if this is real and this industry is going to continue to evolve, then why would it not take the exact same path that the real estate agency world went down? Because people like to reference the Glenn Gary, Glenn Ross movie in sales organizations, right? What a lot of people don't realize is that was a reality. you know, most people are familiar with the scene, but they're not as familiar with the movie. So I'll go ahead and give everybody this. The movie is about a real estate office that is selling lots, lots that nobody wants. And they're calling people and telling them, Hey, congratulations, you just won the chance to buy this lot. And they're doing all kinds of things to get these people to buy houses. That is real estate agents. That is the beginning of a real estate agent. Like that is what it looked like, right? Like they was do whatever you can to get a deal. Craig Fuhr (19:38) Sure. Josh DeShong (19:43) And so I've just we started seeing these patterns and thought all right, let's build out a marketplace Now did not know what I was getting myself into but that's that's what got us there This would have this would have been 2019 Yeah Craig Fuhr (19:51) And what year was this? Okay. Jack BeVier (20:03) Yeah. So like talk to me about, I know that you've got some coding background, but I've got, you know, I'll get a harebrained scheme every, every 90 days that if I knew how to code, or if I had like, you know, developer team in house, we'd be chasing shiny objects all over the place. Um, to my team chagrin, but how did you, um, how did you get the confidence to scope this idea? And then. And then move forward with, you know, with actually building this idea, because like, you know, I feel like, uh, you know, people, a lot of people, you know, lots of real estate investors have lots of ideas based off of the pain they experienced. They come up with an idea and it's a software based idea and they have zero idea how to execute it, or at least that might just be me talking, but I don't think that, I don't think I'm the only one, but how did you actually go from being, you know, a real estate investor who saw a pain point in the marketplace to scoping and then executing on that idea? Josh DeShong (21:01) Yeah, so I would say my CTO is Stephen. You've met Stephen Jack. Stephen is, he's special. He is, you know, I think at 20 he was, or no, how old was he? At 20 he was hired by Microsoft and then he was hired by Google like shortly thereafter. He's pretty brilliant. And so to be just very frank, I don't think I would have had the confidence to build anything without him. I know tech. And I think, remember in the last show I was talking about how my inexperience served me as a benefit. And I would say that my experience can serve me as a disadvantage in that Stephen genuinely knows a lot more than I do, a substantial amount more than I do. And when I met Stephen, I knew enough to ask him questions. to gauge that he knew a substantial amount more than I do. But I could not actually determine his level of brilliance, right? It was just like so, so there. And so, so without him, I probably wouldn't have pulled the trigger in all honesty. And even if I had had, I knew a lot of technical people. I knew people that could code and I knew people that could probably build products, but. There was, he had the ability to really pressure test other people. He had the ability to actually hire other people that I could not. He, um, it cut out there for just a sec, but he had the, okay. He had the ability to, to just pressure test things that were out of my, out of my league, so to speak. And so. Craig Fuhr (22:44) We got you. Josh DeShong (22:54) So one I would say is I had this new knowledge that was attached to me and that gave me a lot of confidence, of course. And then honestly, I've made a lot of mistakes in my career. I started in this business at 17. You just got to take action. And so if it wasn't a software, because I didn't have the technical prowess or the technical... team behind me, then it would have been something else. It would have been building homes or something else, if that makes sense. You just got to take action and keep growing. Otherwise, you're dying. Craig Fuhr (23:33) So for those who are listening and who have not been onto the platform, explain to them what they would see from sort of the forward facing part of it, what exactly Trelly is and how it is the platform for wholesalers. Josh DeShong (23:53) So Trelly, our focus right now is on Texas. You can list a property anywhere in the country, but there may not be any buyers there. But in Texas, we've got quite a few active users. Trelly looks and feels similar to Zillow. You go on there, you're gonna see a map. You can zoom in to the DFW market. you can click on different properties. Yellow properties are sponsored. So those are either partners or they paid a $50 premium listing fee that gets more exposure. The purple icons, those are free postings that wholesalers put up. And last year we did about $700 million worth of wholesale posts on the platform, which is which is wild because it's up from about 400 million the year prior. But we were in more markets the year prior. So we're focused, we focused really heavily and we've just grown quite a bit in the DFW market. Craig Fuhr (25:05) And so basically, you all go, you've built the platform, how do you then get the word out to all of the, you know, sort of better wholesalers in the DFW market that this is the place to market your properties. Josh DeShong (25:18) Yeah, that was the that's the hardest thing about a marketplace because it's called the chicken or egg problem. You know, if you have supply or demand, right, you you have eBay, people have no incentive to go post their items for sale because nobody goes to the website. And then how do you get people to go to the website when you don't have items for sale? So it's this chicken or egg problem. And that that was where, you know, our wholesale brand served as a it served as a seed. We seeded our platform with our own inventory. So we gave buyers a reason to go there. And as buyers had more and more of a reason, they started telling their friends and then their friends started telling their friends who were wholesalers and then wholesalers started signing up and posting theirs. And so the more, and like we don't do any marketing with Trelly. Trelly, we're... Completely focused on how do we make things go faster and spend as little money as we possibly can for the for for the wholesaler? So we spend no money on customer acquisition. So The more sellers brings us more buyers the more buyers brings us more sellers and it's this like never -ending Spiral that that's that once you get going it doesn't stop Jack BeVier (26:37) What's the revenue model for you guys? You charging a commission or a fee or something? Craig Fuhr (26:37) Jack. Josh DeShong (26:41) So we only charge a sponsorship fee if you want additional postage. We were going to do lending. I think we talked to you guys about that. That was going to be kind of our focus. And then the lending market got really choppy. And we decided to kind of backpedal. The big thing you don't want to do with a marketplace is you don't want to add premature friction. You don't want to give the user a reason not to do that. to do business or to do transactions. And so there was a time when we were considering, hey, posting a posting fee or a marketing fee or whatever. But honestly, the network effect is what that chicken or egg problem is called. Once you solve that, that effect, it's not strong enough. And so we don't want to add any kind of monetization until that happens. Once we get to where we have network effects, we're going to probably just be a portal for services. So connecting lenders to borrowers, connecting renovation crews, appraisers, things like that. We think the next theme that we're going to probably focus on is this out -of -state investing demographic, but we're not there yet. Craig Fuhr (28:02) And so not only have wholesalers found you organically found Trelly organically, but the buyers as well are finding it. That's amazing. And you've got 20 ,000 active buyers you said on the platform currently. Josh DeShong (28:18) Roughly 20 ,000 users. The makeup is probably 90 -10. 90 % are buyers and 10 % are roughly wholesalers. Craig Fuhr (28:19) Yeah, well, it feels. Right, got it. And so it feels very mature. It feels like a fairly significant network at this point. Are you in the stages now where you're thinking about implementing some of those services or are you still sort of like holding off on that? Josh DeShong (28:44) We're going to hold off as long as we possibly can. And really, we will not start monetization until it's a national platform. It's got to have some inertia before you add any of that friction. So yeah, for right now, it's just something we've got going. It helps us. It makes a little bit of money, but it ultimately... kind of pays for itself and it's our 10 year play. We think it's inevitable that the wholesaling is gonna become more democratized. It's gonna become more standardized and practices. Like even consider this, real estate agents have a buyer's agent commission, right? A BAC. What's been happening with our marketplace, is my people are selling other wholesalers inventory. Other wholesalers are selling our inventory. How do we cooperate? So like there's still a lot of like philosophical questions that we believe need to get answered about like how the industry should look. And if we rush monetization without answering some of those questions, we run a big chance of running off the rails. You know what I mean? Craig Fuhr (30:04) Mm -hmm. Absolutely. Jack BeVier (30:05) Is the, um, is it an auction environment? Josh DeShong (30:10) It's very similar to an auction environment. Yeah, but the reason it's not an auction is we're not worse We are selecting which bid we're gonna actually go with so like for example if let's say on a property We have a 300 and a 305 but the 305 is cash and the 300 is hard money Or the 305 is hard money and the 300 is cash. Maybe we go with the cash buyer So we reserve the right to be a little subjective at the at the very end, but we generally run it like like Jack BeVier (30:39) Gotcha. What's your. Craig Fuhr (30:40) How do you not run into hurt feelings there? Josh DeShong (30:42) Oh, we do. I mean, but by creating standards and like sticking to them, that you have to do. Because then everybody knows how to play your game. And people only get mad when the rules change in the game. But if you explain the rules upfront to everybody, it's not a problem. Jack BeVier (31:02) What's your, what's your view of Sunday as a, as a business model and how are you guys philosophically different? Josh DeShong (31:12) I thought it was a great, like I honestly, I like their business model. I don't like their approach and I think that their approach is more centralized and I don't think that wins ultimately. I think the Sunday value proposition is strong. We actually shifted our entire Meyers Homebuyers business model and we gave that business, we gave that their model hell. We tried to make it work and make it make mathematical sense and see some kind of potential promise in that unique selling proposition. But what we found ultimately was, and what we found ultimately was, Craig Fuhr (31:54) What we found out today was the home owner who sold their home to a home factory did not sell their home to a factory. They would not sell their home to a mine where we only take a few days. They wanted quick and easy and they really took care of that. We had a friend who went to the house and he asked the owner how much he wanted. He wanted a bit. He wanted a bit. I went on to tell him. Josh DeShong (31:57) The homeowners who sell their homes to a home investors did not sell their home to a Sunday. They would not sell their home through Myers where we only take a commission. They wanted quick and easy and they really could care less about leaving money on the table. Here's how this went. We went to a house and we asked the owner how much he wanted. He wanted for it. And this was one of many, I went on dozens and dozens and dozens of these appointments. Craig Fuhr (32:24) And we have some more in a second. Josh DeShong (32:26) We asked the homeowner. He said how much do you want for this house? and he said I'll take 330 right now and We said hey we have we have a process that that we think will get you a lot more than 330 would you give us four days to see what we can do and he said yeah, sure whatever and We come back four days later. We give this this guy a 430 offer his response is oh cool And I'm like, what? Like, it was, it was not, he didn't give a shit. And, and I saw this time and time and time and time again. And so getting out there, being in the field, I realized like, I think Sunday is onto something in terms of the value proposition. The problem is I don't think the people that, that, that they were trying to target actually give a shit about that value proposition. Pardon my French, but. You know, like that's my take on it. And that made me pause and that made me sit back and go, okay. It is these third parties, right? It is going to be this democratized real estate agency type of model. That's what the future of wholesaling looks like. Jack BeVier (33:39) That's true. Yeah, it's really interesting. I had a, a harebrained scheme before I knew that Sunday existed, which was very similar to Sunday and it's different operational in some respects. Uh, and I've pitched my team on it and they think it's another one of my shiny objects and I can't get anyone to bite, but, um, but it, but it, but it's focused on the, but, but my premise is focused on the idea that, you know, the real estate agents aren't going to work houses that need work. Like those, that's not really, that's just not what they do. They don't. Josh DeShong (33:57) But it's interesting. Jack BeVier (34:09) have construction estimating, they have a hard time coming up with value because they don't know if it's 30 or 50 or 70 that the house needs. So the real estate agent community doesn't serve that market well, uh, and which is why wholesalers exist. But any business model that is predicated off of an asymmetry of information is a problematic one, right? Like I just also don't think that's what's going to win. But so my, you know, the idea is basically to have like an auction model, but for houses that need work. Josh DeShong (34:14) Great. Jack BeVier (34:39) where we try to make it as painless as possible for the seller, but put the property into an auction environment where, where investors are bidding on, on that house so that it's ultimately a smooth closing process. But I get your point about, um, but I get your point. Josh DeShong (34:57) And that's the Sunday model. That's what Sunday does. Jack BeVier (35:01) Yeah, it's very similar. Yeah, it's very similar. Some of the ways that they've executed are different than what I had drawn up in my head. And then I, so I pitched this idea to somebody actually, who is like one of these like people you can partner with, and they'll help you like, you know, they can do the tech side of things, they can help with different aspects, but they need someone to be the CEO, someone I through CG, actually. And, and so he's like, Oh, you mean Sunday? And I was just like, what Sunday and he's like, go like, S U N D A E dot, you know, just like go. Josh DeShong (35:16) Yeah. Yeah. Jack BeVier (35:31) type it in and I'm like, I was, I was pissed. I was like, God damn it. They like, when did they, when did he come up with this idea? Like dude, dudes, he was a year ahead of me and I was like, all right, well, I don't like the way that he executed certain things. So maybe I'll still, you know, keep it in the back of my mind, but, um, but it's, but, but it's, but that centralized idea though, versus what you're talking about. Your point is that like, you know, try trying to jam the whole world into one centralized location is. Is difficult and they may not care. And frankly, also scaling it probably, you probably like the service level that you get when you have, you know, when you're trying to serve the entire country that way is it's a materially different experience seller experience than what you're talking about, which is the wholesaler can provide the, you know, figure out the specific pain points, solve those personal pain points, be the problem solver and solution provider, and just bring it to a, just bring that deal to a centralized clearing house, uh, which is. I, it's a, it's a, you know, it's a fundamental difference from philosophically as to what you think, where, where we think the world's going or not where we think the world's going, but where you think the world's going versus, uh, the way that Sunday's executing it. But I do agree with you that like where we are right now, it doesn't make any sense. You know, like a fragmented market based off of asymmetries of information is just like, this can't be where we're going, you know, Josh DeShong (36:51) No, and the thing is, the reason I have so much conviction behind this real estate agent narrative is like real estate commissions across the country are starting to force licensing to do assignments. Virginia just did, Oklahoma, I want to say Illinois, Texas. Texas, I believe is, I don't know, we require all of our people to be licensed. It's... It's kind of just becoming this. So now that the behemoth, the 1 .2 million National Association of Realtors, that giant trade group is feeling some pain and they're feeling disrupted, it's got these agents out going, okay, what else can I do? and a substantial amount are diving into this business. And here's the thing, there's not one example that I've been able to find of a centralized power beating a decentralized one. We could go talk about blockchain and cryptocurrency all day long, but decentralized systems work better than centralized systems. And so if you take this massive decentralized system and now it's forced to get into your industry. I don't think anybody, any centralized business can actually can win that. Craig Fuhr (38:16) do you protect yourself? Look, wholesaling can be a guy who took a, you know, a three hour class on the weekend and spent $197 how to learn how to wholesale, or it can be a super sophisticated operator like yourself with Myers Homebuyers. And so now you've got these, you know, that strata of folks, if you will, putting deals up onto the platform, how do you protect yourself from sort of unscrupulous operators and you know, all of the things that we know that can go wrong in a transaction. Josh DeShong (38:49) So with my Trellie hat on, ironically I have a Myers hat on, but yeah, let me go get the Trellie hat and put that on. So there's a couple things, obviously terms of service, there's waivers of liability and all of those types of things. We've added features and functions to try to keep quality of buyers and sellers as high as possible. So for example, we do real... Craig Fuhr (38:55) You want to stop the podcast and go get your other hat? Bad branding, man. Come on, get with your branding. Josh DeShong (39:18) We require real phone numbers. You can't use a VOIP number to register for Trelly. We used to have a verification platform. We actually discontinued it because it wasn't really getting used as much as we thought it was. But we would check your driver's license against the national public database to verify that you were who you said you were and everything matched. And the other thing we implemented was reviews. So the more somebody actually transacts on the platform, the more reviews they'll have, they'll be prompted to give those reviews. So we added those kinds of things to let the marketplace do its thing. And we have some other things that protect us from the Nigerian princes and that type of stuff. But ultimately, it's definitely still something that we... Craig Fuhr (40:06) That's that. Josh DeShong (40:13) we have to come up with a long -term solve. Two factor off, different things like that we can definitely add, but again, it kind of goes towards that same thing as not adding monetary friction. You can add just usage friction, and the harder you make something to use, there's a cost to that in somebody's mind. Like we all have, you know, our time is our money, and even if we didn't have currency, we would determine whether or not we were gonna do something. Craig Fuhr (40:35) Sure. Josh DeShong (40:43) by the level of effort it required. And so by adding more steps, you create friction. And so it's one of those things you have to just be very, very cautious and careful of, I think. Craig Fuhr (40:58) What's the upside that you're seeing in terms of like a, you know, the average wholesale fee from a person that would just go out there and sort of market on their own versus putting it on the platform? Josh DeShong (41:09) Yeah, so we actually tested this a few years ago back in well 22 we tested this and we found that you would make a You'd make about 60 % more if you use the platform and you use a General auction process. So there's there's different ways like across the country properties are sold differently Most wholesalers, like the original wholesalers would just throw a price that say, give me 10 grand and I'll assign this contract over to you. But now what's becoming the norm is more like a marketing period where they're going out, they're putting the deal out, they're letting multiple investors see it and say, hey, here's what I'll pay you for it or whatever. And I think... Craig Fuhr (41:45) Sure, sure. Josh DeShong (42:03) If you divide the wholesalers that do one type of business versus the other type of business out, you get a very, very different answer. So the wholesalers that are doing those showings, they're probably getting about $15 ,000 to $25 ,000, depending on where you're at around the country. The ones that put on that fee, they're probably averaging closer to $10 to $12 ,000, is what I would say. Craig Fuhr (42:27) You know, Jack, as a guy who's bought many houses over the years, I know that it's never fun to be in the horse race. And it was always fun just to get a call from a wholesaler directly, rather than having to compete with, you know, 50 other guys who are kicking tires, and, you know, some of them are not serious. And so you make the argument to the wholesaler, hey, one call does it all, you know, just give me your price. And if it works for me, I'm in. I wonder, you know, I think I think the Josh DeShong (42:53) you Craig Fuhr (42:56) your idea for the for the marketplace is awesome. I wonder about the sort of the deal. You know, look, there's got there's plenty of rehabbers out there. I'll take a deal and make 20 grand all day long. I just wonder about the quality of the deal when you've get when you get so many people bidding it up at the end, you know, who's who's the guy making the most is it the wholesaler who really has little risk or the rehabber who's taken all the risk, right? Josh DeShong (43:20) Yeah. I mean, Jack, you can, I just want to throw in there. Like I get that. Like it's over. It's, it's, it's an issue. Your big, your big buyers, like Jack, um, your incumbents, right. They're not going to like to see the change that's, that's happening. And it's, but it's not a change. Like we're driving. It's just what's happening. You know what I mean? It's, it's like, and naturally Jack, you know this, like, Craig Fuhr (43:42) Oh, sure, sure. Jack BeVier (43:43) Yeah. Josh DeShong (43:48) there's efficiencies of scale that have to be obtained. And as the industry becomes bigger and bigger and more systematized, margins are going to compress. Jack BeVier (44:01) Yeah, I completely agree with that. Yeah, more margins are going to compress. It's and also as you scale, I don't like I'm a big open door and offer pad hater because my experience is that flipping does not scale. Well, like it as you scale, it becomes harder and it becomes less and less efficient. So the argument that, hey, we're going to make it up in volume on flipping. I'm like, no, no, no, you're gonna, you're gonna lose more and more the bigger you get like that. I just don't. I don't follow that logic. I don't that that logic doesn't agree with what I have experienced operationally myself. But at the end of the day, markets don't give a shit, right? Like the markets job is not to make my company at scale make money, right? It's to find an efficient place in the market. And frankly, if if the system becomes a place where wholesalers can easily transact with with confidence to the person who's willing to pay the most, Ultimately, the consumer, the seller is the one who's going to get the most money for their house. And that's really the equilibrium in my mind is like, when we figure out a place where the little old lady doesn't get taken advantage of ever, and she gets the most for her house, that will be the point of equilibrium, not where a company can scale their flipping business. No one no one gives a shit about that outcome. So I just think it's Yeah, the message the Craig Fuhr (45:02) Yeah. Jack BeVier (45:25) The question in my mind is what's the right path to getting to that point? But I agree, you know, the inefficiencies that have existed in this business and that existed even much more 10 years ago and 20 years ago, they're continuing to erode. And that's the nature of capitalism, you know, that's just a survival of the fittest thing. So. Josh DeShong (45:43) Well, and there's just a peek behind the scenes where like, you know, our on our roadmap, we want to get to the place where we can actually tell you as a wholesaler what to pay for a house or at least what the house will sell for on our platform. And that way you can when you're going to buy the house, you're effectively determining how much you want to make. And so what's going to end up happening is the sellers are going to end up the homeowner themselves. They're going to be the beneficiaries of Craig Fuhr (45:58) Mm. Jack BeVier (45:58) Mm -hmm. Josh DeShong (46:13) all of them, well, we're all going to be beneficiaries of it, but they're going to be the ultimate beneficiaries of it because it makes its way up the food chain. Now these wholesalers are, because of efficiencies, are able to pay that homeowner more money. And so yeah, it sucks. The days of Trelly $100 ,000 a deal, that's gone. But it is what it is. This is just what happens in markets. It's every market in the world it's happened to. Craig Fuhr (46:19) Yep. Jack BeVier (46:38) Agree. Craig Fuhr (46:42) So tell us, you know, in a few minutes here, you know, what's on the horizon? What's your 10 year hope for the platform and folks who are in the DFW area who are using the platform and maybe elsewhere as you expand, what can we expect from Trelly? Josh DeShong (47:01) Yeah, so we have about five different products for, I think really, that we're building in stealth mode right now. We're using R &D for our Myers business, what we talked about earlier. So one of those things being like the lead routing and lead scoring. You know, our mission as Trelly CEO, my mission is to enable this market. My mission is to make it easier to be a real estate investor, make it easier to be a real estate wholesaler. And I would say that's actually my mission in both businesses, in Myers and in Trelly. It's just the how I'm going about them. I'm doing it very differently, if that makes sense. Craig Fuhr (47:46) Well, it's been a great conversation. I'd like to just point out to everybody once again that when Jack and I bring on guests like Josh, it's only because, you know, Jack had a relationship. We were fascinated by the business and how you've scaled it. We make nothing from, you know, helping you talk about the platform for the last 90 minutes. And that's exactly the way we will keep it. But for folks who want to learn more about Josh DeShong (47:50) Yeah. Craig Fuhr (48:16) Josh DeShong real estate, Myers home buyers and Trellie. How would they find you online, Josh? And how would they find the platforms? Josh DeShong (48:25) can go to Trelly .com, you can go to MyersHomebuyers .com, add me on LinkedIn, Josh DeShong, or Instagram, @joshdeshongre Craig Fuhr (48:38) Last night, as Jack and I were enjoying probably our second or third glass of bourbon, he referred to you as one of the smartest guys he's met in the business, which is kind of scary coming from him. But had nothing but great things to say about you, and I can't thank you enough that you proved him right. What a trajectory. Josh DeShong (48:46) Oh, no way, no way. Thank you. Well guys, I would say the exact same thing about Jack. I think I probably have. So I appreciate that very, very much. And yeah, it's been a great journey and I love sharing my lessons. Because again, I didn't know everything when I started and I still don't. So. Jack BeVier (49:15) Yeah, thanks for hopping on man. Really appreciate it. Really appreciate your time this morning. Thank you. Josh DeShong (49:19) For sure, absolutely. Thank you guys. Craig Fuhr (49:21) Alright folks, it's Real Investor Radio with another two great episodes. Leave your comments. Tell us what we're doing right. Tell us what we're doing wrong, how we can get things better. You know, we'll take a listen. And thanks for tuning in. This is Craig Fuhr, Jack Bevere. We'll see you on the next one.