Don Costa has one of the most impressive real estate investing businesses.
Managing resources to flip and wholesale hundreds of deals is not easy, especially when operating in multiple markets and multiple states.
Watch as Don talks about how successfully invests in long distance markets.
Transcript:
Chris Bounds 00:02
You’ve not only been successful like going from like the rags, rags to riches or I guess, riches to rags to riches. But doing it in a really competitive environment, surviving over that time and not just surviving but thriving and then doing it multiple markets. When you went from like your just individual market to finally, jumping the border to a different market. How did you approach that?
Don Costa 00:31
Well, initially. California is a large state. When we started expanding from our main markets, we were looking at markets that are three hours North or South, or four hours or five hours South of us. In the same state, and that’s kind of our first iteration into going into new markets was within the same state. The second market I tackled was the Eugene Springfield, Oregon area.
The reason I chose that market initially was because I had family up there. I want to get comfortable with our processes and our systems, and still have some controls in place. The next day, we ended up venturing out into my dispo guy actually moved a few hours from the market we were looking at and it just made sense to tackle that state and that states in the Midwest. Now we’re in states that we don’t have any control.
But initially, I did a little bit more conservative than I would say, some people would. I made sure I had some relationship in the market that I was going into, to allow me to kind of establish systems and processes that I felt comfortable with. Like I said, I’m expanding. I’m trying to a country wide at this point in time. We’re setting up some marketing campaigns to just start tapping markets all over the country.
Chris Bounds 01:45
Cool. Really, relationships and boots on the ground that has been a key theme with other guests. You’ve had that whether it was family, an acquisition agent that moved, or it was relatively within driving distance, if you had to go there. But you also probably still knew had resources there.
You are now going into other places where you have much less resources. Let’s talk about those. How are you approaching? Like, going into an I don’t know what these markets are but unlike, let’s say Phoenix or Chattanooga, Tennessee. You probably know people there, but you don’t have any hard resources. They’re like, how are you approaching going into those markets?
Don Costa 02:32
One of the things that I’ve learned over the years is that, people will talk about marketing and they’ll talk about markets. As if they’re all the same. They all operate the same way, they don’t. There’s a learning curve, there’s things that make sense in California that buyers won’t touch with a 10’foot pole and other state.
There’s markets that are good for appreciation, there’s markets that are good for cash flow, I’m sure you’re relatively familiar with that. You got to look at what buyers are gonna respond to they’re gonna wholesale, what buyer is going to respond to, they’re going to flip. The first thing we look at, is there any demand in the market? Before we even look at a market. Is there any demand?
To tell you the truth is like we’ve lined ourselves up with institutional buyers, hedge funds in different buyers that are fairly aggressive across the country. One of the things that I looked at is, where are my institutional buyers that if I’m going to go into a market, do I already have a buyer in place that I know their criteria. That they’re going to be relatively well versed in explaining what their parameters are.
They’re not going to buy houses older than this age, they’re only going to buy in these zip codes. If I have those buyers in that particular market, then I’m going to explore that market. Because there’s always this learning curve to like, what are sellers going to respond to? What are buyers going to respond to in that market.
If I have a buyer that I know their fundamental buying criteria for a market and I could enter that market and shorten that learning curve? That makes sense, so we can get our feet in that market. Start picking up property to start getting momentum when we start branching out to other buyers.
Chris Bounds 04:07
Yeah. You’re understanding the macro fundamentals of the market. Also like what does the consumer want and the consumer for you. It seems like is hedge funds or institutional buyers that are buying. I would imagine rental properties, it’s probably or turnkey or-
Don Costa 04:26
They’re buying them as rentals, they’re buying them as flips. They’re not the only buyers we end up working with long term and in any market we’re in but they’re definitely, we definitely want to have that relationship that we enter. The one thing I don’t want to do is not have an exit when I go into a market and establish exit.
As long as we have that established exit we have like I said, that kind of their formula for their buying criteria and we already know-Okay, we got these particular sellers to market to and let’s get in there and start learning who the players are while we’re making money.
Chris Bounds 04:56
Are you doing any type of construction make ready uplift on these properties from acquisition to disposition?
Don Costa 05:04
We’re not flipping per say. But we are buying hold, like we’re picking up buying holds in South Carolina. We’re doing we’re wholesaling in Tennessee, we’re buying and I’m looking at Airbnb in Tennessee right now. Options.
From the buy and hold perspective, for rentals we are doing, we’re going in there and cleaning properties up and getting them rent ready, or we’re getting ready for Airbnb. We’re not doing any fundamental flipping, per say. If we’re going to exit anything other than buy an older Airbnb, we’re going to wholesale.
Chris Bounds 05:36
If you don’t have hard assets local, how are you going into establish those relationships and find the boots on the ground that you can trust? That are qualified like that know what they’re doing, that’s going to help you both acquire and just sell these properties.
Don Costa 05:57
For the acquisition side of the of the properties, we do everything from our Fresno base. We’re doing everything virtual. For the acquisition side, we have our team made locally here in Fresno run all of our numbers to make a decision as to whether or not the property is going to work for us.
When we’re making the buy, if we need to have somebody see the property, then we’ll usually leverage one of our buyers. Again, institutional buyers are who we usually inter market with and we’ll usually leverage leverage that relationship. For them to go out and see like, we’re going to send the point with the seller per se, to see a property.
Because in some cases, sellers will refuse to sign the contract, unless you put your eyes on it will actually leverage our buyer to go look at the property and have them put their number on it. Now that has some risks, you know, it per se, if you’re working with the wrong buyer, they could go around you, they could give you kind of false numbers.
But again, we’re working with establish relationships, we’ve had long term we built some trust base with and we know they’re not going to bite the hand that feeds them. And so that gives us some comfort in that portion of it. We do work with local property managers, for instance, we have some rentals in South Carolina that we’ve recently acquired, we did a lot of research and got recommendations from people we trusted. I mean, your network it’s a part of a good community, a good mastermind community. You build usually establish a pretty decent network across the country, you rely on those relationships which I did to give me rep referrals for property manager and title companies to work with.
And then we do our own conversations with those individuals to make sure that we’re comfortable with them. And then we’ll give them kind of test rooms. With one property manager, we said go into this pictures tell us what’s the cost to do this. She came back, it was really reasonable. We gave her a shot, we gave her a budget to go in and do the repairs to make her rent ready. Her turn around time and quality work was good. She got it rented for more than she she told us, she’s gonna get rented for 18 $100 a month, she got to rent it for $99 a month.
We’re going to start giving her more projects. We don’t put 10 projects on somebody, I’m very-I’m a conservative investor, I’ll give you one, and if you do well I’ll give you two. And if you do well, but we’ll start talking about more. I don’t usually give you three or four times. That’s kind of-we just kind of ease into it. I don’t want to say we take our time, we don’t take our time, we’re very quick. But at the same time, we’re not irresponsible about how we’re doing it.
Chris Bounds 08:18
The last like 60 seconds, 30 seconds. You’re doing this all from a hub in Fresno, California. Well, what are like one or two good tech tools that allowing you to manage that kind of operation.
Don Costa 08:32
I mean, having a great CRM in place is extremely important. I think follow up is extremely important. Creating relationships and conversations is huge. We have a good Call Rail or smartphone to make sure that all your calls are recorded with your team. That way you can counsel and train your team properly virtual is a little different than belly to belly.
Zoom goes a long way if you have sellers that want to know if you’re real, you can always jump on zoom with a seller and have a face to face conversation with them when you’re not in the same market. And of course, having a seller walk around the house and FaceTime you to show your property and we would as far as that to just see the condition of a property to make a decision as to whether or not it was a good buy for us.
Chris Bounds 09:15
Five years ago, you’d never do any of this stuff. It’s It’s crazy. I’ve moved.
Don Costa 09:20
It’s nuts in the belly, the belly part of it. I mean, it’s hard to give up the belly to belly part of things, but it’s really not that much different fundamentally when you think about it.