Sean O’Toole of PropertyRadar. After a successful technology career in Silicon Valley, Sean purchased and flipped over 150 residential and commercial properties, nicely exiting the market before the credit bubble burst. Combining his technology and real estate experience Sean launched ForeclosureRadar in 2007, well before most realized a foreclosure crisis was coming. The service was quickly recognized as the nation’s best foreclosure information source and helped tens of thousands of real estate professionals succeed in a market which was otherwise devastating. Sean’s mission to help the little guy succeed in the real estate market continues with the launch of PropertyRadar.
Bruce and Sean talk about the special gift and tradition that led to his early fascination with being an Entrepreneur. Sean’s career in Silicon Valley and his early days as a real estate investor.
- Will we see a wave of foreclosures?
- What are the leading foreclosure indicators?
- What lasting COVID-19 policies will have an effect of forclosures?
- What states are the migration winners and losers?
- Unemployment and tap able equity?
- New normal?
Narrator This is the Norris group’s real estate investor radio show the award winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever changing real estate market hosted by author, investor and hard money lender. Bruce Norris.
Bruce Norris I thank you for joining us. My name is Bruce Norris and today our special guest is Sean O’Toole. Sean O’Toole is a friend. And after a successful technology career in Silicon Valley, Sean purchased and flipped over 150 residential commercial properties nicely exiting the market before the credit bubble burst. Combining as technology and real estate experience Sean launched foreclosure radar in 2007 well before most realized a foreclosure crisis was coming. The service was quickly recognized as the nation’s best foreclosure information source and helped 10s of thousands of real estate professionals succeed in a market which was otherwise devastating Sean’s mission to help the little guy succeed in the real estate market continues with the launch of property radar. Sean, we welcome you to our show.
Sean O’Toole Well, thanks, Bruce. Great to here.
Bruce Norris We’ve known each other for quite a long time and had some pretty cool experiences
Sean O’Toole Probably closing in on a decade now.
Bruce Norris Yeah, at least. One of one of my favorite days every year that we’re not going to get this year is a is a ride in a limo from a hotel, to the, to the place that we have the event Nixon library, and almost every time I’m there with you alone for you know, a half hour, you say something that I’m going, Okay. I never even heard of that. So, I’m going to go back to when you were 10 years old, and then we’re going to talk about your, your son’s gift because it’s kind of significant to me. So when you were 10 years old, you got a special present. What was that gift
Sean O’Toole Was that Apple two early Apple, two computer so like 1978 and yeah, it was it was, yeah, it was great. I you know, I wanted one badly my parents officially bought it for their business not for me. But I had a lot to do with it.
Bruce Norris Okay now, at 10 years old, I don’t know how many 10 year olds were in the mode of I need a I need an advanced computer. That seems to be pretty advanced.
Sean O’Toole I was fortunate I had a friend his dad had a company that built power supplies for for NASA for space vehicles. And he built a very successful company and had a computer at home and my buddy had no interest in the computer at all but I would go over to his house and I was just fascinated by it. Every second possible but on it
Bruce Norris that’s that’s interest. So it was more your idea than your parents. You said, this computer would be really good for your business.
Sean O’Toole Yeah, exactly. And fortunately, I was able to talk them into that. And I think I was mostly probably two to shut me up. But they did have a business and they did have a legitimate need for it. So it was very expensive at the time. And I was very fortunate that they happen to be you know, both my parents were teachers, but they’d started this little side business, and at that particular point in time, that was telling pretty well, so.
Bruce Norris So when you were when you were in high school, how did you utilize that computer? to, you know, benefit? I mean, kind of started your career almost in high school.
Sean O’Toole Yeah, so, you know, I just I took two, there wasn’t a lot you could do with a computer in the late 70s. Right? Like, wasn’t a lot of software out there, it was really expensive to buy software. It’s only a couple of good games or other things for it. And so you quickly turned to programming just because you know, there was no internet or anything else, you had this thing and you wanted to do something. And so I started writing software. And then one of my dad’s friends actually had a firm that did data entry. And they had a pretty expensive mini computer. And it only had 10 terminals, and that was the maximum they could put on it. And they needed to hire more people and they couldn’t afford more terminals, but couldn’t afford a second computer. And I realized you could use these relatively inexpensive Apple twos to do the data entry, store the information locally, and then upload it to their mini computer for processing. And and that turned out to be a huge Boon for that company because now they could add these computers a couple thousand dollars versus having to make you know, 100 plus thousand dollar system upgrade add more terminals. So and that really started it. I will tell you when you figured that out because 13 when I wrote that software for them.
Bruce Norris That’s crazy. Oh my gosh. So you’re doing startups basically, in your early teens?
Sean O’Toole Yeah, for sure. That’s great.
Bruce Norris Did you have anybody at school you could talk to about this. Are you just the lone Mohican?
Sean O’Toole You know, and that was kind of just on my own. Although, you know, my school high school was actually one of the first to get a you know, an apple to lab an apple kind of own education market at that point. And so we did have a lab and they taught a basic programming class. And, you know, by that time this was a few years later. I already knew the apple so well, that I ended up basically just getting co opted to help with the lab in the class. I remember getting pink slipped out of class because you know, the computer network was down and they needed somebody to fix it.
Bruce Norris So you got a call, that’s funny. Your son turns 10.
Sean O’Toole Well, that was quite a while ago. Now. He’s, he’s gonna be a freshman in college here just in a couple of weeks.
Bruce Norris But that’s okay. So that’s a significant, it’s going to lead to another question. But when he was 10, you got him a special gift. And by the way, when you mentioned to him to me, you know, we talked about when you were 10, and what you got, and you were contemplating what to get him when you mentioned it mentioned what you were getting him I had never heard about it. And we were in that limbo. You’re trying to explain to me, so what was it that you got him
Sean O’Toole A 3d printer. I decided that was kind of like you know, of right now, at this moment. It was the most similar thing to that Apple 2 back in the late 1970s. Right. It’s still early. You know, I think most people go I don’t know that 3d printing is really going to be a thing. This like, even when I when I reached college, right, so, in the around 8685 86, my college advisor said, Hey, Sean, you need to stop messing around with these microcomputers, right, the futures in mainframes and mini computers, COBOL and Data. And, you know, that’s kind of where 3d printing is right now, in my opinion.
Bruce Norris Okay.
Sean O’Toole So a little early.
Bruce Norris How has that impacted your son’s life.
Sean O’Toole So yeah, so I got him this 3d printer off of Kickstarter when he was 10. And he learned how to Do 3d CAD modeling? And
Bruce Norris Okay, don’t? Don’t
Sean O’Toole you know,
Bruce Norris don’t I don’t even know what that is. So what is 3d CAD?
Sean O’Toole Yeah, it’s basically, you know, you got to do a drawing of the part you want to create, and then the 3d printer will print it. So the 3D CAD is is how you design it. And so he had his first project, I think, right around the same time I did 13. We went to it, we were at this local meeting, and you know, everybody stood up, like meeting them, entrepreneurs, everybody stuff. And my son at 13th stood up and said, You know, I’m an entrepreneur and I’m into 3d printing, and I have a 3d printer and I’m trying to figure out what to build. And a guy approached him afterwards and said, Hey, can you can you build some prototypes for me and turned out he had a large electrical equipment manufacturing company and they had some circuit breaker. I don’t remember what it was saying that they needed, you know, model they had all the drawings, but they were all hand drawn drawings, right. So he converted it into a CAD model and then printed them prototypes. And they actually use some of his drawings, their patent application and other stuff was really cool. And then he went on and actually designed a part for me for my airplane to hold my headset holder, and I sent one of those to a friend, a friend put that online. Lots of people got interested in now he sold thousands and thousands of those. makes a good little living as a high school kid selling holders for aviation headsets. Unbelievable. And she prints in the garage.
Bruce Norris At some, it’s it’s amazing. He’s done a TED talk.
Sean O’Toole He did do a TED talk with that was for another invention. He did. Quite a while back and he’s got a pending patent on that one. We should actually be hearing back pretty soon
Bruce Norris What do you think about the future of 3d printed houses? Because, you know, that was one of the things that you said you, you went back in history and said there was a significant decline in the cost of building a house and that was significant. And at one point, you kind of thought 3d print printing could enter that space and really make it very, very affordable to live in a home.
Sean O’Toole So we’re long overdue for technological, you know, little leap in housing, right? We’re still using this kind of stick frame, gypsum board siding, you know, approach you know, on top of a slab or raised foundation right or approach there has not really changed much in it. Well over 100 years, and it was actually, you know, was the Case Shiller or Robert Schiller’s study that went back into the 1800s. And there was this really interesting dip that when you first look at the chart, everybody thinks it’s the depression where housing prices drop substantially, who was actually about, you know, 1520 years prior to the depression and better aligns with the launch of the Sears catalog. And, you know, catalog order and homes that came, you know, basically ready to assemble, right, dramatically lowered the cost of housing. And, and, you know, I just think, you know, we haven’t seen another event like that, and I think we’re long overdue. I think 3d printing is definitely one possibility. Like there’s some others too, you know, there’s lots of interesting stuff. You know, factory built homes, you know, even cross laminated timber that takes junk wood. We’ve got a lot of problems up here in Tahoe with bark beetles. And right now they damaged wood, but you can reuse that wood in something like cross laminated timber. So, you know, I think there’s a number of things, but we’re long overdue, for sure. And I definitely think 3d printing could be one of them.
Bruce Norris If your son was gonna be 10, tomorrow with the gift change?
Sean O’Toole I still think 3d printing is pretty early. You know, I also think with, you know, some of the trade disruptions we have going on and that kind of thing, right? We’re gonna have to figure out how to bring manufacturing back. You know, a lot of people think, oh, we’re going to bring manufacturing back. We’re going to bring manufacturing jobs back. And you know, that’s one possibility, but it’s not a really of actually a very good possibility. In terms of cost of living, right, so exporting this, these things off to be built or labor is is cheap has seen us have tremendous standard of living increases, you know, TVs get cheaper every year, etc. I don’t know that that happens if we bring manufacturing back to the US if it’s done the same way, right? I think that can happen if it’s brought back to the US with automation that won’t solve the jobs problem. So I think there’s a little bit of a kind of some of the things that people are hoping for probably aren’t going to turn out the way they expect to see they’re going to be okay, we got, we got those things back and we got the jobs back. The prices are now you know, way higher and our standard of living is going down or we bring them back and we bring it back with automation and standard of living stays hot. cost a low, but we don’t bring back into jobs. I think those are the kind of two likely outcomes there.
Bruce Norris In another trip in the limo. You made this comment may not be word for word, but it’s close. One of society’s biggest problems is how will we have a society where 40% of the people either don’t have a job or don’t need to work?
Sean O’Toole Yeah, I mean, I think, you know, as I look forward, and I, you know, I really find robotics and artificial intelligence and all of that, you know, really fascinating, like as I for because I look forward, right. I think we can, over time replace most jobs. Yeah, right. And I think that actually should be our goal is to replace most jobs. Right. And, but that has big implications, right, like so where does income come from and why? Do we receive it? I mean, our whole culture, our whole way of life is so centered around work productivity, right? That to go to a future where robots do everything and, you know, we just hanging out with shadows is maybe a little utopian, but I don’t think it’s, you know, I think it will happen someday. Um, you know, that’s a that’s a, it’s really not a technology problem. It’s a cultural problem.
Bruce Norris Right. So you’re saying the capacity is there to pull that off? It’s sort of got some repercussions we’re not ready to deal with.
Sean O’Toole I think it already is having I think it’s been having repercussions since the 60s. Right when we had the first kind of software come in, per table was the first big application right and as you had payroll, done on the computer, you got red, have lots of people that used to do payroll. there’s still lots of people doing payroll, but it takes a lot less manpower than it did, you know, pre, you know, payroll software. And you know, so that was kind of the first and then there’s been, you know, there’s a new ones every day right now, where things are coming out that automated things we didn’t, you know, previously thing could be off. And that that trend is going to continue in it. I think it may accelerate. And I, you know, I think we’re still struggling with that, you know, wage growth basically going flat starting in the late 1960s. Right. And, you know, that has a lot of implications and I don’t think, you know, we’re ready for it at all, and I think it’s going to continue and accelerate.
Bruce Norris On another trip we we talked about 3 not 3d printing, self driving cars, and I said, Oh, I can’t wait till I’m driving next to an unmanned car. And what I was saying is that’s going to be completely dangerous. And you told me that it will be a much safer driver than than I could be. And yeah, can you explain? I mean, ever
Sean O’Toole Never distracted yup.
Bruce Norris But also is that you explained to me that there was a computer if you use an analogy that if it played you rock, paper, scissors 100 times in a row would win 100 times, because it anticipates what you’re about to do. And then you told me that it does that with every decision around it. And that just is it was that accurate? It kind of blew my mind thinking that. In other words, even if it got in an accident, it was the best possible outcome given the circumstance.
Sean O’Toole Yeah, I mean, I think that’s roughly true, right? So there’s there’s always there’s The world is complex and everybody wants to, you know, bring it down to a sound bite. But, you know, I think there’s no question, you know, that rock, paper scissors thing, what it’s basically doing is it it, it can perceive changes in your hand faster than you can perceive changes. And then we can perceive those changes, right? And so it’s not really predicting what you’re thinking in your head. It’s just that it can see things so quickly and change so quickly, right? That it feels like it’s predicted what you’ve thought, right? But it’s not. It’s not actually like reading your mind. Right. And just just to be clear. And then, you know, on something like self driving cars, there’s a bunch of stuff that’s easy, right? You can get to a pretty reliable self driving car pretty quickly, like you can take online color. classes that would allow you to get to the point where you could build that, right? Okay, especially if you have some programming skills, so it’d be a little harder for you not being a programmer. But if you are like an average programmer, like you take online classes and get 95% of the way there and then it gets much, much harder, right, as you get farther and farther out into what we refer to as the corner cases, right? unexpected events pretty easy for a car to follow lines in the road. But we’ve all had our most of us had at least us. Those of us up here in the mountains have had days when it’s almost a whiteout. And you know, there’s snow covering the road, there are no lines and you’re picking up on very subtle clues to kind of figure out where you are right maybe tire tracks previously in the snow and the way the snows burming on the edge of the road. or things like that. And, you know, to get to the point where, you know, that color is going to be safe in all situations. And, you know, we had that terrible accident in Arizona with the person who wasn’t well, crossing the road, the algorithm didn’t recognize it. Right. And so it’s that last little bit to where we really trust it. They still have some work to do.
Bruce Norris Okay, the impact of the cloud, on the ability for artificial intelligence to learn and to share what it learned is that was has that been a significant thing?
Sean O’Toole Well, sure. I mean, he is you can tap more and more information, right? I think. So. So I mean, artificial intelligence is kind of a big realm of stuff, right. And I think there’s enough different disciplines within it. It’s, it’s called Kind of hard to, you know, for those of us with some data science background, right, it’s a little hard to talk about it in place a little hard for me to talk about it in general terms. But typically, like the things that are where we’re seeing the most benefit right now, is not really pattern recognition. But it’s more like where there’s some model of data that you can use to then, you know, learn and then solve problems. So for example, in the vision side of things, right. If I take a bunch of photos and say, This is the type of house that it is, right, this is a modern house, this is the Victorian house, this is whatever, and I feed it enough of those examples. But when I give it an a new image, even though it won’t look, that house won’t look like any of the others, it will be able to say oh, that’s it. torian right. And, um, you know, really great results there with like spotting various types of cancers and, you know, reading x rays and things along those lines. Right,
Bruce Norris right.
Sean O’Toole So, you know, works really well there. Were, especially in the real estate industry, I think we see a lot of people kind of buy into mistakenly buy into artificial intelligence is that you still do to your point, like you need that internet, that data. The data available on a typical property, you know, is pretty fantastic, right? It’s my business, public records, data, bedrooms, bathrooms, the owner is how much debt there is how much equity is. There’s lots of stuff there. Right,
Bruce Norris right.
Sean O’Toole But when you think about like predicting the value of a home, which, you know, a lot of the eye buyers like compass and and Zillow with theirs estimate, and others talk about right like, Oh, we can predict the value of that home. If you stop and just think back for a second, how does the computer access? You know, curb appeal? Okay, maybe Google Street, you know the owner, right? How about for most for plans on online? Right? How about views? Right? If there aren’t photos that show the view or descriptions that talk about the view, none of that’s in public records, often missing from listings, right. So there’s a whole bunch of data that’s missing, and artificial intelligence can’t create that data, right? It can’t know that. Now, if there was enough other samples in the area where it’s at, okay. Most of the homes in this area have a view therefore, this probably has a view. Right? Maybe you could. But I think a lot of people you know, we’re still not where we need to be to solve a lot of problems. So it’s both amazing. And very early.
Bruce Norris I’m going to circle back around now to your your start as a real estate investor. Maybe it wasn’t the start, but when you start a buying trustee sales, that’s not exactly the place most people start. Because that’s pretty technical. You have to get your information correct, or you got a problem. So is that where you kind of started being a real estate investor?
Sean O’Toole Yeah, it really was, you know, I actually bought my first house when I was 18. I had success with computers early on that the earlier stars and most that didn’t really go that well. I don’t recommend if you’re 18 buying a house. It’s way, way too much. Responsibility right then. But and then I kind of just did the normal, you know, homeownership thing. My girlfriend and her my fiance and I bought a house when we got married and we bought another house we fixed our houses up, but I wouldn’t have called myself so you know, we did okay analysis we fixed up and resold but would have called myself a real estate investor. And after the.com crash, I left Silicon Valley and then, you know, moved out to my vacation house, I was trying to figure out what I’m going to do next. And a friend introduced me to a guy who was flipping foreclosures and he was still keeping track of his business on the back Polaroids kept in a shoe box with dividers for each day of the month. So okay, it’s the third day he show up at the auction and pull out his Polaroids for the third and show up at the auction and he took his notes on the back, and he’s like, hey, my, you know, my friend says, hey, my buddy’s making a lot of money and foreclosures wanting to write software for him. So he put away the Polaroids
Bruce Norris Wow
Sean O’Toole and I went and talked to him. And I like, it’s like, I have no interest in this, right? Like, there’s not very many people buying foreclosures, I want to write software for millions of people, not 40 to 40 thieves as referred to back in the day, right? And I just really had no no interest. Although, like, I think we all have that interest in like foreclosures, right. We all heard that they’re a great deal in there. Ask them like, you’re the guy who’s an expert, you know, I’ll go have lunch with him and talk to him. And I kept asking him, you know, like, How much? What’s your kind of rate of return here? Right? And are you able to fully deploy your capital, right, because let’s say you’ve got a million bucks, right? Just to use a round number. And, you know, you’re buying houses for $200,000. Well, you’re not always going to have all of that million dollars. deployed so that other money has to be sitting there ready, which means it’s not making any money. So if you only have 600 deployed on, for the most part, you got 400,000 sitting idle that lowers your returns, right? This was the way my mind was thinking, okay? And he just couldn’t answer these questions, right? He’s just like, I don’t know, I do really well. had a really nice office. He drove a nice car, but he had no idea. And he said, he said, Why don’t you take my last 20 deals and figure it out? I’d be curious to know, right? He was at this point, he was interested, but he didn’t have time. He’s busy. I wasn’t working. So I took all this stuff home, built a spreadsheet, you know, put in all the expenses and all the rest analyzed all the deals. And he had an 80% return on capital, including the money that was sitting idle. Wow. Oh boy, you know, I had a couple of decent little exits in Silicon Valley. You know, I wasn’t, you know, retire for life rich, but I, you know, I had some money. And I was like, Okay, if I put my money in made that kind of return. Unless I happen to hit a Google or a total home run in Silicon Valley, I’m going to make more money doing this. And I am going to be going back to Silicon Valley. And I can do it from my vacation home, right, which is where I want to live, not Silicon Valley. So I said, Okay, I’m gonna give this a try. and ended up flipping 150, almost 160 properties. And, but I only managed to 55% return on capital, so didn’t do nearly as well.
Bruce Norris That’s just Terrible.
Sean O’Toole Terrible.
Bruce Norris Wow. Okay. But in the meantime, you did. You did. Something else now? About 2000. And was it six you said Okay, looks like I’m, I’m going to be done as a buyer. What was what was going on there that you said it looks like? I’m concerned. I’m gonna leave the leave the business.
Sean O’Toole Yeah, I wish I’d known you then I came to that conclusion on my own at the end of 2005. And my partner’s, you know, that I’d had and others were like, you’re a moron, right? This is the best real estate market ever. What are you doing? Um, she’s got to stay in. And I was just convinced, you know, and it was just there was some signs that convinced me you know, I sold a $450,000 house in Stockton to a hotel made the sand a field worker. Yeah. And like they could barely afford it on the pay option payment. I’m like, wait a second this pay option payment, you know, isn’t going to stay this low it’s going to go up. Yeah. And, you know, I actually call my agent actually even talk to their agent. And they’re like, it’s fine. Like, what do you care? You’re selling the house and I’m like, Oh, this isn’t okay. Yeah, and it really bothered me.
Bruce Norris Yeah.
Sean O’Toole Um, so I just decided I was done. I felt like there was a that this wasn’t sustainable and it was going to blow up and I didn’t want to be on the wrong side of that.
Narrator For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com for information on passive investing with trust deeds, visit tngtrustdeeds.com. 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 to thenorrisgroup.com and click the hard money tab.