Bruce Norris is joined this week by Dyches Boddiford. Dyches is one of the most recognized and trusted names in the real estate industry. He went through college, got a degree in physics and computer science in the early 70s. In the 1980s, he began to purchase properties, first his own home. By mid-80s, he also began to purchase notes. In the early 90s, he retired from working for other companies to work on his own. He created loans for mobile homes, and he even bought and flipped them and carried the financing. In the early 90s, he began teaching about the subjects he’s most well known for, holding properties and trusts and corporations and LLCs.
- Which states has he done most of his investing?
- How did he learn about the house buying business?
- Did prices radically change in the areas he was investing from the ’70s to 1980?
- What kind of work does his daughter do in the field, and does she source properties in new ways?
- Who are his favorite teachers in the real estate space who had a big impact on him?
- What is his strategy for discount note buying, and how does he protect himself by doing this?
- What did Bruce and Dyches have to do to get listings and advertise before the MLS existed?
His Web site is www.assets101.com. Dyches is actively teaching people, and he and Bruce had a conversation within 30 days on him helping direct Bruce on how to put his assets in a safe place. Bruce started by asking him about his background as a real estate investor and what state he was mostly active in as far back as the 80s and 90s. He said he has been primarily active in Georgia. That’s where he started out. Having spent almost four years doing real estate, he’s a big believer in working in your own backyard where you can keep an eye on the market, property, tenants, and you know what the laws are in that area as well. So he did a lot in Georgia, but he has also done a good bit along the coast of South Carolina in their resort areas as well as some inland counties. He has also done business in North Carolina as well. He always find that the deals that he does outside of his backyard are the hardest ones to deal with and the ones that tend to create problems for you when you don’t have time to deal with them.
Bruce asked him if he is usually dealing with partners at that point or if he is working on his own. He said he has had partners over the years, both good partners and poor partners. Not everybody has the same business acumen nor expectations in investment. He has had partners over the years, but he worked out of most partnership situations as partners wanted to retire or wanted to go different directions. He’s not against partnering, it’s just that you eventually should be working toward being your own partner. Anytime you get away from your area, you do have to rely on relationships and it’s hard. The only reason he was along the coast of South Carolina was that there was a real estate agent that was also a real property investor with whom he partnered. Most of the deals he did along that area were with him.
Bruce next asked Dyches how he learned the house buying business. He said he kept looking around and decided what he wanted to get into, either as a career or as an investment. He kept coming back to real estate with its ability to incorporate sweat equity along with the ability to get leverage financing, both from sellers and from institutions. He saw real estate as the way to go while still working a full-time job. He wishes he had started doing real estate 10 years earlier than he did because he spent about ten more years in the working environment working for a company before he really started just working for himself with the investments.
Bruce asked Dyches about the area where he was investing and if prices radically changed from the early 70s to around 1980. He said when he started in 1980, he started in the high-interest rate environment. As a matter of fact, for one of the first houses he bought, he got some financing from a third party, a hard money investor, and it was a 25% annual rate of return. Fortunately, it was a low-price house, under $10,000, and he was able to pay it off within a couple of years from his salary and from the rents coming in on the property. Another property he bought was a V.A. property on which he was paying 9 percent interest on the V.A. loan, which is pretty hefty. It worked out over time, and the values went up with the inflationary market that we had at that point in time. He definitely saw a lot of difference in price.
Bruce said for him during the 70s and 80s, he was lucky enough to own just a couple of houses. These included an occupant residence and a couple of rentals. In in this 10-year period, six years in California, 1974 to 1980 prices tripled here. That got his attention as far as wealth building and equity. For a California investor, there’s a lot of emphasis on where prices are going to go as opposed to holding on to something forever and hoping it pays itself off. Bruce asked him if he is looking to have his price increase in the areas where he typically invests be his dominant gain. Dyches said California is the odd duck out there. Out of the 50 states, in 49 of those states, you really want to be concerned about cash flow and about paying off any debt that’s on the property, and hopefully, you’ll get some increase which might just stay ahead of inflation but grow the value of your assets. In California, you’ve got such a crazy market there that, in many cases, people are forced to play the appreciation game either in forced appreciation buying and fixing up and reselling or buying and letting the market take them up. But, they can’t justify their prices strictly on the rents that are coming in. It would be very difficult to pay off that debt on a property strictly from the risk that you can get in California.
What’s interesting is Bruce and Dyches both started in a very similar time frame. Bruce said in California, he could buy a HUD-owned fourplex for $60 grand and resell it for $120 or $130. Naturally, the fourplex is in a rough area. It would have been a challenge to keep rented and not much fun to own it. He was always tempted to sell it and cash in the check. Of course, those fourplexes went from one $130 to $600 grand. This hurt a little. Dyches knows a good number of people on the coast who sold a few of their properties early on, but they held on to other properties. Now, properties they bought for $50 or $60 thousand dollars back in the timeframe Bruce is referring to are pushing $800 to $1 million in value; and some are well over that, especially the ones that are closer to the coast. That is some good appreciation.
From where he was sitting at the time, Dyches really looked at real estate more as an asset to pay off and hold for quite a long time. When he talks to his daughter, who is now in real estate, and other students, he tells them the best deal that they can give is being able to get 1 percent of the value of the property in rents coming in each month. Now, the mark is high right now, and you can’t get quite one percent, but you can still find properties that are in the .7 to .8% of the value as rents coming in. The idea is that you want the property as much as possible to stand on its own and pay itself home. For instance, if he borrowed a property for $100,000, and he had a 30-year mortgage of $100,000 on the property and was able to use the rents coming in to pay off the $100,000 mortgage; if for some reason in the 30 years he was only able to sell that property for $100,000, you would still be making money on it. The reason is that the restored value from the rent that was paid over the years that was used to pay back the financing that was on the property. At the end of the 30 years, he was able to sell the property and put $100,000 in his pocket.
Dyches went on to say he is not as active as a real estate investor as he used to be. He has mainly done hard money lending over the last 15 years. As he mentioned prior, his daughter has also gotten into real estate. One thing he told her when she first got out of college and said she wanted to try this for a while, he made sure she knew she was not taking over his properties. He told her she is building her own portfolio. He told her not to turn around and call him when somebody calls her in the middle of the night with a clogged toilet. Instead, she had to figure out the problem for herself. She’s done rather well with a nice little portfolio of properties, and she’s also learned how to do some of the other things like flipping properties and lending. She does some loans with him and handles all the due diligence upfront, the closing, and collections. If for some reason, there’s a default, her responsibility would be to take over the property, finish completing the rehab, and sell it. That way Dyches, as the first mortgage lender, would get fully paid at the rate that he was supposed to get paid with the other bar, but she then makes all the profit.
His daughter, Dorsie, who just got into real estate, got a degree in building construction from Georgia Tech, which is also his alma mater. What he had asked her to do when she first started talking about being in real estate is that when she gets her degree and goes out to work for these big companies, she works for at least three to five years. Then, they can talk about her getting into her own portfolio of your house. What he wanted her to do was to find out why she didn’t want to work for somebody else. Putting her in that environment where she was working for somebody else has certainly done that. In 2011, she talked him into letting her try to do the real estate right out of college, which doesn’t work for a lot of people. However, it worked out well for her because she was coming into the marketplace after the big recession. She was able to pick up houses, fix them up and flip them, and put money into her pocket to build a chest that she could use to start investing in property. Just recently, she said that she wishes she held on to all of the properties that she flipped over the last five or six years. He kept telling her she would be in the same position she is now because she needed that money to put in the bank to build toward the reserves and the down payment that she needed for the rental properties.
What’s nice about having a skill of flipping is you’re always buying something wholesale, and that can start your rental numbers out at a very advantageous number that may not otherwise occur. That’s always the best approach. Bruce asked Dyches if Dorsie is sourcing properties in different ways than he ever did. He said absolutely. Most investors, including he and Bruce, would scour the For Sale ads in the paper. They would drive around and try to find out what properties listed with an agent were going by the wayside. Dorsie gets a whole report every morning when she gets up on her computer. She sees right away what’s been listed on the MLS and in other areas from some of these other Web sites that she deals with. She rarely buys from those sites without going out and actually determining that the property is what she thinks it is and getting face to face with the owner or the agent that is selling the property.
What’s interesting is the business can change a lot too. When she was involved in 2011, the dominant way to buy properties for probably the next five to six years was going to be an REO or a short sale. That’s not always true, and it’s not true today. She got very professional with the HUD Web site and with some of the auction sites in buying. Just like the old days when he and Bruce were coming along, she did go to the foreclosure sales and picked up several properties that way as well.
When Bruce started around 1980-1981, for 10 years he did not even deal with the MLS. He dealt with running an ad in the paper, and he bought for about 10 years directly from people. His ad would generate 50-60 phone calls a month, and it was very simple. Then, they had a lot of REOs start in 1990, and he went from being a real estate buyer to being a therapy consultant for people that were upside down. Then, he found the equity was in bank-owned things, and it would come out in the MLS and be on sale. Dorsie’s already learning that she has to figure out multiple ways to buy because sometimes it’ll be thick with REOs and short sales, and sometimes it won’t be at all.
She has not seen a recession while she’s been doing her own investing on her own. But she’s waiting for it because she knows what to do now. She will pick up as much as she can when the prices go up. He’s told her it probably won’t drop as much as it did in 2009 and 2010, but it will still drop some. That gives you a little bit of a lead on paying off the property as time goes by.
Bruce next asked Dyches who his favorite teachers are for Real Estate Investing. He said one was Jack Miller, who unfortunately is no longer with us. He passed away 10 years ago in September. Jack was an interesting guy and a lot of fun to listen to. He really expanded Dyches horizon’s when he first listened to him. Another is Pete Fortunato, who is still a good friend of his, and they teach some courses together. Pete’s down in the Tampa area, and he’s very technically oriented. He’s a lot of fun to listen to and a lot of fun to work with as well. Another is Jim Napier, who unfortunately has had some health issues and is not out there as much as he was. Dyches learned about discount notes and mortgages from him.
There’s a really good group of people out there. Bruce had the chance to teach one time with Pete about a year ago. There was a Florida club who asked him to come to teach there all day on a Saturday, and he agreed to do it if they could talk Pete into teaching half of it. Bruce had never heard him teach, and he always wanted to do that. They split some time on a Saturday night, and that was a lot of fun.
Pete and Dyches have been teaching the wealth-building IRA class for 20 years now, and it’s always fun to listen to his stories and how he approached the property seller. You get the phrase in your mind, “Why would you sell a nice house like this?” This is what he always sells, and it’s interesting to see what comes out of just expressing that to a seller. They respond very well to it. What’s great about Pete’s model was that, at least on one occasion, he’s not only bought a couple of properties from the same people but a couple of dozen. This really tells you that you’re treating people correctly for that to occur. The interesting part is they didn’t buy all those properties at one time, but rather over a few years. He’s been in this business over 50 years now, and he’s bought from the same families, multiple properties over that period of time.
That’s when you know you’re doing something right, which Bruce appreciates. As a matter of fact, The Norris Group honored Pete and John with the Rhony Award for that very reason because of their reputation and raising the bar for the industry. They try to keep it a surprise when we can, although Jack Fullerton was the only one who didn’t know he was getting it. Dyches is getting it because his reputation is great. With so many people not teaching for the right reasons, it’s just nice that he has done all he has in his career. Dyches was so appreciative of Bruce setting up I Survived Real Estate as a charitable event. It speaks highly of his ethics and his way of looking at things. We all need to think about what legacy we are leaving behind, and that is a great one.
In part 2 next week, Bruce and Dyches will be discussing asset protection. In this segment, they ended by talking about discount note buying. Bruce is really familiar with the hard money and originating it, and that seems to be so much safer. However, Dyches is pretty familiar with buying existing notes. Bruce asked him how he protects himself by doing that. The way he sees it is making a loan or buying a loan are just two sides of the same coin. If you buy a loan at a good discount and you do your due diligence, as you certainly should, it puts you in an excellent situation with that property. Sometimes he will do both. For instance, a couple of years ago he had a fellow from California who wanted to refinance a duplex he had in Atlanta. He got the call, looked at the numbers, and he said he could do it. He was willing to pay what they were requiring. He asked him who had the financing, and when he told Dyches, he knew the person.
After he got off the phone with the potential borrower, he called up the note holder talked to him about the note on a particular property that he was interested in buying. He told him he had a note on it, and it was supposed to pay off in a few months. He needed the money because he had another deal that was coming up real quick. Dyches said if it was paying off in a few months, it’s probably not going to be worth it for him to hold onto it for a long period of time. He wondered what kind of discount it was, and they were talking about a couple hundred thousand dollar loan. He only got a $10,000 discount, but then by getting the $10,000 discount he funded the new borrower and paid himself the extra $10,000 because that’s what he would have paid off for the old lender. Not only did he make a hard money loan, but he was able to get a return on the discounted paper that he picked up.
Bruce noticed Dyches teaches the hard money loan business. He asked him if he encourages people with money. He read in the description for the course that it was for players only, not brokers, which he completely understood. Bruce asked if he teaches them to go out and find their own borrowers or to find the right broker. Dyches said he teaches them that they need to look at individual borrowers as potential clients and also to talk with local loan brokers. Sometimes the loan brokers that are dealing with conventional financing run across situations where a person needs to get rid of financing on a note or mortgage that he has or he’s got a property that needs some fix up before a conventional lender can do anything. So they might need a bridge loan. Dyches wants to have as many opportunities as possible, including deals with individual borrowers and brokers. Back in the 80s, we had a lot of brokers, and that was really the primary way to get loans. As time has changed and the loan industry has changed, those independent brokers are not on every corner like they used to be.
Tune in next week as Bruce continues his discussion with Dyches Boddiford.
The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.
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