Latest / Real Investor Radio Podcast / Ep 80 | Distressed Assets & Tax Secrets: Frank Cava's Playbook for Real Estate Success

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Ep 80 | Distressed Assets & Tax Secrets: Frank Cava's Playbook for Real Estate Success · Real Investor Radio Podcast

• Craig Fuhr (00:12) Hey, welcome back to the real. I'll go ahead and start that one more time. That's all right. Hey, welcome back to the real investor radio podcast. I'm Craig Fuhr joined again by the great Jack Bevere, Jack, good to see you. Frank Cava (00:16) Sorry about that, door slam. Jack BeVier (00:27) Good morning the great Craig Fuhr how you doing? Craig Fuhr (00:30) Uh, always good, sir. Today, especially because we've got Frank Kava back on with us. If you haven't heard the first episode with Frank, I highly encourage everyone to go back and take a listen to that. Lots of great information in there. Uh, Frank, uh, Kava owns Kava companies in Richmond, Virginia. Uh, he's been operating as a real estate investor, property manager in the space, uh, for since 2007. Frank, welcome back to the show. Frank Cava (01:00) Hey, thanks for bringing me back. And we talked news in the first one about that commercial plane crashing. wasn't sure if you guys were going to bring up that the feds, you know, they, they, suppressed the loan payments for basically a day. And then, you know, they suspended payment of what $50 million in condoms to Gaza. Like these are real hard hitting news topics that your listeners want to hear. And I was curious that you guys didn't bring those up. So I didn't know this time around if you're going to hit it. Craig Fuhr (01:25) Well, that's first time we've talked about condoms on in a year and a half on the on the podcast. So thanks so much. Frank Cava (01:30) I like to raise the bar, Craig. like to, next time you bring me on, I'd like to be introduced as the great Frank Kava, who's bringing up these topics from, you know, across the bow. You never, you never know where news is going to come from. Craig Fuhr (01:43) That's it, man. We like to keep it topical, Frank Cava (01:46) Jack is showing you his Ivy League brain and I'm showing you my lack of Ivy League brain. Like, I just want to balance it out. Craig Fuhr (01:50) That's it. That's why we bring you on Frank, not just a pretty face. So go ahead, Jack. Jack BeVier (01:58) Hey, um, since you're speaking of which, the, uh, what's your, uh, Frank, what's your view on all the, uh, the Trump EOS, any impact and you think any of this is going to have any impact on the housing market, particularly make it harder, easier for real estate investors. mean, we're in a supply con. It's like the worst of all worlds right now. Right. My wife's a real estate agent. Good Lord. It is a difficult, difficult market. Like buyers think it's a bad time to buy sellers think it's a bad time to sell interest rates are high. Inventory is low. Um, you know, how are we going to get through 2025? Frank Cava (02:30) So I had a friend who was, used to, two or three years ago, he was using the term survive until 25. And I was like, well, what are you saying now? He's like, ah, basically it changed it and made something catchy for the 2027. it like, Jack, I've known you 10 plus years at this point. We don't see each other all that frequently, but we've known each other a long time. I can't remember the market ever being easy since I've known. Right? It isn't. It's just like, this is a competitive market. There's a lot of people who want to get in the space and it's difficult. So what I actually think is this, and so I'll answer your question specifically and then I'll kind of go broader. Specifically, Donald Trump, like him or dislike him, is a real estate investor. He's going to do things that are going to be good for real estate investors. He did it last time. He's going to do it again. Does he, is, does he thinking of me when he does them? I'm sure he's probably thinking of himself. But it just so happens that I'm also in the same industry and there's a lot of inertia because of that. I don't know what will happen with Doge. I don't. I'm really nervous about our debt as a country. I'm also, although the Fed has cut rates, something in the neighborhood of 100, 150 basis points in the last six months, the tenure has gone up and it's gone up because people know that we have more debt that we can service. And there's not a lot of buyers for our debt. Are we going to default? I don't know. So there's a series of very complicated things. There are social issues that are out there and I feel like the other party really hits on those. The thing that I get encouraged about is there's a lot of business people and I'm a businessman who are actually moving their way into Washington. People who you and I listen to and I know we kind of pay attention to some of the same stuff. Like I think there's a lot of really smart business people who are affecting policy. for the first time since I've been paying attention. So I'm encouraged by that. I don't know what that means for social stuff. I don't know what means for the environment, but from a business perspective, I get encouraged about those things. And again, I'm a real estate investor with the president who's a real estate investor. So that seems good. I can pause there. have another point to pivot to, but up to you. All right, so in my line of work, Craig Fuhr (04:36) No, please pivot. Frank Cava (04:41) What I do see as real, and I kind of stayed this in the, the first episode, the disparity between retail and distress is the largest I've ever seen it. Now that we talked about why this industry scummy previous, like there's a lot of opportunity to take advantage. If you, if that's, you're so inclined, although it is a very difficult market to purchase a home. Interest rates are tight. It's hard to make things paper. If you're a commercial developer, it's really hard to get things out of the ground. It's complicated because interest rates have gone up an exponential amount. If you look at percentage of raise in the last four years during ZERP, zero interest rate era, during that period of time, things were really, really, really cheap. And although we've only gone up about 500 basis points, percentage wise, it's into the thousands. So the shock to the system has slowed things down. But if you provide a good product, and you provide a product that people want, they buy it. Even in the Great Depression, people bought housing, but it has to be priced right and has to be in a position where it can be acquired the right way. We had talked about why I'm bullish on novations. I don't have the season and a lot of buyers right now are FHA buyers. So there is a big disparity between the people who are selling and where the market is. And that is encouraging. Craig Fuhr (05:56) Mm-hmm. Frank Cava (06:03) If we figure out how to get a ton of inventory to the market, I think we'll see pricing pressure pull us down, but we haven't gotten there yet. That's my overview. Jack BeVier (06:10) Do you think that the, what's your perspective been on the competitive environment over the course of the past couple of years? Like with the lower supply environment, you know, there's the, you know, the, pie has gotten smaller in terms of the number of deals to do. Have you seen competitors fall out enough such that you think that the, know, that it's a more favorable competitive environment or people still hanging on. And as a result, it's gotten, the pie has gotten smaller and there's more, there's still the same number of, you know, forks in it. Frank Cava (06:39) I don't know the answer to that question specifically, because I think if people... Yeah, I would think this is my gut and my gut is this. I don't think it's gotten any less competitive. And I think we've gotten better. And because the way that we built this business, I built my business similar to how you and Fred built yours. We don't have, we're not desperate to do a deal because we have a significant portfolio of rentals that are securitized at really good rates. Jack BeVier (06:41) What's it feel like though? What's it feel like, you know? Frank Cava (07:04) And that's part of the business, right? So we don't have to stretch in ways that we have to make mistakes. but because of the market is where the market is and because we're a voice that's easy to find, we'd have, we, have plenty of buying opportunities, but I, again, what I come back to is if you actually treat the seller the right way, I think the amount of opportunities there and the way that you can convert them are incredibly high. What matters to them in a lot of instances is what you're going to give them net. So you have to pay attention to that. for me, we've grown market share and we've grown deal flow year over year over year, even though we've lost appointments. And although there's less inventory, like we've gone up every single year in years with less inventory. Jack BeVier (07:45) Yeah, I definitely think there's like a professionalization of the industry that has been happening for a long time and it just, but it just keeps going. Like it's just, you know, the competition is just getting better too. so I do think it's like becoming, you know, you mentioned in the last episode, the barrier to entry to entering, entering this space is very, very low and it is of course, and it remains like kind of like a, know, people like the idea of buying real estate still. Right. So it's something that, you know, people still find attractive. But the disparity between those who do it on the side and the companies that are really, really leaned into to fine tuning their business. mean, you're working on your business all day, every day. Right. And, and this, and as a result, we've seen, you know, companies scale up and the, the level of professionalism and the, legitimacy, think, frankly, of the, of the more professional operators is just continue to increase. which is good, you know, ultimately good for, it's good for the consumer, right? Like, you know, back when, you know, it's, it's harder to hit a triple and that's a, and that's probably a good thing for like the country, right? Like it makes, it gives more legitimacy to the business. Frank Cava (08:50) Sure. so Craig, you mentioned the presentation that I gave years ago that you saw. I mean, we're talking like almost 10 years ago at this point. And when I gave that presentation, I think it was 2016. Yep. When I gave that presentation, what I did is I broke for people listening, right? I broke it into four quadrants. So, and this wasn't my slide, this was for somebody else, but there's four basic quadrants. There's recession, recovery, hyper supply, Craig Fuhr (08:59) Fails about right. Frank Cava (09:17) and recession. So you're going around like this, right? So in the recession period, typically, and where are we? Who knows? Are we in hyper supply without the actual supply? It kind of feels like it, right? We're certainly not in the boom times of recovery or post recovery with hyper supply, but there's some recessionary tendencies. But what I think you're saying, Jack, that I think is worth bringing up. There's professional buyers that are in this market now who quit their job 10 years ago and they're buying inventory. On that slide that I did years ago, Craig, that I showed at the meeting you referenced, I said during these two bottom phases, there's not a lot of wholesale opportunities. That's different. There's wholesale opportunity now because these people are professional flippers who come to people like us to help find their inventory. So. Craig Fuhr (10:00) Mm-hmm. Frank Cava (10:08) It's the market is becoming more full cycle and more like you were using the news story in the beginning about putting legislation in place now. Like it's ass backwards. Now it's actually the market is actually becoming self-regulating because it's a real industry where it wasn't a real industry when the banks were actually gobbling things up at a low price. So like the market economics are actually starting to wield their forces in my opinion, and this is becoming a robust. Craig Fuhr (10:16) Mm-hmm. Frank Cava (10:39) and self-contained industry because of the fact that it's growing up. It's not just some tertiary thing like it was years ago. Jack BeVier (10:45) Are you still, what's your view on housing prices? Are you still adding rentals to your portfolio or is this a cashflow business for you? Frank Cava (10:52) We're very selective on what we're adding and anything we're adding on the rental side is usually short term to manage out the tenants and then sell it as inventory. It's just with the interest rates where they are comparative to cost of construction and cost of acquisition, it's so hard to get things to work. Now, the stuff that works insanely well, this is a conversation maybe we can have later. Like some of the loans that I have with you guys, like if I could debt swap, and put new construction against things that I've been sitting on for years. Like that stuff works. So I have like a bunch of lots that we bought for next to nothing, like under 10 grand and what I can build a new construction rental for and get section eight on those things are great. So where it makes sense to keep those we do, but honestly, like we can build it for 85 bucks a foot. can land it at $105 a foot with the area figure and it's worth 225 on the backend per foot sold. Like it's really hard to keep that as a rental. You're better off just stacking cash. Jack BeVier (11:54) you doing about taxes, if anything, or you just paying the piper? Frank Cava (11:58) No, I have a tax strategy, like I have millions and millions and millions of carry forward loss through depreciation and I don't pay myself a ton. Like I'm not begging here, but at the same time, like I don't pay myself a ton because I knew eventually I'd want to be able to take the cash and I have that ability. And a lot of our profitability on top of, sorry, a lot of our profitability on, so tax strategy I think is huge, right? I think people miss it. Like you guys are really good at it. If you do it right in this business, the stuff you're wholesaling and flipping that you don't have seasoned so it can become a capital gain sale should fund your business and should fund your major expenses. Over the top of that, if you do it the right way, you should get cap gains on things you've owned for a while and that's how you sell. So you're feeding the bottom of the funnel, if you will, with new stuff that you'd have to pay market rate taxes on. And on the back end, you're selling things that you have seasoned out. And if you do it right, this requires thought. But that's how we do it. Jack BeVier (12:58) Yeah, that makes sense. So what's your what are you excited about in 2025? Like what's, you know, is this like a hunker down, roll your sleeves up, stay tight to the ground and operations because that's what's necessary. And, you know, we'll wait for some more opportunistic environment. But right now, it's just, you know, exist. Or are there things that you're feeling opportunistic about this year? Frank Cava (13:20) So it isn't sexy, right? So we got kicked in the stomach in 2022. Interest rates went off. Like we had a bad year. We lost as a whole that year. We had a good 2023. We sold a lot of assets to get there, but we had a good 2023. 2024, we just stripped down our expenditures by a significant amount and we focused on operations. And we had a really good 2024. Our 2025, think there is, if the market is flat or even goes backwards a little bit, maybe up to 10%, I think we're going to have a really strong year because of all the operational things we put in place three or four years ago. So it's like, this is not a fast moving business, but if you move with purpose and intention and you look towards a couple of year window, you can build real efficiencies. so is it exciting? It is not, but I think we'll have a really, really, really good year profitability wise because of all the little things we've been doing for two or three. Jack BeVier (14:14) Mm hmm. What you mentioned ovations on the previous on the previous podcast in terms of like new construction versus heavy rehab versus patch and paints versus multifamily. I don't know like what like how have those things kind of moved on a relative attractiveness in your market the past year or so. Like you know like you know his new construction gotten better or patch and paints disappeared you know as multifamily. got interesting, but now it's less interesting. I don't know. I'm literally making up stuff. Frank Cava (14:41) No, no, I understand. If I was going to restate your question in way that I think I can actually answer it coherently. So what the way I think your question was fine, but the way that I have to interpret it is this. Like, where do I see the right opportunities? Right. Most of the things that you call them, patch and paints, most of the patch and paints are through novation. Jack BeVier (14:48) Help me out. Craig Fuhr (14:56) Right. Frank Cava (15:03) and those are neighborhood specific. And if we can do those, those are incredibly attractive because the cost of entry is really low. The risk is really low. Like I don't own the house. If the market goes to hell in a handbasket, literally all you do is you forfeit your construction and like there's low risk. so I like that a lot. What we do and how we look at the market is most of the things that we do are going to be simply rehabs. The big numbers, the big strokes, the like. the going and getting a loaf of bread are those. Killing an elephant is knock it down and build new and sell for over a million bucks. So we probably do somewhere between three and eight of those a year, depending on a year, the sweet spots five or six. Those are big, big deals for us and the profitability side and literally, you you do five of those. We're talking millions of dollars. So we are very, very, very selective on where we'll do those. So. We go to the best school districts, the best areas, and we do knockdowns and builds. And then a lot of the other stuff, we serve as affordability. So because of what we provide on the rental side, most of 85, 90 % of our deal flow is FHA-qualifiable at some point in the process. 10 % of our deal flow, but probably 40 % of our profit comes from the discretionary second or third time move up. And that's the stuff where you just make big rips. And those are usually knock it down and redo the whole house. So what I'm really strategic on is less the product and the type, but where is it located? And if there's something that negatively happens to the environment, is there still a vibrant buyer base? And that's how we kind of analyze our risk. Jack BeVier (16:44) Are you doing teardown innovations ever? Frank Cava (16:46) Tear down innovation, no, because that's just way too much. But we have done so I'm working on a deal right now. It's not done and I'm not going to give anything away. That's going to jeopardize the deal. But I'm doing a deal now with somebody where I'm going to acquire three of his vacant lots. And I'm working on a deal with the with the lender where they're going to basically just pledge the lots to me and I'll settle them up on the back end. But I'm going to take control of it with a contract. Jack BeVier (16:49) Yeah, Yeah, that's it. Frank Cava (17:15) obligation essentially. So I don't have to carry the lots, but they just want to be done with them. So like we'll do some, we'll do creative financing on that type of stuff, but a tear down innovation we don't do, we'll take ownership. That's just too complicated. I would honestly think that that'd be very hard to sell to somebody. Jack BeVier (17:32) Yeah, yeah, I was thinking that. Craig Fuhr (17:33) Frank I admire guys like you that you know we we talk to investors every day here at Dominion and I don't know that most of them would say that hey it's you know it's it's fairly easy to find a deal right now we're still buying 100 a year I don't but for guys like you who have figured out the mining operation not looking for you to give away any trade secrets here but you know talk about how it is well maybe Jack is but Jack BeVier (18:00) Yeah, yeah, I you could, I'd be fine with it. I'd be totally fine with it, actually. Craig Fuhr (18:04) I mean, it's say, give us. Frank Cava (18:06) You want to Jack BeVier (18:07) Thank Frank Cava (18:08) You get a 3 % debt, you want to lever my way, I'll give you a couple of trade secrets. You control the bank. Craig Fuhr (18:14) You mentioned on the last. Frank Cava (18:16) hell jack I'll give you a four you get me a four handle I'll give you some nuggets Good. Sorry, Greg. Craig Fuhr (18:21) No worries. So you talked about on the last episode how you're, you know, you're using TV, pay per click SEO, you know, sort of the usual suspects, but what does the, you know, give us sense of the marketing budget that you have and how you're really using technology to go out and find distressed by distress sellers. or sellers where you can add value, I should say. Frank Cava (18:45) So one of the things that we do now that's better than we've ever done it is we track where we spend our money and where our leads come from. And that is complicated. Now, Salesforce is very helpful with that because that's what it's built to do. So in 2024, think the biggest month we ever had, think we had 14 or 15 lead sources. So what we do and what we track is where does every lead and every deal come from? What's the ROI and where does it? And what we're good at now that we didn't use to be good at, because we used gut and feel, is, OK, what's my return on spend with this? And what is and what is not working? So I'll give you a couple of nuanced examples for Jack, and I'll just expect the 4 % interest rates later. But this is what it looks like, right? So TV is, it allows the most credibility. So if you run a TV ad, the easiest deal to do is innovation. is when you've gotten a TV lead because they believe you because you're a big deal and you're on TV. And like I go places and people know who I am because I'm on television. And in a lot of instances, it doesn't really help. if we're going to, there has to be a factor of trust. If you're going to do a novation with somebody and you're going to add value to their house and a TV lead is the best place for that. Our TV spend to return is roughly four to one, very close to that number. goes up and down. course. Um, we do postcards. And we're really specific on the message, what we say and who we send it to. And I mentioned this on the last episode, but we widen our aperture. So, um, we did it intentionally. There are some people in there that aren't as they're not perfect for us from the standpoint of they're going to sell to us, but it gets us more appointments because we were really struggling with appointments in 2024. And last time I saw Jack in person, I talked about that. We literally had 66 % less one third as many appointments year over year, month by month. So I was freaked out. So I want to figure out like, how do I keep my people busy and engaged in front of people? Sometimes there's a deal, sometimes there isn't, but the upside of it is this. So I can get more granular. I have all this stuff committed to memory. I'll tell you this, like if you're doing this business and you're thinking about spending or how do you grow or how do you add, understand this, we're not in the early days anymore. And there's someone like me or Jack in every market. and you're competing with someone who takes this very seriously. And we measure and look at every single thing. Is there a magic bullet? There isn't. The lazy question is what mail piece is working? Can I copy it? That doesn't work. What you have to understand is what mail channels, how are you converting? How are you nurturing the leads? How are you following up with the leads? And they're all created a little bit differently. And then what you have to kind of lean into is you have to be really nuanced. Like I'll give another example on TV. I upped our TV budget in Q4. We had the election to deal with. We had other stuff. It was late Q3, early Q4. And I was real nervous that we weren't going to be able to afford airtime. And that's a big part of our business. So we went into, yeah, it's a big deal. Yeah. So we went into what's called OTT, which is basically every online, who lose OTT, but YouTube isn't because those are different, right? YouTube is YouTube owned by Google. So they're different, but you have to understand that those things are different and you have to look at your ROI. Jack BeVier (21:44) Yeah, the spend, it got really expensive in the second. Frank Cava (22:02) My ROI in OTT is shit, but my ROI in TV is really good. So I spent more money on OTT thinking I'd hedge out the election and I lost. That was a bad bet. So what I better be suited to do is actually take that money and reallocate it to TV because that's where my seller is. They're not on OTT. So, but that's the type of stuff that I could have never told you five years ago. And I can tell you now with great certainty because I track it twice a month and I look at it over and over and over. And I need to make sure if I'm spending a buck, I'm gonna get that buck back or I have to stop spending it and put it somewhere else. Jack BeVier (22:37) What's your, we've started doing TV, I don't know, two years ago. And so we're doing TV, pay-per-click. We just started doing radio, so we got a little jingle now. So we'll see how that goes, that's brand new. And then a lot of direct mail. And then buying from wholesalers, of course. And sometimes the courthouse stops, but it's a pretty competitive place. so, you know, we're trying to, trying a bunch of different lead sources. What we found, TV was interesting. it requires a significant upfront investment, right? Because you have to commit to a longer term contract. can't just like run TV for 30 days. But the, we, we, we found that what you said that when we went on those appointments, they're like, you're the guy from TV. And like immediately there's like credibility and authority and like, you know, it's you like a little local celebrity to this, you know, to this person. Right? So like that's a big, big help. So the conversion rate on the TV ad or TV appointments was Frank Cava (23:19) Incredible. Jack BeVier (23:29) really high. was like one in two. It was crazy. But the appointment itself was like really expensive. so what have you, so my question is, we saw our cost of acquisition of customer climb throughout 2024. We attributed it to the, to just the cost of ads, right? Like that people weren't paying, you know, there was Frank Cava (23:36) Mm-hmm. Jack BeVier (23:53) the TV ads themselves became much more expensive and certainly people's attention was being focused on the election cycle, not on, Hey, I got to get rid of mom's house. Um, and so I'm really curious to see what's, going to happen in 2025. Now that the, now that that, that cycle is over, um, what's your experience been on the TV side in terms of like cost of acquisition of a customer over time through that channel. Frank Cava (24:16) That's quite a question. As a whole, it has gotten way more expensive to get a lead. I don't have this in front of me, so I'm doing this from memory, but when I saw you last to get a lead in January of 2024, it cost me like 2,600 bucks for a lead and almost $8,000 for a deal, which not great. By the end, yeah. Jack BeVier (24:35) Okay. That's, that's, where I'm at. And I'm like, I'm like six, I'm like six grand for direct mail, 1012 for TV, like any, it went from like eight to like 12 over the course of the year. And so I'm like praying that that's going to reset. Frank Cava (24:49) What's your average deal profit? Jack BeVier (24:51) I keep a lot of rentals. like, you know, like, you know, off balance sheet equity. Yeah, hard to say, but you know, like 30, you know, 30, 30, 40 grand somewhere in there, you know, I mean, not wholesale, wholesale are like 15 grand, right? So like wholesale is kind of like just turning money. Like I'm not making big rips on wholesale deals. Frank Cava (24:54) Hard to say. But 33 grand in equity versus. Okay. Clearly you and Fred are a damn good business and a multitude of them, right? So you know this, but if you're going to make 20,000, I'll round up and call it 25 grand. Cause if you're looking with rentals, you're getting equity, but it's hard to realize that if you're going to actually sell it, right? So if it's 25,000, you're paying those numbers, that is not on balance, a profitable business. just isn't. So what we had done, what I mentioned to you a minute ago from January of 2024 is we got those numbers significantly down. Like my cost of appointment by the end of the year, was under a thousand bucks, was closer to 750. And I think, again, I don't have it coming to memory, I didn't have it in front of me. Somewhere between 750 and a thousand bucks, and I say, put a bullet in my head if I'm wrong, I think I'm real close. And the cost of contract was something in the neighborhood of like 5,600. But if you look at that from what that was five years ago, that is up significantly. Craig Fuhr (25:58) Is that the blended number sort of over all advertising? Okay. Frank Cava (26:01) All channels, all channels. Yeah. But if you look at it from that perspective too, because we use novation on the Dispo side, like our average profitability is north of 30,000 bucks. So your cost of advertising contract is about 20 % of the cost of the profit, which is a business you can make money in. like those are the things, the Discreg is where it comes down to your CRM and what you're spending money on and how you're paying attention to it. Like You've got to be so insanely precise or you're going to get killed and you're not, you're going to miss it. Like I'm talking to a guy from Denver, great guy. He traveled the world for a couple of years on a boat and he's like, yeah, we didn't make anything last year. I'm like, yeah, no shit. Because like you have to like be paying attention to all of this every single day. And if you're not like, this is not an industry that has a huge margin of error. It did 15 years ago, but there's just too many people that pay attention every day. You're gonna get filet. Craig Fuhr (26:58) So getting back to the direct mail channel, know, surprised to hear that postcards are still working for you. Talk about that. Frank Cava (27:05) You shrugged, Jack, why'd you shrug? Jack BeVier (27:08) No, they are like they're fine. Like it's it's it's tried and true. I don't know. It's solid. Craig Fuhr (27:12) I mean, talk about the obviously a lot of people doing it. It's another very low barrier to entry. mean, geez, there's there's companies now you just give them the ad, you you give them your list and they'll handle the whole thing turnkey for you. From from putting the postcards out, put them in the mail, put the put the stamp on it, everything. How's the messaging changed on that over time for you, Frank, like just really sort of honing the message? Is it one simple message that goes out to the to to like your entire list or do you have to cater the message to two different lists? Frank Cava (27:45) soon. That's a hard question. So the answer is you have to constantly pay attention to your message and you need to have a curated message over time. You need to pay attention to it. You need to call the action that actually works and doesn't lose its effectiveness. Now the upside of postcards is it's a really low number of percentage, right? Like if you're lucky, you get somewhere. If you get north of 2 % response rate, you're crushing it. Like it's usually a fraction of a percent. Craig Fuhr (27:58) Mm. Frank Cava (28:11) So if you can figure out how to do that, like I'm not gonna tell you like use this postcard because it's lazy of me to give you that answer as it would be lazy of someone to ask like what postcard works, depends. What I can tell you is this, and I say this with great conviction, if you're gonna be in this business, you need to reinvest your winnings back into marketing, you just have to. And if you're good at this business and wanna become a pro in this business, you need to use a multitude of lead sources. What I will tell you again with great certainty is when I started running television ads, all of my other channels work better because people understand who we are, our brand, my name, and I don't physically go on appointments, but they know my name. And we did a novation deal. did, was crusher. It was our best deal of 2023. It was out in the country. It was a log cabin. And I don't go out and look at all that many houses anymore, but I went. at this one because I was like, a long cabin. I want to go see it. And this guy had pulled his gun on three people because he's a country guy. Nobody drives up on his house. And as soon as I got there, I put my hands up like this and he's like, oh, Mr. Kava, I know who you are. Good to see you, man. He goes, I thought your hair was redder in person. Like something like that. Right. But he knew who I was. And I don't go on appointments a lot. But the whole point is this. If you want to be good at this game, you have to reinvent your winning, reinvest your winnings into the marketing and you need to use multiple channels. You have to measure. And there's not one way to do it. How you do it. Like the other thing I can tell you is this, Jack, you'll find this interesting. We came up to look at your business. I think it was like 10 years ago at this point. I was a direct mail guy. There was another guy from Philadelphia who was a PPC guy. My PPC results sucked. His mail results sucked because we both started in different verticals. Just like if I went to compete against Jack on the steps, he's going to kick my ass because he built his business building on the steps. Craig Fuhr (29:40) Hmm. Frank Cava (29:58) So we all inherently have strengths around certain things and you need to lean into what are your strengths and how do you convert better than others. And that really, really matters. So the brush, the messaging, the branding and those types of things, but how's your back office set up? I'm not set up to buy from the steps and I suck at it, but Jack is, but I probably have as an advantage that he doesn't cause I didn't come up that way and I still find a lot of inventory. So again, it comes down to who are you? What are you good at? How do you convert and paying a lot of attention to that stuff? Craig Fuhr (30:26) Yeah, I'm really glad we had a chance to dive into this with you, Frank, because I've always believed that the business is marketing, so much of it. And so those who tend to take it very seriously tend to do well. So. Frank Cava (30:40) I wanna lean back into this point, Craig. Sorry to jump back in, but it's this. Marketing is critical, but marketing the way that you can convert is more critical than marketing. Knowing who you are, what your strengths are, what your weaknesses are, right? Like you do not wanna see me in a bikini, but if you need to lift the refrigerator, you might wanna call me. Like, right? So like we call Frank for this, but know that about yourself inside of your business as well. Like we're good at converting these things because we're built for it. And I know we are. Craig Fuhr (30:43) Please. Frank Cava (31:07) We're good at adding value through construction, because I'm a construction guy with a degree in construction. I don't know banking like Jack does, but I know a two by four really well. And I know how to manipulate that. So if you lean into your strengths, it inherently causes you to have a market advantage over others. And if you really lean into that with your marketing or how your salespeople approach things, I'm not afraid to do innovation with add-on because I know what I'm going to spend. like, so if you know who you are and you're true to it, you can really dominate because you have a distinct advantage over others because that's what separates you. Craig Fuhr (31:42) Right, Jack. Jack BeVier (31:44) I couldn't agree more. I, I think that there, cause there's people who are great at that, what they do in, every market, right? But it's not, it's not as if it's, it's not as if there's going to be like one winner in a particular market, right? Like nowhere does a company dominate, an entire geography, right? Like the best you can hope for is to be the, you know, the infill lot guy in a particular city and you're, know, and that would be total domination of the game, right? To be as good at that. Frank Cava (32:09) Right? And that's good enough. Jack BeVier (32:12) Yeah, exactly. Craig Fuhr (32:13) for most. Frank Cava (32:15) So there's so what it comes down to after that is like, where do you reinvest your winnings? Right? Like if you can be dominant in a vertical, just one, it gives you enough places to go. Like I'm really good on the phones and we're really good with direct mail. We're really good at leads. And I can take all of that and have a huge tax bill. But that wasn't my goal. My goal was to build a portfolio. And now I have two things, but they all work together. So like that's how you that that's what a hub in a spoke is. Jack BeVier (32:40) Mm-hmm. Yeah. Frank Cava (32:44) is how you do that. Like Jack and Fred have got that in their business and they have the ability to withstand markets because they have multiple tentacles to market now. So like, if you go into this thinking, I can just do one thing, you could, but you have more vulnerability because like, have you ever seen a stool with one leg? It falls over. Like every stool has a minimum of three legs. Every chair has four. Like that, so your big ass doesn't knock it over. Like that's, if you look at it from that perspective in a business, it's, it's It's in light. Jack BeVier (33:15) Yeah, I couldn't agree more. Craig Fuhr (33:16) All right, so listen, I think we've had a honestly between the two episodes, a lot to laugh for the listeners to think about here, Frank, we can't thank you enough for your time. Jack asked you what you were excited about. What are you excited about right now, man? What's got you juiced? What like you've been doing this a long time we Jack and I were talking just a week or so ago. And Jack mentioned on a company call that in terms of lending He's he's not been this excited in many years in terms of what you know, we see on the horizon here at Dominion Financial. What excites you right now, man? What's what's got you juiced? And what are you looking forward to in 25? Frank Cava (33:54) What else is bringing you, is that where you see the excitement for you guys, Jack? Is it on the lending side? And if so, why? Jack BeVier (34:00) yeah, I on the lending side, I think that the non bank lending space is continuing to grow. And it's taking market share with we're keeping you know, private lenders are competing with each other, technically, like, right, like, definitionally, but the pie is getting bigger, because we're stealing market share from the banks. And, and I think the banks are just seeding market share to the private space. And as a result, the more product that is Frank Cava (34:18) Yeah. Jack BeVier (34:24) that comes to the private lending side improves the liquidity of money to the private side and drives our cost of capital down. And I think that within a year or two, we're going to be competitive with banks like in rate, like we're going to be crushing them on service, but we were, there's going to be no reason to go to your local bank because we're just going to be the same price and a much higher service level. And I think that the, that kind of the professionalization of the space is driving that direction. And I think that's great because the pie is just it just seems like the pie is just getting bigger and bigger each each year. In terms of the private lending space. I'm also still very, very bullish on American real estate. We are still adding though I completely agree with you that the numbers barely work like if like they barely cover, you know, like I'm if it covers I'm happy, right, but the idea that it's gonna like, be a creative from a cash flow perspective. No, it's not like it's just not right like you're borrowing money at 7%. ain't nobody buying eight and a half caps in good areas. Like that's just not a thing. so, but that said, I think that I I'm very, I think that, you know, American real estate is a, that is a hedge against inflation. And I think that rents are going to continue to increase and that's what's going to keep happening. I think consumption of housing per capita may go down. We'll have more people in a particular house and that's what's going to balance. That's where the market's going to find an equilibrium. So I don't see housing prices coming down despite the affordability challenges. think that consumption is going to come down, but the idea of owning real estate as a hedge against inflation and actually something that's going to exceed the, the return of, of inflation. I feel more confident about that today than I, than I kind of ever have. And so I'm excited both, you know, so on the lending side, I'm excited because of the trajectory of the industry on the real estate side. I'm excited real estate side. I'm excited about the, I don't know, guess my conviction in owning American real estate relative to all the other options out there. so it's hard on the real estate side right now in my perspective, like I think we're running a thin platform, right? Like it's, not, we're not knocking the cover off the ball from a profitability perspective, but I'm at, I'm tucking away really good houses that, know, with, with good equity and I'm not getting taxed on that equity. And so, you know, that's, that's efficient. I like all that stuff. So sorry, that was my little that's my little soapbox. Frank Cava (36:38) No, no, it's great. Craig, do want to weigh in or do want me to knock it out? So this, it's hard to say this, right? Like I dated a girl in college and her dad was a big golfer and we went golf and he goes, Frank, if you're going to miss it, miss it long. And I looked at him and I was like, if I could miss it long, I'd have a lot less problems. Like I'm worried about getting over the ladies' tees. Like that's, I don't have that stroke. So the thing of it is, so coming from me, easy for you to say, right? Craig Fuhr (36:42) Knock it out. Right, right. Frank Cava (37:07) I love the fact I own a bunch of rentals. I love the fact that all my stuff is sub 4%. I love it, I love it. I love that we are 85 % affordable working class housing and I feel really good about all that stuff. So this is a boring answer and then an exciting answer, but I'll give you both. I've invested a lot of time and money in our staff and I think this is a year our staff breaks out. I feel really good about it. Like we had gone to a flight to quality. We had a lot of people that needed to go. was a lot of very difficult conversations and we were really young last year. We're not young now. We're seasoned. We're excited. We've got some things on that front. I'm in the process of hiring a full-time construction trainer, which I think is a big deal. We're going to have people who understand how to build and how to build well and they're going to have real training. Literally he used to work in corporate America and do that job and we're bringing him in and that's a service that we're probably going to sell to the market because I think everybody needs to know how to add value to a house in an affordable way. So I'm excited about those things. Macro. When I got into this business, nobody was really all that excited about it. People were kind of like, I quit my job to come do distress real estate and everyone's like, what the hell is wrong with you? Turns out I was right. I got into the section eight game because I thought that it was something that was desperately needed. we, we turn on average two times a decade with a section eight runner. And it's incredibly good. I do think I'll just come out and say it. Elon Musk may become the first trillionaire in the world. It's good shot, right? But the amount of people between the first trillionaire and the people who need government assistance is going to cause, think. golden era of things like what Jack and Fred provide with their affordable housing or we provide with ours. People come to me constantly like, you build a fund? you do like, like the amount of people who are interested in affordable housing would section eight rents. It's gone from something that was very, very unfavorable to something that is incredibly favorable. And I think it's incredibly favorable because of how well it pays. Is it easy? No. It is really hard, but does the money come in and is it subsidized in a way that it provides housing in an affordable way for people who need it? does. So like those are the things that I think are interesting and I think there's going to be wind at our backs for a while for those of us that got into kind of something that had headwinds. Craig Fuhr (39:36) Great answer. You mentioned briefly Frank Cava (39:37) Do you agree with me, Jack, by the way? Jack BeVier (39:39) I got 100 % to yeah, and I'm not and we were never one to be allergic to work. So like, I don't care if it's hard, like I just want it to be not risky or have upside, you know, so Frank Cava (39:49) And I just turned 50 a couple of days ago, like what my risk profile is versus what it was. It's very different. I've got a wife, I've got kids. I've been busting my ass for two decades doing this thing. Like I don't want to lose it. So now you've kind of put it into something that's more safe and you get into that, you're balancing your portfolio from risk and from safety and you kind of look at it. So go ahead, Craig, you're about to ask. Craig Fuhr (40:13) Yeah, you mentioned a mastermind that I think you said you were starting. Frank Cava (40:17) Yeah. So I was a part of a big one. I won't mention it by name. but I was a part of that for a very long time. That's how I met Jack and how I met you, Craig, how I met Fred. and you got specifically got on work with you as much Craig, but Jack and Fred have been very influential for me, but my, my goal with this thing, I brought in someone full time to help run it. and it's the same thing that we talked about earlier. There's people who are in this space who need. real customer service. And what we're offering is this, it's a small group, it's invitation only. I don't expect it to be huge. I'm cool with all that. But there's three criteria in our group, that's it. You gotta be great at something. I don't care what it is, but you gotta be really good at it. And I think you can tell like with my passion on how I talk, like I'm not great at a lot of things, but I'm pretty darn good at single family affordable residential in Richmond, Virginia. You gotta be great. Jack's great at what he does. Fred's greater what he does. Dominion is great at what they do. You gotta be great. Number two, you have to be real estate adjacent. You don't have to be a real estate investor. You don't have to be a wholesaler or a flipper. Like you need to be in the space. Like I have a friend who sells lighting control systems in houses. He's adjacent, but he's an incredible marketer. Like Google sponsors him to have events in Dubai. They haven't called me and said, hey, will you host something? They haven't asked me to host something in Richmond, let alone three quarters away around the world. And he needs to buy assets that allow him to have the appreciation. So he's going to be in the group. And at first, this is invite only, but there's going to be a financial component. And the financial component is this. It's like the American express black card. No one's going to know what it is, but you know, if you got one, you're pretty damn good at what you do. And you hit a certain series of marks. It's all third party. It's all sealed. It's not going to be something that gets talked about, but the whole point of the matter is, it's like, we want real people who are real operators in their space who are great at what they do. And. they can afford to be there and they deserve to be there because they've performed. And I feel like what happens in a lot of these spaces, you don't have that. You have just a lot of pretenders like I did 250 deals, where's the audit process? Like I don't need to do this to make more friends. I wanna do it because I want a higher level of conversation and the people who are coming to it wanted to and were kind of starved for it. Craig Fuhr (42:30) Agreed. Hey, man. Well, listen, we can't thank you enough for your time. Frank Kava, owner of the Kava companies in Richmond, Virginia, folks want to get in touch. How do they find you, sir? Frank Cava (42:43) The easiest way to do it is just go to our website and just fill something out and it'll, comes to my email and there, me or somebody will get back to you. But yeah, comments, thoughts, interested in anything we've talked about, happy to talk about it. Craig Fuhr (42:57) We talked to a lot of great operators on this show, Frank, and I've always admired you. So thank you for your time. Frank Cava (43:02) We've talked to a lot of great operators and you aren't one of them. Fair enough, buddy. Fair enough. Craig Fuhr (43:07) Well, you know, at least Jack BeVier (43:11) You going to any conferences this year? Frank Cava (43:14) Yeah, I'm heading to IMN. Do you want to hit, I don't know if you want to keep going on this, but I would love to talk to you about some of those. You want to do it here? All right. So I'm going to IMN. I'm hosting my own at least three times this year. I'm going to go to All-in once again. I've gone to the All-in Summit two years in a row. So if you're looking to come, I'll tell you where I stay. That is incredibly great. There's a couple of other things I'm looking at, but nothing I've committed to. Jack BeVier (43:15) What are you on to? yeah, sure. Yeah, sure. Craig Fuhr (43:25) Yeah, go ahead. Frank Cava (43:43) How about yourself? Jack BeVier (43:45) I'm going to structured finance association, which is like the securitization conference. That's more for the lending side of things. It's in Vegas in a month. And then the national association to home builders conference is right actually back to back with that. So I'm just going to stay for an extra couple of days. No, it's not IBS. It's any HPs. Well, yeah, no, no, it's any HPs. IBS. That's what it is. Yeah, yeah, sorry. Frank Cava (44:01) The IBS. Yeah, yeah, yeah. OK. I know it's in Vegas. That's why. IBM. Yeah. Jack BeVier (44:11) Yeah, yeah. Yeah. And then I'm to do do I am and I'd really like to do I've never done the ICSC. I've just never gone before. I think it'd be really fun International Council of Shopping Centers, which is basically like, for those who don't know, it's like commercial real estate. Literally, you'll have like, cities and states that are like, hosting parties to promote their their jurisdiction as a place to do business and inviting vendors and inviting Yeah. Companies then, you know, start a Panera, know, put a Panera over here. We're doing a new development in this part of town looking for some, you know, retail. so it seems just like a cool conference. I've never attended. just always been on my bucket list to do. So I'm to try to do that this year as well. Frank Cava (44:50) Awesome. Craig, any big conferences for you? Craig Fuhr (44:53) I'll be in Vegas at the Home Builders Conference, taking some loan officers out there and looking forward to meeting all the builders. if we can get as much time as you can need, Frank Cava (45:02) Do we have five more minutes or do need to wrap? Jack BeVier (45:04) Now we're good. Yeah. Frank Cava (45:06) Besides an incredible head of hair, Craig, what like what do do on a daily basis? Like I don't under I don't know what you do now. And I would love to know. Craig Fuhr (45:15) So I've been working with Dominion for about a year and a half now. Frank Cava (45:20) because you were inside the fold before you left and now you're back. Craig Fuhr (45:23) Yeah, yeah, you know, we can we can get into all the discussions of the wise in the house and things like that. But left did some coaching that went well until it didn't. And, you know, I I was looking for a job and really love talking with real estate investors. I mean, it's been it's been a real joy to be able to speak to people on a daily basis about their deals and underwriting those deals. So really found a place here. Love it. Have grown significantly over that time. And so yeah, man, it's the phone rings off the hook here. And so it's just great talking with guys like you every day. Jack BeVier (45:59) Craig and I, Craig and I'd get together and get bourbon, like get bourbon and barbecue every six months for whatever past 10 years. So yeah, yeah, yeah. So I always just, I was just, you know, stalking, waiting, you know, trying to, trying to recruit them back into the fold and saw my opening and I pounced man's and I got them. I took it down. Frank Cava (46:07) Yeah, you guys have been doing that for a long time. Craig Fuhr (46:07) Yeah, yeah. Yeah. Yeah, right. yeah. Yeah, I was that whiteboard that we were talking about that I was always at the top of the list. Got to get Craig Fure back in the place. Right. Jack BeVier (46:25) God damn right. God damn right. Frank Cava (46:26) What do you guys drink? It's Craig Fuhr (46:29) What don't? Bourbon. Frank Cava (46:29) on the bourbon side. Which one? Do you have like a go-to? you have anything you really like? Craig Fuhr (46:34) You know, I had a chance to, a buddy of mine is the, what used to be the food and beverage director of a casino up here in Baltimore. Calls me up one day and he says, Hey, we're going to Kentucky. Get yourself a plane ticket. I'll take care of everything else. And we went to Maker's Mark. I mean, you want to talk about a high end tour. This was not like you're going to join 50 other people. It was us. And we got to make our own barrel of bourbon literally at Maker's Mark. Frank Cava (46:51) Yeah, yeah. Craig Fuhr (47:03) And when I tell you it was the most, I don't know about prices coming down, but so Makers Mark for me has sort of got that special place in my heart. It's my Budweiser and then, you know, all the usual suspects after that, I guess. Frank Cava (47:04) Is that why the prices have come down? Do you have a favorite Jack? Jack BeVier (47:20) my, one of my buddies from high school is a big bourbon guy. And so we get together every Thursday night and go like, go out on the boat or go golfing, whatever. And he always shows up with two bottles of bourbon that I've never heard of before. So I just like on a rotating group of, of, of whatever stuff that he's trying out. So he's got all this like high proof, like, you one 20 proof stuff that just lights my hair on fire and been trying some Japanese whiskies, but Just trying the new stuff that my buddy Tim has been bringing through is kind of my hobby. Frank Cava (47:52) One of the things I'm doing at the group we're doing in Denver in a couple of weeks in Denver is the event we're hosting. And one of the draws I'm a big book. I love red wine. So most people like Cabernet's. So I'm to bring from my seller a dozen bottles that I'm going to share with some folks. And then I'm also bringing one really nice bottle of bourbon. Cause almost everybody's like, love an old fashioned. So we'll either do a need or an old fashioned or something along those lines. But that's like, That's the fun, the thing that I'm really excited about is just getting together with high level people and having good conversations, breaking bread and having a couple of cocktails and creating experiences. We're going to do an event in June and we're going to do it in Vegas because none of the masterminds ever go to Vegas because they don't trust their members that they can actually fucking handle it. We're taking our group there and we're going to get tickets to see Kenny Chesney at the Sphere because I want to see the Sphere and I love Kenny Chesney. So it's like, and I told this like, Craig Fuhr (48:28) Man, I tell you. Frank Cava (48:47) Like he couldn't, I don't think he gives a shit about country music. He's from, you know, he speaks with an accent from Miami. He goes, I'm in. I'm like, do you like country music? He's like, no, I like experiences. So like, those are the fun things that I think, you know what I mean? Like that's what gets me excited is doing fun things and getting people's demand. Craig Fuhr (49:04) just before coming to Dominion, I was running a group of guys where that's all we did. We just went and had insane experiences and, you know, we went pig hunt, you know, and I'm just pulling back the curtain here. What I found was is that I didn't want, I never really wanted to do it for profit. You know, I just, I just wanted to, just wanted to get together with guys, cover the costs and have a really great time. So we went pig hunting. we did a, Frank Cava (49:12) Yeah. Do you still do it or no? Right, that's the hard part is charging. Craig Fuhr (49:32) a bourbon thing. Yeah, we did a run. Go ahead, Jack. No, go ahead. Jack BeVier (49:34) you did that gun thing at the head. Good. No, yeah, we see I got Craig invited me to this. It was really fun. We went to this shooting range and had three instructors, A.R.s and pistols and had a blast. Like got some really good instruction. It was like full day. It was really good. Frank Cava (49:48) Yeah. Craig Fuhr (49:49) Literally. Yeah, I got a buddy who in my gun club, it's like X Special Forces guy. And he basically gives you most people that own an AR who bought them within the last year have no idea really how to manipulate it. But when you're trying to do that as you're running with a pistol on your hip as well. It becomes pretty intense. Yeah. So by the end of the day, Jack BeVier (50:10) learning curve is steep. Yeah, the learning curve is steep. Craig Fuhr (50:14) You know, we've got we've got targets down range for the ARs and we've got forward targets for the pistols and you run and gun and hit them each and it is the time of your life. Yeah. So so the plan really, Frank, to get back to your question was I never really wanted to do it for the money. I really just wanted to do it for the experiences. And so I do I pastor my church started up this thing called Cigar Church and they get together. Frank Cava (50:22) is exhilarating. Yeah. Craig Fuhr (50:39) once a month, once every other month, it's by invite only business guys, talk a little bit about God, talk a lot about business, smoke a cigar, drink some great bourbon. And that's really the, you know, the ultimate plan for me at some point, get something like that going. Frank Cava (50:55) What I have picked up since I've gotten this thing kind of off the ground is what people are kind of not interested in. We all make good money. So it's not the money or the two impediments are the time. Can you get away and can you have some time to actually be engaged? And the other part of it is, it feel corporate? And that's the hard part, right? And I think this kind of takes this full circle. We talked about at the beginning. Craig Fuhr (51:11) Mm. Frank Cava (51:24) We all compete against national buyers. We're kind of the ACE True Value hardware store, if you will, our businesses, right? We're systematized, but we're also mom and pop. And at its core, it's always nice to have people you can bounce things off of that are doing something similar in a fun environment. not being pitched, we're going there to do certain things and just like, you know what I mean? It's hard to find that environment. And I think there's a real need for it. Craig Fuhr (51:49) Yeah, I agree. I agree. Yeah, well, listen, man, we've taken enough of your time. Don't know how you managed to fit us in. But Jack, any final thoughts, sir? Jack BeVier (52:02) Nah, as Frank, you're always one of my favorite people to talk to. So looking forward to hanging out again soon in person and really appreciate you taking the time today. Frank Cava (52:10) It's always my pleasure. Good to talk to you both. Craig Fuhr (52:12) I never say this, but I'm a little pissed that you haven't called me to do some loans with you. you know, phone call would be nice every now and again, I can send you my number again. Frank Cava (52:20) I'll shoot you boys a text in a minute. I think there's a horse trade in our future. I'm excited for Jack and these 4 % rates since I just like opened the kimono on my, here's my marketing strategy. I hope no one from Rich Virginia is listening. Craig Fuhr (52:27) Hahaha! Jack BeVier (52:31) you Craig Fuhr (52:34) you Jack BeVier (52:36) I'll barter, absolutely. Craig Fuhr (52:38) Alright, everybody, that's real investor radio. Hope you enjoyed it with Frank Kava at the Kava companies. And please leave us your thoughts, comments. Love to hear from you. We'll see you on the next one. Frank Cava (52:50) Take care everybody.