Latest / Real Investor Radio Podcast / EP39 | Josh DeShong - Navigating Real Estate Business Growth

Transcript

EP39 | Josh DeShong - Navigating Real Estate Business Growth · Real Investor Radio Podcast

• Craig Fuhr (00:12) Well, welcome back everyone to the real investor radio podcast. I'm Craig Fuhr joined again by Jack Bavir. Jack. It's good to see you. We were out late last night. Jack BeVier (00:25) Yep. We found this, uh, there's this little, uh, local place in Odint and south of Baltimore and they've got the best barbecue and the, one of the widest selections of bourbons that, uh, that I've, that I've been to. And, uh, so we part took in both and had a great time. Craig Fuhr (00:40) can't say we tried them all, but we tried quite a few. And I can't wait to go back. So got a couple things to talk about today. And we have an amazing guest. And Josh will introduce you in a minute, man. But we got a couple of news stories here, based on some prior episodes that we've done that I just wanted to touch on quickly, man. So jump in if you want to comment. And then we'll jump into your story. So, Jack. Jack BeVier (00:43) We tried. Craig Fuhr (01:10) We talked with Doug Stein a few episodes ago, famed tax attorney, you've known Doug for many years. And I'm sure you and you and Fred have used his services quite a bit. But we talked on that episode, Jack, about the Corporate Transparency Act and what that meant for folks, especially real as we discussed on the episode was, you know, passed by Congress as an anti money laundering initiative in 2021. Basically stated that reporting companies defined as corporations, LLCs and similar entities must disclose the identity and information about beneficial owners of those entities. And so for new entities incorporated after the first of 2024, they must report and disclose the identity of the applicants. The fines for that Jack are hefty, as you might imagine, $591 a day for not reporting up to $10,000 in two years in prison. So interestingly, a federal court in Alabama just ruled that act as unconstitutional. The district court granted the plaintiff's motion for summary judgment about a week ago in the case of the national small business United versus Yellen, and basically said that it was unconstitutional. Obviously, there will be appeals. Federal government's got some deep pockets to go and fight that. But I think Doug got back to us, Jack, sort of on his feelings on it. And I was wondering if you wanted to comment. Jack BeVier (03:02) Yeah, so the implications of that are that, you know, it was the case that everyone was, well, will still have to register the LLCs that they own. Now, if you have like 50 LLCs, it becomes kind of a burdensome chore. And the intent is to, for the government to really kind of like eliminate the anonymity of hiding behind LLCs with lawyer resident agents and undisclosed operating agreements or even trust agreements that, you know, where the nature of the trust and the rules of the trust are rarely disclosed. The government wants to be able to see, you know, where's the money actually flowing to in terms of the human beings. And so Alabama thinks that's an overstep, but the federal government, and so it'll likely, Doug's take is that it'll likely be appealed to the Supreme Court, but in the meantime, Craig Fuhr (03:42) Correct. Jack BeVier (03:53) The government came out and issued a ruling stating that they'll be exempting that plaintiff, but everybody else it still applies to. So the government is coming, coming right back over top the Alabama court and saying, Hey, we're going to go fight that out. But in the meantime, no, you need to go still file. So if you see any news reports out there about, you know, how the Alabama court has, has ruled this thing on constitutional, don't breathe a sigh of relief quite yet. Uh, we're going to watch as that, as that plays out in the court system. But in the meantime, the government's taking the position that you still have to do those filings this year. And for existing LLCs we have until the, to the end of 2024 to, to make those, those filings. So it doesn't take a lot, a lot of time per LLC. Um, just, you know, kind of, but if you have a bunch of LLCs, don't wait until December 30th, cause you know, sure things will slow down and the website will get crashed or some. Craig Fuhr (04:43) Hmm. Jack BeVier (04:53) junk like that. But yeah, so we'll keep you guys apprised of as that unfolds, but it was interesting to see that play out. Craig Fuhr (05:03) Well, if you want more information on the Corporate Transparency Act and sort of its effects, its ramifications and, you know, just information in general, I would urge everyone to go back and take a listen to two great episodes with Doug Stein. I've had so many folks comment on those two episodes, Jack, and yeah, it was great content for folks to check out. Second news story. little bit more on the macroeconomic side, Jack. Horrible PCE inflation report. The Fed needs to hike in March. So January core PCE inflation, Jack, which is basically a measure of durable and non durable goods and services. Inflation was reported at point 4% highest since February of 2023. indicating a possible acceleration of inflation and more specifically the services side of things rose 0.6% in January, which was the highest increase in the last 12 months. And so, you know, they're speculating that, you know, we'll probably still see maybe a couple rate decreases in the, you know, around June, but maybe, maybe not. And so wanted to get your take on that. Jack BeVier (06:28) Yeah, yeah. So it was really interesting because Powell had came out in December, talking about how we're moving in the right direction. And the new consensus in the Fed was that we would likely have rate cuts in 2024. They even and they even the consensus the dot plot for the Fed, which is what they could use to kind of indicate to indicate where each of them are thinking each of the Fed governors is thinking the kind of the median was three rate cuts. before the end of 2024. And so the market just, you know, got super giddy about that the end of the rate tightening cycle. And you know, the stock market took off mortgage rates came in because if inflation is under control, then mortgage rates long term are going to come down some. And then, you know, a month later, well, really was really just a week ago, but the January data for inflation for PCE came out and it's and it's Craig Fuhr (06:58) Mm-hmm. Jack BeVier (07:26) point 4% on an air, you know, on a monthly basis. So that's, you know, 4.8% for just PCE, that's that there's other components of CPI that are that are even a little bit higher. So that's kind of throwing a wrench into the feds plans for a nice smooth landing and coasting into 2% inflation. And so now, pal, you know, Craig Fuhr (07:29) Mm-hmm. Jack BeVier (07:50) immediately Powell comes out after that and says, Hey, you know what, we're just going to follow the data. I didn't promise any rate cuts. We're just following the data. I've always said that I was going to follow the data. So he's backpedaling. And so we'll, you know, we'll see what we will, I guess we will continue to watch that data to see what's going to happen. Mortgage rates increased based off of that news, which sucks. And that's been frustrating. And now I think it's actually this week. Craig Fuhr (08:11) Mm-hmm. Jack BeVier (08:19) which was probably by the time you guys hear this a week or two ago, uh, Powell is speaking, uh, today actually in front of Congress. So we'll see what he says today. And, um, the, uh, so it's TBD right now as to whether we're going to see any rate cuts in March or even June. Um, so, uh, obviously because of the impact on mortgage rates and the potential impact of mortgage rates on the housing market, that's something that we're, we're following very closely. Craig Fuhr (08:48) Real estate investors live in a world of goods and services. And so while goods appear to be still, you know, falling the price of goods, services, they're saying is very sticky right now. And so we haven't seen any significant decline in services, Jack. In fact, they've remained largely the same since COVID and appear to be even increasing at this point. So yeah. Jack BeVier (09:17) Yeah. And that feels right to me, like in terms of like the cost of labor, we've seen some decreases in some categories of materials, but labor in general has not, you know, maybe in the third or fourth quarter last year, we saw a little bit of softening, people are getting a little bit concerned. And so we could get some, and work was drying up a little bit, maybe just because of the seasonality of things. But you know, labor is not something that we've seen certainly not drop in terms of price, so we're still dealing with an elevated cost of, you know, replacement cost. Craig Fuhr (09:24) Mm-hmm. Jack BeVier (09:46) for building houses and renovating houses. Craig Fuhr (09:49) Well, keep an eye on it. It was good. Good to start off the conversation here. But let's go ahead and introduce our guests for today excited to have them here. Josh to show. Josh is the founder of Josh, the shong real estate. Myers home buyers. Huh? Yeah, man. You've got a lot going on, brother. But we're gonna jump in all of it. And also the founder of Trellis. So Josh, welcome to the show, man. It's great to have you. Josh DeShong (10:06) It's a mouthful. I said it's a mouthful. Yeah. Hey, thank you so much for having me, guys. It's awesome to be here. Jack BeVier (10:19) Yeah, dude. So if you could, I mean, we've known each other for a long time because of the real investor real investor round table mastermind. And I've always been really fascinated with the stuff that you do, because frankly, it's a lot of stuff that I don't do. And you've done it on a very hot all of those things on a very high level. And I'm always fascinated the way that you think about problems think about the world you you're you got a really fascinating background. Um, and your career has been a really interesting story. So if you would do me a favor and just like, if you, if you do me a favor and just like, uh, give folks a background, you know, maybe like a quick couple of minutes on how you got into the business and then just, uh, the, uh, the evolution of the different businesses that you have started over the years and bring us up to speed on, on what you're working on now, that'd be awesome. Josh DeShong (10:52) I appreciate that man and likewise. Thanks for watching! Okay, yeah, yeah. Craig Fuhr (11:11) And if you could somehow try to explain the fact that you appear to be about 23 years old and have done all of this in that time period is really the part that I'd like to get into. Josh DeShong (11:23) That's funny. That's great. Thank you. I don't get called. I got into the business when I was... I got into real estate school when I was 17. I don't get called young like I used to. I used to everybody would be like, how old are you? How old are you? I had this baby face and now I'm starting to like come to age and I'm not like the young guy anymore and it's a little weird. I'm not going to lie. So yeah, guys, thanks again for having me on the show. You know, like I said, I started almost 20 years ago, 18 years ago in this space. At a necessity, you know, it was 2004, 2005, I was working for my dad at his furniture store and I was reading a business journal and it was talking about how great residential real estate was. And I was like, okay, fantastic. That's what I want to do. So I went and enrolled in classes. It was a total fluke thing. I didn't know anything about real estate whatsoever. Went and enrolled in classes. And yeah, I actually did all my coursework while I was 17. When I turned 18, I could finally sit for my state licensing exam. So I sat for my exam and I joined Keller Williams. And... I always look back and laugh. I was so naive. I was so young. I didn't have any experience at all. I mean, at that point, I obviously didn't even do college, right? So my experience level was nothing. And it was phenomenal because I didn't know what a bad market meant. And I didn't know what a good market was. And so that ended up serving me in the long run to like a serious advantage. So I get licensed, I get rocking and rolling in 2006. I was, It's funny, I don't know how I sat for my real estate test guys. I didn't even know what earnest money deposits were or any of those things after I got my license that I was like, I cannot believe I actually passed that test. But there was one thing I got a really good piece of advice and it was call expired and canceled listings. So I just I obsessed over that one thing. Jack BeVier (13:22) Ha ha ha. Josh DeShong (13:36) every day I would call as much as I possibly could. There's actually a photo of me at my desk and I noticed something the other day. I had three phones on my desk because I would dial off of each one. This was pre-auto dialers, right? And I did that for like two and a half, three years to really kickstart my career. And it turned out by year three, we were in the top probably. probably the top thousand at Keller Williams and maybe top 500 or so. But by year five or six, we were, we were ranked in the wall street journal. We, we had a pretty massive business. And, and I, again, I attribute a lot of that to just getting in timing wise. I got into kind of a bad market and I just learned how to work really hard. So when the market started doing well, I was just used to working hard, right? It kind of set that standard, that benchmark. So. Craig Fuhr (14:35) She said, we talked with a few weeks ago, we talked with Austin Carroll. And Jack, do you remember how he was talking about his initial foray in the real estate, how he would make like, he went out on this crazy, and I think it was a Keller at brokerage, if I recall correctly, Jack, where he decided to get into a competition where they would talk to, was it a thousand or 10,000 people, Jack? It was like some ridiculous. Jack BeVier (14:53) Mm-hmm. Yeah, he's also color. Yeah. I think that's... Yeah. Craig Fuhr (15:03) And so, you know, it sounds like a very similar trajectory, Josh. And so yeah, amazing. You know, I have always said that Keller is more of a coaching company than it is a real estate company, you know. Josh DeShong (15:13) Yeah, for sure. I, to this day, give Keller Williams a ton of credit for my upbringing because really, my real estate team, my brokerage team, that was my college. That's where I learned everything. You know what I mean? I went to the school of Keller Williams. That's what I should put on my LinkedIn education. I should say I attended Keller Williams for 11 years. Yeah, exactly. Craig Fuhr (15:28) Yeah, right. Yeah. Got your MBA in color. Josh DeShong (15:43) You know, one big thing and Jack, we've talked about this. One thing about me is I know that I don't know everything. And so I'm constantly asking questions. I'm constantly seeking mentorship. So very early in my career, I sought out mentors and by 2012, so roughly six years into my career, I had, I had two or three people that I really looked up to and would seek advice from, and this could be, you know, business advice, spiritual, like. advice, just anything, just for guidance, right? Mentorship is probably one of the things that I, like one of the few things I got really right. But in 2012, a mentor of mine says, Josh, services is hard to build wealth. You need to build products or you need to acquire assets. It's one or the other. Those are the only real two paths to building something and actually have wealth at the end of the day. I took that very literal. So within two weeks, I probably had two houses under contract, one of which I actually still live into this day. So, but yeah, within two weeks I bought two flip properties and I finished those out in 2012. In 2013, I did over 30 and I was just coming across them in our traditional real estate business. In 2014, I did over 100 and I started actually wholesaling out of necessity. Jack BeVier (16:49) Nice. Josh DeShong (17:11) So, Myers, so we had our brokerage business, Josh Deschamps Real Estate. Then we started, what was DFW Home Buyers, and we were flipping properties here and there, and we started wholesaling off our excess inventory. And then, fast forward a few years, and to 2017, we're doing hundreds and hundreds of wholesale deals a year. And we decided, hey, I don't... I don't have the capacity to actually invest in property anymore. So we went exclusive wholesale. And it also was good too, because we wanted our investors not to feel like we were competing with them, like they were getting our scraps or our leftovers. So yeah, in 2017, we went exclusive wholesale and we launched Myers Home Buyers. And it's a... Craig Fuhr (17:46) And then it also was good too because we wanted our investors not to feel like we were going to be with them like they were getting our scrap or our revenue. Right. So, yeah, what is going to bring you in the future? Josh DeShong (18:05) a large wholesale operation based in Dallas, Texas, that right now we're pacing for about 500 transactions this year. It's only March, so you never know how this year is going to go, especially with the, you know, who knows what the Fed's going to do, right? So, but yeah, then, so originally as a kid, before real estate was ever around, I was a little bit of a nerd growing up. And so I was always into computers. I got my first computer at eight. So I had learned to program, I learned to code quite young, taught myself most of it. I sat for my A plus certification, which was kind of like the original Microsoft certified when I was 13. So I had a little bit of a technical prowess and I used that a lot as I was going and evolving and building my different businesses. Craig Fuhr (18:48) Yes. Josh DeShong (19:01) Well, in 2016, I encountered a gentleman by the name of Stephen Chang, who was an engineer at Google at the time. And he actually joined me and our company and we've built all kinds of different tech products, internal and some external that we've licensed externally. But a really cool one that we were really excited about is Trelli. And Trelli is a marketplace for wholesalers. So just like Myers, Homebuyers is a wholesaler. Craig Fuhr (19:09) involved in and you can also get a different type of product internal and external as well. So that was a really cool way that we could really talk about it. And the value of the marketplace for a wholesaler. And so just like home buyers who's a wholesaler, there's not a formal playground for them to play on. Josh DeShong (19:31) a formal playground for us to play on. We still operate off Facebook, email blast, text blast, things like that. So we designed a marketplace that helps connect investors to real wholesalers, rates the wholesalers, they can get reviews and ratings from their clients, from their database. And yeah, that's something we're really, really excited about, but that's like our tenure, that's our tenure game is what I call that. Craig Fuhr (20:00) So. Jack BeVier (20:01) So how did you, how did you, uh, where'd the, by the way, just out of curiosity, where did the Myers brand come from? I mean, it's very catchy. Myers home, the home buyers. Um, is it, it rhymes. Josh DeShong (20:01) So, the lot. Craig Fuhr (20:04) Yeah. Josh DeShong (20:11) Yeah, it rhymes. It was between Meyers Homebuyers and Schmidty Buy Shitty Houses. I was struggling at figuring out which way I was going to go there. Craig Fuhr (20:16) See you guys in the house. Jack BeVier (20:18) Yeah. Craig Fuhr (20:23) Well, I know what the name of my company is going to be now. Jack BeVier (20:26) Hehehehe Josh DeShong (20:26) But I'm gonna be honest, I would love to run those ads. Those, that would be so much fun. Craig Fuhr (20:32) I want to see I want to see the bench right next to the to the home investors bench. Yeah, like, you know, right. Jack BeVier (20:39) So growing that wholesale business, obviously, the market was a lot different in the mid teens, but that's no small thing, the amount of transactions you're talking about. And so like, how did you? How did you build? How did you go from you wholesaling yourself just finding stuff maybe on the MLS or like sending some direct mail to actually building a company that's doing it? Josh DeShong (20:39) Oh, that would be so great. Jack BeVier (21:02) How do you, how do you recruit the sales guys? How do you keep the sales guys because you know, wholesaling is not the, you know, one of the appeals of that business model is that it's low barrier to entry. So how do you like, if you find a really good salesperson, keep them in house as opposed to them going off on their own, like talk to you about that kind of stuff. Cause I feel like people have a hard time building acquisition. One of the hardest things to do is to build an acquisitions team. And there's lots of, lots of investors who have, you know, stories of getting burned by somebody they mentored for two years and then dipped out on them, you know, Josh DeShong (21:19) Yeah. Yeah, I will. And you know, I will say I don't think there's a world where that ever will go away. I think at the end of the day, every investor wholesaler needs to needs to accept the fact that if you hire talented people, you are likely not a destination, you are probably a layover. Right? Like, otherwise, you have to give them upside. There is no there is nothing that you can do to retain them. If you do not give them upside. It's it's a Like, I mean, look, winners win period, right. And I think it's a it's silly for us to commoditize people. And don't get me wrong, like, in all honesty, I've tried to in thinking about how Craig Fuhr (21:56) Yeah. Josh DeShong (22:21) how to evolve the business and thinking about recruiting people in. And then one day I just kind of had to accept that like, hey, I just need to enable people to do as good as they possibly can and treat them as good as they possibly can and give them and build. And so this is where the technical components come in, build things that give them a an advantage versus if they were on their own. Right. But the then it becomes, is that defensible? Is that thing I built defensible or can they go out and license it from somebody else? And, and so that's when, okay, training. helping guide them and helping them achieve things. That's when additional value comes in. But again, at the end of the day, layovers versus destinations. Craig Fuhr (23:06) Jack, in your in your all of your years running the ship with Fred here at Dominion, I know you guys have gone through the similar growing pains of sort of finding the finding the right avatar and the right compensation for great people. And maybe you could just talk about like sort of the evolution of what you guys have discovered over the years of finding, attracting and really keeping great talent. Jack BeVier (23:33) Yes, I, so I definitely agree with Josh's sentiment. Frankly, that was like, you know, when Fred, uh, when I joined Fred, that was, that was the deal. I was like, Hey, I'm here for ups or I'm out, you know, like I was. And so now I've always, all right. I don't know if I've always struggled, but I think there's an important distinction though, because some people say they want ups. Like, so if, you know, if you want to be on the operating agreement, well, you get the ups along with the downs. And there's a lot of people who say they want up. Josh DeShong (23:43) Yep. E T Yep. Jack BeVier (24:02) but they're actually not willing or frankly not able to take downs. Like they've got a family they got a they have a they've already made decisions in their life where they've got a family and a mortgage and you know, and a lease payment on their car. And so you know, they also they've got a lifestyle that they've like become accustomed to. And so they need a base that starts here. But they also one ups. Well, you know, America, so like, you know, if you want upside, you got to, you know, you got to take downside. And so finding that finding that mix of like folks. And so we've ended up like, I've really struggled with this over the years, right? Like I think 10 years ago, I was thinking like, hey, let's just, let's do like an employee-owned company. Like, let's turn this into an employee-owned company because then everyone will have, you know, everyone will really be invested in it. And we already have, we're recruiting folks who think real estate investing is interesting, but they've got their piece that they do well. And if we all like just make this place where we've got all these different people the experts in their field and we all like kumbaya and you know, work as a team together, we'll all do better and we can all, you know, join, you know, enjoy the upside together. And I, and that, that downside issue kind of smacked me in the face because you know, I was, I was willing to work for beer money, but other people weren't or aren't able to work for beer money with upside. And that's been a challenging thing. And then I've had folks who were just, you know, who, who have stopped by stopped through over the years and come in saying they're here, ride or die. And then dipped out like two years later, regardless of the structure, even if I'd like structured something that I thought had considerable upside, you know, they were never really here to for the long term in the, you know, in the first place. And I know that's definitely something that I've that I've struggled with. I agree with Josh's sentiment about building an environment where you're adding value so that they can do the things that they do well. And they don't have to do the things that they don't like to do or don't do well. Part of that gets into maybe even a deeper conversation of like, what people are, you know, what understanding people being honest with themselves about what they're good at and what they're not good at. And that's a that, you know, that can be a difficult conversation, because some folks, a lot of folks will tell you they can do everything, right. And it's just not true. I also used to think that I could do everything, but I've since learned that is also not true. Craig Fuhr (26:11) Yep. Josh DeShong (26:22) Thank you. Craig Fuhr (26:26) Oh, jack, you're just being humble. What? Josh DeShong (26:29) It's funny, I was listening to you, Jack, say this and it's like, we really all are out here just living the same life. It's just on repeat or something because it's like, yeah, I've done the same thing. It's surprising how much employees don't value upside or value immediate compensation and no upside. So, it's just like everybody has these different triggers. just accepting like, hey, there's going to be these different triggers, levers, I guess, I can pull with every person. Makes it a lot, it makes it, it takes a lot of the minutiae out of it. It takes a lot of the extra thought out. It's less game gamified, but, um, it builds a stronger culture. I think. Jack BeVier (27:02) Mm-hmm. So what's the Myers structure look like, right? So you got, I'm sure you got salespeople who are answering the phones, but behind them, what is there that, you know, behind them to make that happen? Craig Fuhr (27:26) Yeah, what's making the phones ring? Josh DeShong (27:26) Yeah. So there's actually not, um, there's, uh, we have an answering service that answers all of our calls, um, or the leads come in via, um, our website. Um, from there, um, the, from there we actually have a proprietary lead routing system that looks at all of our, okay, it looks at two things. It looks at, um, one is the client side. So the person that submits the lead, What's owed on the house? How long have they owned the home? What is the overall score of that lead? What is the quality of that lead? That's happening on the on our on our website actually From there we then send it to another engine that looks at our sales our acquisition associates It looks at their revenue efficiency. It looks at how many leads they've been given What was the overall score and how are they doing and then it distributes that lead out to that person? whoever that is. At that point, our team reaches out, our acquisitions department will reach out. Somebody will go out and meet with the homeowner. So we do all physical in person. There's a lot of, I think this virtual wholesaling is like the new hot thing. We are not virtual. We are the opposite. So We have an acquisitions associate that actually goes out, they meet with the homeowner, they'll walk them through whatever. If there's an issue on title, which is a substantial amount of our files, they will start the curative process, we'll go under contract with that homeowner. At that point, our team then does two things. One is we have the Trelli database, the Trelli marketplace. We post the property to Trelli. And then we have a Dispo team or our sales team is what we call them. And sales, their objective is to engage with real estate investors and just connect dots for opportunities. So we've got roughly 20,000 investors that we are actively engaging with in the last 12 months. And of those, our sales team will start drumming up interest on those properties. Craig Fuhr (29:38) And also, our sales team will start running up and put some new properties. We'll take all of our sales to our selling platform in the marketplace. And the investors will put on that property there. And sales, kind of like a state option. Would that generally make sense? Sure, yeah, absolutely. Josh DeShong (29:45) We take all of our bids through our Trellif platform, through the marketplace, and investors will bid on that property there and we end sales kind of like an eBay auction. Does that generally make sense? Jack BeVier (30:01) Yeah, yeah, yeah. How many? So how many sales? Like, how big is the team? Like in each category of folks? How many people are there? Josh DeShong (30:06) Because... There's 15 people, roughly four in acquisitions and 11 in sales. So the way we think about it is sales is kind of like our entry level, like sales is where people come, that's where they kind of like earn their stripes. Then they go into acquisitions and then the goal is to get them to go into management or leadership. Jack BeVier (30:18) and then what's the end? Craig Fuhr (30:23) Wow. Jack BeVier (30:31) Interesting. And what's what is management and leadership look like? I mean, I know you guys do a lot on the tech side of things. So that's got to be is that you know, do you consider that like a department or do you have like a guy? Josh DeShong (30:41) So, well, no, if you go into management or leadership, the hope is you're running your office, you're running your own market center and you're getting some sort of an upside, some sort of a profit share incentive. And that's really the only way that you can keep leadership. We've tried scaling without doing it that way. And to y'all's point, you know, once you get some, you train somebody good enough to leave and you... and then you're not paying them what they can now go make on their own, they're going to leave. So scaling when scaling that model doesn't work. So now we're about to go open our second office again with a GM, somebody who's actually earned their way up through the ranks. They've kind of gone through this process of advancement, if you will. Jack BeVier (31:37) Interesting. Craig Fuhr (31:37) When you say second office, are you still staying within, you know, the Dallas Metro? Are you branching into other states? Josh DeShong (31:44) Yeah. No. So we were in, we had a couple offices. We had Dallas, Fort Worth, Houston, and Tampa. And then when 21 came, things got really, really tight. And we decided to cut bait on anything that wasn't core revenue, like our core focus. So we bailed on those other, on all of our other markets except for the DFW. So now we're going back to Fort Worth, and then we'll probably actually do a third office in Dallas by the end of the year. And then we'll start our statewide expansion, then we'll go back out, probably hit Florida. Craig Fuhr (32:20) I go ahead Jack. Yeah, I was gonna say man in an era of low transaction and you know, everybody complaining that it's like finding a needle in a haystack. How are you guys centered in one metro area and able to do 500 transactions? Jack BeVier (32:21) What's Legion? Josh DeShong (32:36) So that's where I think our competitive advantage is from a tech perspective, because like, okay, everything we do, we try to make it, okay, let me, I'm embracing qualitative, but I'm very quantitative. So I try to use data to make decisions. So we have feedback loops built into like our CRM. So for example, I would realistically pay $500 for a lead. No problem. I would realistically pay $1,000 for an appointment. No problem. I would realistically pay $20,000 for a $20,000 fee, right? So what's happening in our CRM, as this stuff is happening, we are getting different, we are sending back, for example, to Google, we're sending back different values for every lead that we actually get. We're sending our website different values for every lead that it's actually putting into our CRM. That is allowing us to really optimize and effectively pay our people with leads rather than pay them with money. So if you do really well, you're going to get more leads than if you don't do well. Does that generally make sense? So that's where like, because I can go out and spend 500 grand on marketing, but the problem is I can only, people can only work so many leads at a time. But then they can only work, yeah, they can only work about, we've found they can only really work between 25 and 45, ideally. After that, conversion rate starts to drop. So if you're not focused on really optimizing conversion rate, you can't scale up how much you spend in marketing. Craig Fuhr (34:03) We were just talking about that last night. Jack BeVier (34:21) Do you have, are you, are you optimizing feed? Do you have, I mean, this is, I'm not sure exactly how you, one would execute this. Of course, you know, we can put a man on the moon so we could figure this out, but maybe you already did, but like, are you saying that like a lead goes through the system gets, you know, from a particular lead source gets sent to a particular, um, acquisitions person and they make, you know, and, and they dispose of the, you know, the sales guys, dispose of the thing and they make 20 grand on that. And you. feedback loop the system to be like, Hey, we made 20 grand on that. Like you could pay you only paid 1000 bucks for that thing or you only paid you only paid 5000 bucks for that you could pay six and like ramp that back ramp that up to try to dial that up. So like as like you're getting a feedback loop from the system into your dialing up different the different areas of the funnel based off of the feedback loop of what's coming out of the bottom. Josh DeShong (35:03) Right. Bingo. Yep, that's exactly what we're doing. And it's, it's the only way I've been able to figure out how to scale. So every time we tried to scale marketing and the number of leads that we're actually getting, we start to lose invisibility in the management of what's happening with all the different leads. Then things like our, we'll have salespeople that'll take that'll steal stuff. Loss mitigation is another topic we could get into. But we'll have salespeople that will, will Craig Fuhr (35:32) and then things like our people have sales people that will pay a little steal, that's lost mitigation. And there's another topic we can get into is the broad idea of having sales people that will be able to call up one of their buddies and be like, hey, I got this deal, I lost it, I'm just buying it. So we have to get to the table. So like all these things with the new problems that you're born with as you try to scale. Josh DeShong (35:43) call up one of their buddies and be like, hey, I got this deal, you need to lock it up. You need to buy it and throw me a fee under the table, right? So like all these different new problems get born as you try to scale and that you don't foresee it when you're doing 50 or 75 units a year. And so you have to, at my stage, what's most important is optimizing that conversion rate and not letting, like what would happen a lot of times back in the day is, somebody would start doing bad. And we had them on an even round robin of how we were distributing our leads. Well, when they were doing bad, we wouldn't realize it, but we would, six months would go by and this person would have cost us maybe hundreds of thousands of dollars and we never even thought about it. And yeah, and maybe they were just going through, you know, maybe they were going through something personally, maybe they didn't, they, or something that also happens. Jack BeVier (36:29) Yeah, yeah, and opportunity cost. Yeah. Josh DeShong (36:41) they make a bunch of money and then they want to take two or three months off. That happens a lot. Well, I don't want to keep giving them leads. I want to change who I'm giving those leads to. So by having a real time system that's now managing distribution and then also has a feedback loop to ultimately score what the lead is valued worth, that helps us keep the conversion rate high and also keep increasing our overall spend. Jack BeVier (36:45) Mm-hmm. What level of granularity are you guys doing? Did you, so did you create a scoring system? And if so, what, what level of granularity are you guys using on that scoring system? Like obviously, you know, like paper click based off of this word. And, but like, are you doing also like who picked up the phone or the script that was used or the, anything about the nature of the lead, like what level, how, how nitty gritty do you get there before you're like, Hey, yeah, this is like good enough. Josh DeShong (37:34) So we will look at indicators like how much was owed on the home, when they bought the home, number of occupants in the home. We will look at mortgage date, last recording date. We look at quite a few different variables. And really we're learning off of this constantly, right? We're trying to identify patterns. and use those patterns to our advantage. Craig Fuhr (38:07) How much are you taking a look at sort of what the motivation was? Josh DeShong (38:13) Not nearly as much as you would think. So because we call those subjective variables and subjective variables can, um, can kill any kind of, um, pattern recognition. Um, like for example, you ask yourselves, people, you know, rate elite, hot, cold, uh, whatever, um, what I call hot and what someone else calls hot will not be the same. It never is. So those types of variables, motivation, if the husband calls in, they're less likely to say real motivation over the phone, whereas if the wife calls in, she's more likely to say it. Craig Fuhr (38:49) The reason why I ask is, Jack, with that fascinating discussion with the guys from Audantic, and sort of what they're doing to identify motivation in ways that people may not have thought and sort of much more and really taking a look at the demographics of particular sellers who, you know, in terms of patterns find themselves in, you know, situations where they're more motivated than not. It's obviously a business of motivation, right? And so. Jack BeVier (39:22) Yeah, Josh, where would you like, I mean, you know, Audantic well, where do you, do you, do you use them and then follow up to that? Do you, where do you differ philosophically from them in terms of how you think about optimizing, optimizing a lead gen channel? Josh DeShong (39:25) Mm-hmm. I don't think I differ that much actually. I love Chris. You know, they, Audantic is, we've worked with them in the past. I would say they're probably one of the best when it comes to identifying people that have the most, the highest probability of selling. In Texas, so I'm in Texas, it's a non-disclosure state. Audantic isn't able to do the same things in our state that they can do in other markets. Craig Fuhr (40:10) Dagger. Josh DeShong (40:11) So if you're in Florida or you're in pretty much any other state except like eight of them, then you can back into motivation based on probate filings, based on water cutoff, you can do things like that a little bit easier. And then you can still do a lot of that stuff in Texas, but it's not as robust. Jack BeVier (40:38) But you've built that like determination of you've built that feedback loop right into, you know, right into your acquisitions pipeline. So you're feeding the, you're feeding your acquisitions pipeline data in real time, which I also, I think it's a super powerful idea because I love the idea of looking at public record data and saying, Hey, you know, who sold all right, who else looks like the people who sold and finding more of those people, but also like the market changes, right? Like market psych, but what that doesn't get you is it gets you a ret, where what it gets you is a retrospective, uh, vantage point on who's selling, right? And so like, whereas, you know, if all of a sudden some scary thing happens in the news and a certain segment, certain psychology, right? Of, of seller says, Hey, you know what? Now it's a good time to sell, right? Cause they read on wherever that like, now is a good time to sell. Um, but the, but the values are capped, but now is a good time to sell. If you were thinking about, you know, if you've been sitting on the sidelines, do it now you'll, you'll get that feedback, like in real time, right? Like, you know, as, as the guy is closing the deal and you're disbowing something, you're like, Hey, this just worked. And anyone looking at public records data will see that six months, or sorry, two months from now, um, and, and in, in the event of an honest or a non disclosure state or not at all. Um, that's super interesting. Yeah, I like I like that a lot. Josh DeShong (42:04) Yeah, and you can, and don't get me wrong, in the non-disposal state, you can still get like probate data, but you can't get as much granularity as you can in some of the other states. Jack BeVier (42:18) So what CRM are you using for everything you described? Did you build it yourself or you build it on some backbone? Josh DeShong (42:26) So, fantastic question. We started back in 2017. We started trying to build our own CRM and we cut bait on that because our ideal CRM is, yeah, it's basically Salesforce. And so it's like, okay, so are we going to build Salesforce? And that wasn't... Craig Fuhr (42:41) non existent. Josh DeShong (42:51) that did not seem to be a viable proposition. So we played with Podio, we played with Zoho, we played with a couple different platforms. Ultimately we decided on Zoho for a few reasons. It was extremely flexible at the time. Zoho was like this up and coming bootstrap startup, but they were doing really, really well. Craig Fuhr (43:15) Mm-hmm. Josh DeShong (43:16) And then Citrix stopped supporting Podio. So that kind of freaked us out in terms of long-term viability. So we built out a custom instance of Zoho and over the years it's actually been great because they've added more and more to their suite of products. So, you know, a $40 a month per user seat on Zoho is the equivalent of like a $400 per month user seat on Salesforce or something extreme. Like it's a lot. a lot more cost effective for us. It seems relatively user friendly. It is relatively user friendly compared to your Salesforce, but it's still a startup in all honesty. Jack BeVier (43:59) Interesting. Craig Fuhr (44:02) Yeah, we've certainly had our growing pains with Salesforce. I'm just, I was, I would wonder, you know, how much, how much, where do you find the people to do the customizations? Uh, and you know, how much, how much time and money have you spent on that for Zoho? It's a robust platform for sure. Josh DeShong (44:21) Yeah, it started with me doing it. Cause again, remember I said, I have some, some technical chops. And so I started building it out. Like what was the minimally viable CRM? And at first it started as just, you know, a leads and a prospects module. And then it, then I added a, a pending properties and then, then it became all these different workflows and then Steven, our CTO got involved and then, then it turned into a whole nother thing. So. We've also had people that, you know, CRM managers and stuff on salary. I would say we've probably spent since 2017, 2018, we've probably spent $450,000 on it. Maybe 350,000. Somewhere between there. I don't like to think about it. Craig Fuhr (45:10) I always I always love when Jack gets that nostalgic smile on his face like Jack BeVier (45:15) Yeah, I don't want to look at it. I don't want to look at what I've spent on Salesforce in the past two years either. Josh DeShong (45:15) Yeah. Salesforce is by far the most robust and it can do things that nothing else can do. But man, they are proud of that product. Jack BeVier (45:30) That's what I keep telling myself. Craig Fuhr (45:31) I've always said it's the photo it's the Photoshop of CRMs. You know, it's this crazy robust platform that can do a million things. But most people only use about 100,000 of those things. You know? All right. Yeah. Josh DeShong (45:42) Yeah, yeah, you need paint and you got Photoshop. Jack BeVier (45:46) Yeah. Cool. Hey, Josh, I want to jump in and talk about Trelley and that experience and the marketplace what you know, how you guys have built that out and that experience, but we're running up from a time point of view the end of this episode. Craig, you want to take us into the next? Craig Fuhr (46:02) Yeah, sure. I'd invite everybody to join us for episode two with Josh DeShong, where we will talk about this great marketplace for wholesalers that he's bought. I'd love to hear sort of like the genesis of the idea, you know, how you follow that through to the actual product. I'd also like to talk more about the real estate investing that you do and sort of how you manage it all. And so join us on the next episode with Josh. We'll end this one here. Thanks for joining us. And we'll see you in a bit for episode two with Josh DeShong