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REAL Trending Special Edition: Leading Through A Challenging Market

Jul 17, 2020 6:00:00 AM

Nick Ron, CEO of House Buyers of America

With a hybrid iBuyer-ish model, House Buyers of America has continued to buy homes throughout the Pandemic. Find out where Ron is seeing opportunity in the market and how he's making this model work when others chose to shut down buying homes early on.

Tracey Velt:

This is Tracey Velt, editor in chief of content for REAL Trends. Today we're speaking with Nick Ron, CEO of House Buyers of America. Welcome, Nick.

Nick Ron:

Thank you. Good to be with you.

Tracey Velt:

So let's before we start ... Our listeners probably don't know a lot about House Buyers of America, so tell me a little bit about your business model and your geographic footprint.

Nick Ron:

Sure. House Buyers of America, I started it back in 2001 and we basically buy, renovate, and sell houses. We're a real estate investment company and we bought since 2001 thousands of houses all over DC, Maryland, and Virginia and we've had rapid success. Early on when we first started, we went from zero to $50 million in annual revenue in just our first three years of business.

I personally didn't even own a house when I got into the business, so just utilizing technology and systems and processes that I learned outside of the real estate industry we were able to grow real quick, and then once there was a downturn in 2008 and then now our next bump in the road, which is coronavirus. So I've had a good, strong track record for the last about 20 years.

Tracey Velt:

Okay. How many people work with House Buyers of America? And tell me a little bit about, are they mostly investors? Or talk to me about that aspect of it.

Nick Ron:

Sure. We contract a lot of work that we buy through our renovation process. We hire hundreds of contractors and so we focus kind of with a small crew internally here that just manages all the processes.

There are about 20 of us now, 25 of us operating out of our corporate headquarters and like I said, we have anywhere from marketing to all the renovation process and all sorts of consultants that we use to manage the whole process from start to finish.

Tracey Velt:

Okay. How do you identify properties to purchase? How do you differ from some of the other ... It's not technically an iBuying model, but it's similar to an iBuy model so tell me how you identify properties.

Nick Ron:

Yeah. Very similar to the iBuy model. Yeah, we're more of a hybrid, so yes, we do the iBuying approach. We have all the technology. We can come up with an instant offer, but we're also high touch. From our roots, we've always worked with customers. We actually answer the phone and we talk to the customers, not all done through a computer.

We want to hear from them the condition of their house and little history on the house so we can know exactly how to get the most accurate value of the property, and we do a lot of renovations.

That's another thing that the iBuyers don't do, but we want to add value to the property. Whereas most iBuyers are trying to get in and out of a property with minimal work. You know, the term is clean and list. Just clean it and list it on the market. That's what most of them are trying to do.

Nick Ron:

We've done full gut jobs and tear downs and rebuilding new houses if we need to, all the way down to just small houses that we buy that don't need a whole lot of work and we do more cosmetics. We do start to finish, so we're kind of a hybrid from that approach.

Tracey Velt:

Okay, great. Obviously the country's starting to reopen with COVID and some places are more open than others, so tell me a little bit about how your business was impacted and how you're doing today.

Nick Ron:

Sure. Initially, March, everyone was obviously starting to get really concerned about the virus, how it was going to impact the economy. Even before the lockdowns people were not going out as much, and people just had that fear and I knew just having gone through a major recession back in 2008, the Great Recession, fear just the locks up the market. People get paralyzed and they stop doing what they normally do.

It's selling their houses, buying houses, and that's the worst thing for the real estate market. So I was a little concerned that no one knew how this would play out, and if you said you knew how it was going to play out, you're lying because no one's has been through a pandemic like this.

Nick Ron:

So that was our biggest concern, but as time went on we realized homes were still selling. What we did notice initially was the homeowners who would normally have listed and sold their houses, they were not interested in selling quite as much, so it became a lot tougher in our business where we're trying to buy houses.

It became a lot harder to acquire properties so we had to get real creative and really good with reaching out to people, marketing effectively, so we had to sharpen ourselves in that area but we noticed sales kept moving and we were still getting multiple offers on most of our properties. We do a real nice job renovating our houses. We have a nice design look, and so we usually never have much of a problem selling the houses.

Nick Ron:

But it started to slow, and each week we'd noticed we're getting less multiple offers and some properties were only getting one offer on a weekend, and so we started to get a little bit concerned and wasn't sure if that was going to be a continued trend, but it bounced back in May and here we are today.

We're booming. Can't sell our houses fast enough. We just listed some over the weekend and had you eight or nine offers on one house and like five or six on another, and it's just multiple offers and just about everything we're listing, and so it's actually hotter than it was pre coronavirus on the sales side.

Nick Ron:

Acquisition side, it's gradually getting better but still people are hesitant to sell their house, and I'm assuming that's for coronavirus. They don't want to move into another house or go through the hassle of finding another house and having to look around and maybe people don't want to risk getting the virus, so we're definitely seeing some of that.

A lot of people are in a wait and see. Let's see what happens in a few months and when things are steadier ground. Then we'll sell our house. That's what we're seeing right now.

Tracey Velt:

Alright, great. Have you had to put any new protocols in place as it concerns to the contractors you're working with or the people who are working directly with the home sellers and buyers?

Nick Ron:

Yeah, so for our staff, early on we took all necessary precautions. Masks and gloves. It was tough finding it at first, but now thankfully this applies a lot better. But yeah, we had everyone in the field so the people who are managing the properties of renovations, doing the inspections on the properties, all of them have to wear a mask and gloves mandatory, and anyone meeting customers or people outside our business, wearing masks was mandatory as well. And in our office, we clean it two times a day, scrub it down with disinfectant. We have hand sanitizer all over the office.

Nick Ron:

So we went through all the normal stuff that you'd want to do to protect yourself, we've done really well. Initially everyone worked from home for a while, and actually this week is the first week in our headquarters in Virginia, and we're in phase three now and so everyone could have stayed in the office had we wanted to because we're considered an essential business, but we have all the technology for work from home so we let people, in fact we mandated everyone to work from home except for a few managers in our business, and now everyone's back and they're safely distanced in the office.

We have a big enough office where everyone can separate and so, yeah, it's kind of exciting. Now it feels like a little bit of normalcy to get everyone back in and be able to get back to business as usual.

Tracey Velt:

Okay, great. Obviously you've probably learned a lot of lessons through the COVID-19 pandemic which continues, but tell me some of the lessons you've learned along the way while building your company. What is your top lesson learned through your building of the company?

Nick Ron:

Sure. Well, thankfully we went through, thankfully and unthankfully went through the Great Recession back in 2008, and I don't think you can get any worse than that for real estate at least.

And so going through this, we were well prepared and so I'm glad you asked that question because when we went through the Great Recession, I mean we had about a year or two. It was just absolute hell.

It was devastating, and I said to myself, I never want to go through this again or have to go through as painfully as it was. So we set some principles aside and make sure the next downturn, whenever that is, we would be able to get through with flying colors.

Nick Ron:

And I find that a lot of us in the industry went through that, learned our lessons, but it was quickly forgotten by many. As soon as things start picking up, people were going back to the same mistakes they made before the last recession. So I think it's important that people learn those lessons and stick with it.

Nick Ron:

One of the big things was always be conservative. You know, it's Murphy's Law, so when it comes to your finances, you have to be conservative and save and have a big cash cushion because you just never know when the next downturn is coming.

People didn't see it back in 2008, people certainly didn't see it with the coronavirus, and so you have to be ready. There is no crystal ball out there, and so we were well positioned before the lockdown to weather the storm. That's probably number one.

Nick Ron:

Number two, always strive for excellence in your business and your operations, constantly improving because you never know when the market's turned down to the point where you need to watch every nickel and need to operate efficiently and costs, and you never want to go through a major cost cutting program.

You should be watching your costs everyday and managing efficiently, and so when you get to a point where you have a major crisis, you're already in good shape because on a day to day basis you're constantly improving in those areas and watching those things.

Nick Ron:

It becomes a way of life, how you operate your business. You're operating with extreme efficiencies, and along with that is having healthy margins. You have to have really good margins when the economy is good and when things are going well.

If you are operating on tight margins in a really good market, you're never going to make it in a down market. If you look at companies like Zillow and Opendoor and some of these iBuyers, they were losing money to the tune of three, four, $500 million a year.

I think Zillow lost last year up around $400 million, and that's in a good market. So how do you survive a down market? And no wonder why Opendoor and Zillow both stopped buying houses when the coronavirus hit.

We just kept moving forward. We kept buying houses, but they were already losing and I could see in their mindset, "Gosh, if I'm losing 400 million a year in a good market, gosh, I'm going to lose billions in a down market."

Nick Ron:

So you should never be losing money or operating on a tight margin in a good market, because you know it's only going to get worse in a down market. So you always maintain healthy margins. Do whatever you need to do to operate that. You have to operate efficiently at all times. That's another one of the big lessons learned during the coronavirus and prior recessions.

Tracey Velt:

Okay, great. Let's talk about aha moments as it pertains to growing your company or building your company. What was your aha moment when you realized you needed to either restructure or change course or do something a little bit differently?

Nick Ron:

Sure, sure. We were blessed that we went through 2008 and so we didn't really have to adapt to the coronavirus, but one of the things I learned back in 2008 when the market crashed is we just had to operate very efficiently and certain areas, like in our business, our construction was never that great. You could get real lazy with construction when the market was good.

You didn't have to have the nicest looking house when the market was smoking hot, and so that was one area we had to improve in and then we had to improve in, just everywhere. We just tightened up.

We realized there was some extra fat that we needed to cut and different areas where things just weren't as efficient, so we doubled down on our technology, on marketing. We became masters at construction.

Nick Ron:

In our business, when you're buying and renovating houses, one of the keys if you want to operate profitably is you have to add value to the house, and so when the market was down and it became a strong buyer's market, you had to have a really nice product to get people's attention.

So we became very efficient with construction and design, and we wanted the nicest looking house in any neighborhood, and that's what we did for many years and we implemented a lot of systems so we could consistently produce a really nice looking product, and that's what's helped us grow.

Then when the economy got better, our margins grew even more, and so I guess that was my aha moment back in the last downturn is hey, we need to really improve our construction and we just need to tighten up everywhere. Otherwise we'll just never survive the downturn.

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Tracey Velt:

Yeah. Yeah, definitely. You said you're in the DC/Virginia area, so tell me a little bit about your growth strategy. Do you plan to move to other areas, and how has that evolved through the years?

Nick Ron:

Sure. So, number of things. We're growing in our area. In DC, Maryland, Virginia we're saturating our markets. Before, and we'd grown to other markets in the past and what we've learned is you really want to get all the business you can out of your current markets before you jump in a new market.

It sounds really cool and exciting to jump into another market, but it's costly to launch a new market and you have always new things you have to learn going into another market. So before you do that, make sure you're maximizing your current markets and become as profitable as you can in your current markets, and then you jump into another market.

Nick Ron:

That said, we've really invested a tremendous amount in technology so it's really easy for us to jump into another market at this point, and so by really refining our systems and technology we're able to jump into multiple markets, so that's our goal. Next year, we'd like to jump into one or two new markets.

We're also doing different things in our local market, like buying and holding properties, having different strategies to do more with the leads that we're getting. So instead of just offering one product or one service to people who want to sell their houses, we can offer multiple items and so just once again, just trying to grow more business in our existing markets, not just expand to other markets.

Nick Ron:

Everything we do is all organic. We don't believe in mergers and acquisitions at this point. Usually companies do that when they don't know how to do it themselves. We're really good at what we do and we believe organically is the best way to grow longterm, so that's our growth strategy right now and I think a big thing is just really getting better with marketing and technology, continuing to improve in those two areas.

I believe that's going to drive the market going forward, and everything we do is a lot of technology and just diving deep in the data, being a data driven company.

Nick Ron:

So everything we do in marketing, we're always trying new things. We want to measure everything using a lot of technology in the backend to make sure every phone call, we get every email, every lead we generate off our website. Find out where did it come from and how did we do and how are we converting all of our different campaigns?

Some marketing we realized we're getting a lot of leads, but they're not very good leads. So on the surface, if you're really not looking closely at the data, you can realize, these leads aren't that good. This marketing avenue, marketing medium is not working out very well, because I'm not converting a lot of those leads.

Nick Ron:

So you have to look at how many leads you're getting and how well am I converting? So looking at the data is very, very key, so we do a lot with that now and that's helped us to grow by being able to invest in the right marketing channels and discontinue in marketing that's not working well for us.

Tracey Velt:

Okay. Let's talk about your relationship with real estate agents. Do you use companies or agents to list your properties, or do you do ... Tell me about your relationship with agents in the market, real estate agents in the market.

Nick Ron:

Yeah, absolutely. You know, my wife has a broker, so we love agents. Love working with brokers. So while we do compete in some areas, we also work a lot with them and we see the value in them, and lots of agents do real estate investing on the side so they understand our business and we have good, good relationships.

And typically, especially when we're selling a house, that's where we work mostly with agents. We list and market our properties, and most of them get sold through a realtor, and that's not uncommon even for other iBuyers. So yeah, we work well with them, and one of things that agents love about us is when a buyer comes to us and they want to buy our property, we take the whole process start to finish.

We have a great system so we're able to get it to close on time just about every time, and we work well with the lenders and the title companies and we have a whole system and technology where we follow up with everything and we're on every detail so the agents can sit back and relax and know that that's being handled.

Nick Ron:

That's what we hear frequently from other agents, and when we acquire properties, we do have agents bringing us opportunities, especially if it's a property. Let's say a homeowner who has a property that's not in great shape or it's dated, and they've lived there for 30 years and they're looking to downsize, and they know it's not going to show very well.

The agent knows it's going to have to be sold as is. So agents will come to us and say, "Hey, here's an opportunity," and we'd make an offer and they know we can close quickly and do all cash and no finance contingencies, and so they love working with us when they have those kind of opportunities.

Tracey Velt:

Okay. Do you have preferred agents that you work with, or can they become a preferred agent, or do you just look for someone who's active in the market that you're in?

Nick Ron:

You know, we talk to a lot of different agents and we get repeat agents that we've worked with. Sold our houses for us on repeat basis, or have given us multiple customers to sell houses for the acquisition side.

So we don't have necessarily a preferred customer, but we know who we're working with more frequently and work closely with them and try to give them first opportunities in some of our properties so we can take care of our good agents that we work with over and over. Absolutely.

Tracey Velt:

Okay. Yeah, that makes a lot of sense. My final question is just an overall question about opportunity in the real estate industry. Where are you seeing the most opportunity right now?

Nick Ron:

Well, I'd say the biggest, the three top things is technology, technology, and technology. In that order. Tech, tech, and tech. I mean, real estate is so behind technology. If you're good with technology, it's going to really give you a leg up, and that's my background thankfully, before I got in this business I was not ... Before I owned this business I was not in real estate.

Knew nothing about real estate, but I knew a lot about tech and marketing, and so I sold marketing systems and so from day one, we're always looking for ways to use technology to speed things up, to increase productivity for all of our team members, and to get creative and work well with customers and stay on top of everything. Make sure nothing slips through the cracks.

Nick Ron:

I can't believe it to this day that some companies get leads and they don't follow up on them right away, or some slip through the cracks. I get calls from customers all the time. "Hey, I called one of your competitors and I didn't get a phone call back, and I contacted you guys. You picked up right away, or returned my call right away, and here we go. We did business with you."

Nick Ron:

And so with technology, you should not ever lose a lead. You should be tracking every lead. You work so hard and you spend so much money and time getting leads, and you want to make sure that nothing slips through the cracks, and so I think with technology, it's just so vital.

And I see people who are doing it, whether it's agents or investors or whoever you are in this industry, even contractors, home remodeling companies. The ones who are leveraging technology and are good at it are really taking a lot of market share, so that's what we spend a lot of time focusing on.

Tracey Velt:

Okay. Well Nick, thank you so much for joining the REAL Trends podcast today. I appreciate you taking the time to talk to me.

Nick Ron:

It was a pleasure. Thanks, Tracey.

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