This week’s Misfit Entrepreneur is Tom Nardone. Tom is known as the Millionaire Mailman. He is a great example of ingenuity and the American Dream. He is the co-author of the best-seller, Secrets of Real Estate Millionaires and has been featured on Good Morning America, CNBC, and others.
At age 19, Tom started working for the post office, but according to him, it didn’t take him long to realize that the security entrapment of a “good job” is NOT a lot different from a 30-year jail sentence.
So in 1993, he took some real estate investing courses and bought his first property. But, he realized that he had a huge advantage where others didn’t. Every day, he would see properties along his mail route. In fact, being a mailman, gave him even more huge advantages which I won’t spoil and let him tell you about.
Because of the system he developed, Tom was able to retire at 35. Nowadays, he has purchased over 250 properties and works with and mentors others on their path to real estate investing success.
The lessons he will share with you will not only help you if you invest in real estate but also in your business as well.
Tom's Free Ebook on How to Make $10,000 in Your First 90 Days in Real Estate: Text Mailman to 31996
Tom started working as a mail carrier in 1979. After 5 years, he and his wife wanted to find a way for her to be a full-time mom. And one mailman’s paycheck wasn’t going to make it work. So, Tom went to a few real estate seminars where he met a couple mentors that were real and doing the business. They helped him to realize that he was in the neighborhoods everyday where he got to look at houses and start a real estate business doing what he was doing every day.
He got started by buying run-down, foreclosed houses on his mail route. He slowly fixed them up and rented them out and after 10 years, he woke up and realized that he had enough cash flow that he could go full time.
At the 6:30 mark, Tom reveals more about how found and got his homes…
- He would see the notices of potential foreclosure in the mail where he had to deliver a certified letter.
- The home owner would mention needing to get rid of the house and Tom would offer to help.
- He would come back after work in his civilian clothes and work out a deal with the seller.
- Tom stressed that timing and being prepared to act are big keys to success.
What is different between the crisis in the 80’s and what we saw in 2008/09 with real estate and what are you seeing in the market now?
2008/09 allowed many to reinvest in the market at a very low price which hadn’t been available in a few decades.
- There are signs to watch for to see if there will be a slowdown in real estate or a future buying opportunity.
- Look for new housing starts to slow
- Look for defaults on credit cards to pick up
- Look for defaults on car payments
- After these happen, then you see foreclosure filings go up.
- At this point, Tom is seeing houses not move as fast and prices begin to flatten out.
- There has been an uptick in foreclosures.
- The next crash is not here yet, but things look to be slowing or at least in a softer patch
Tell us about your system. How do you find properties and make them profitable?
You want to buy houses for way below market value – find $1.00 for $.50.
- Tom uses postcards/mailers to find interested parties that need to get out of properties
- Mailers still work very well.
- You can get much more “intelligent” mailing lists
- You can get lists of absentee owners, 2nd homeowners, age, price range, how long people have owned properties, and also the equity spread, etc.
- Your profit as an investor is directly related to the equity already in a property.
- For example, if you find a property worth $100k and the owner only owes $50k on it, but wants to get out…you can negotiate to get the property below market value.
Where can an investor get a list like you mentioned?
- Where you need to be careful is that it can be expensive to test because of mailer costs.
- You have to give it a shot and when you find a good response rate with a list, stay with the company you got it from because the data is good.
What is the criteria you look for in a deal?
- Look for problems, not properties.
- There needs to be uncomfortable circumstances with the seller and they have to be ok with selling at a discount. They just want to get out.
- There will be work that needs to be done – so you have to have a good idea of what those costs will be.
- If you can do a cash offer, you have a better chance.
- Only a small amount of offers you put will have interest and you will close a few over time – so staying consistent is important.
At the 26 min mark, Tom talks about wholesaling and how you can make money that way.
When flipping a property, you don’t want to have more than the 40% mark in the home compared to similar homes in the market. This means if houses are $200k average, you don’t want to have more than $120k in it after purchase and repairs.
How does someone purchase a property if they don’t have the ability to do an all cash offer?
- Throughout the country there are real estate clubs and meetups.
- Go to the meetings in your area and start to make connections and learn
- These connections will have money and or be able to help you.
- Meeting others in the space can help you as well in evaluating deals to make sure you are not doing a bad deal.
- There is even the ability to use 401k or IRA money.
- There is a lot of money from non-traditional places looking for a home. It’s called “lazy money.”
Talk to us about renting…
- That is the endgame. You want to have a rental portfolio in which the tenants pay down and eventually become free and clear.
- This will give you great cashflow and tax benefits over time.
- This cashflow is better than most retirement plans. But, you must be willing to play the long game to get there.
Thoughts on AirBNB?
- You can do really well with them.
- It is more hands on as you need to run a tight ship with them.
- You also need to get good reviews from your guest
Any other tips and tricks?
- Don’t become emotionally involved in a property.
- If you are buying a distressed property, it has problems, so the numbers have to make sense.
- Treat it like a business.
- Be careful about borrowing money personally – make the asset the sole collateral.
What have you learned from real estate investing that translates well to running a business?
- You cannot and should not do everything yourself
- Put together your team of all stars in the areas where they are needed to help you.
- Stick with your unique ability
Best Quote: "Look for PROBLEMS, not properties..."
Tom's Misfit 3:
- Don’t settle for mediocrity. Do something bigger and braver.
- If it doesn’t feel right, don’t do it.
- Where the mind goes, the man follows. Feed your mind with good things.