If you’re looking for a hot real estate market to invest in, then Tampa, Florida should be right up your alley. With the low prices and resilience from the pandemic, the Tampa real estate is a great place to gain some profit. Scott Carson is joined by real estate investor and the founder of Torcana, Colin Murphy. Colin talks about his journey into investing in real estate, how he came to invest in Tampa, Florida, and the pros and cons of the market. He then discusses his investment strategies and fixing and flipping properties. What is more, Colin and Scott also talk about the need to borrow money to help scale your business and how you can effectively do that. Navigate your way into the Tampa real estate market in this episode!
Listen to the podcast here:
Finding Success In The Tampa Real Estate Market With Colin Murphy
This is Colin Murphy from ColinInvestments.com. In this episode with Scott, we talk about my journey from Ireland to Tampa, Florida via London and how I ran up to $100 million in sales in fix and flips. We talk a lot about how to scale your business, how to find private money. We dig deep into the Tampa market, the pros and cons of it, how the foreclosures are affecting it, where we think the prices are going to go, what the best property types and tenant types to target are and a lot more besides. You’re going to enjoy it.
I’m extremely excited about this episode. If you have been here for a while, you know how much of a fan I am of God’s waiting room, the Florida real estate market, and how I’ve bought notes in real estate there for years. We’d like to focus on the bigger markets, not only in Florida but across the country. I’m excited to have a buddy of mine. He’s a full-time investor in the Tampa market. He’s also a real estate podcaster. He’s got a big passion for helping people but he’s got such a unique and different story than most of us when we get into real estate investing. I’m honored to have my buddy, Colin Murphy, joining us this morning live from sunny Tampa, Florida. What is going on Colin? How’s it going?
I am awesome, Scott. It’s great to be here.
I love the fact that you’ve been in real estate as an investor. You’re also a realtor. You’ve done a ton of fix and flips in there. You’ve got a little bit different of an accent. It’s not a southern accent for the most part. Let’s talk about your journey to where you got and where you’re from so folks know who Colin Murphy is.
I’m very happy to. I’m originally from Ireland. I’ve been investing in real estate since my mid-20s. It all started out in London. I lived in London for three years just after university. I started selling advertising space in real estate magazines and showroom space for a real estate exhibition. It was an awesome introduction to both real estate and selling because I used to be traveling all over Britain and Ireland attending 25 to 30 shows a year. I work hard and play hard, talking to all of the Florida developers, the Spanish realtors, the Turkish builders and people building resorts in Belize. I was hanging out with these people all the time.
I used to travel to all the places and try and get them to come to the show. I buy a half-page in the June edition of the magazine. I buy 30 meters at the Big Show in London. I got to travel a lot to meet all these people. It was a whole lot of fun from about the age of 23 to 26. After that, I went back home to Dublin. I opened a real estate office that was selling real estate in emerging markets that were mostly in Eastern Europe and Central America. This is for a British-based developer. That business did great for a few years. The Irish were very passionate about real estate. This was in 2004 to 2008 where there was a tremendous real estate boom all over Europe like there was in the US. I sold a lot of real estate to Irish people in those far-flung locations because people didn’t have the money to buy in France but they could buy in Bulgaria. It was a little nuts but the business did great.
The 2008 crisis wiped us out completely. I had to close the office and let everybody go except my manager. I licked my wounds and started again. That’s where Florida comes in because in 2009, I and my buddy David Shaw and his wife Kathryn, set up a company called Torcana. We started selling Florida condos, mostly in Orlando to British and Irish buyers. If you remember back then, a lot of developers were making good money doing condo conversions, converting apartments into condos and making a ton of money by selling them off in ones and twos.
When those guys lost their financing and their business model crashed because no finance was available for condos, I was one of the earlier guys who was able to come in and market these condos for $0.30 on the dollar to cash buyers. They were buying these $80,000 condos in these lovely gated communities that used to be $230,000 to $240,000. We did well from that for a few years. We then started selling in a beautiful place in Tampa called Waterside at Coquina Key. It was a stunning place on the water in St. Petersburg. We did that for a few years until the low-hanging fruit went away.
The big boys came in. I used to be selling B-quality products for under $100,000 and a few years later, being offered C-quality products for $130,000 and it was like, “We need to pivot here.” Generally, every five years, I find myself pivoting over the last twenty years. In around 2014, we started getting into the fix and flip game and started buying our own houses and working our way up from buying one, fixing it, selling it. Buying two, fixing them and selling them up to about almost 100 fix and flips in 2019. We did very well in Tampa. I’ve more or less been investing full-time in the Tampa market since about 2014 and in other places in Florida and in the United Kingdom before that.
It’s funny that you talk about the condo stuff because we bottled up a lot of debt on condos in good communities around Celebration.
The economy is unreal.
You’re right. Even my beach condos are going for $5,000 to $10,000 back in 2008, 2009, 2010 and still coming up. It took a while to foreclose. We’ve run into that. We bought some notes direct from a couple of banks that they wanted off their books because the borrowers lived in England. They lived overseas, over the pond. It was a lot more to reach out to them to serve them when they start the foreclosure process. There’s a lot of international money coming in not only to the United States but also Florida. At the time, they said that close to $0.40 to $0.50 on the dollar of every dollar spent on real estate was international money coming into the Florida market because people were seeing the bargains and weren’t mind holding on to it for 12 to 24 months to take the property back.
I had always had that tremendous international name recognition. It was the only place in the US I could have feasibly sold real estate to British and Irish buyers. I couldn’t have convinced them to go to New York or Boston or California or Ohio. In Florida, that was easy, especially when the numbers look great.
You’ve done a ton of fix and flips over the years and you know the market in Tampa. Tampa is one of our favorite markets. Tampa and Miami were the first two bigger markets in Florida to rebound back. That’s where a lot of stuff took place. Miami has a big international flavor. Tampa a little bit more with your Florida investors in the neck of the woods. You had a lot of international come up there to get better pricing in Miami. Let’s talk about the Tampa market in today’s numbers for the most part. You’ve seen a big shift in product or pricing and stuff. Where do you see with your fix and flips and the stuff that you’re doing in the market? What price range do you see the biggest bang for your buck that’s more available on the market for people, if there is any inventory?
The safest and best investments for me now and are consistent through any market cycle would be suburban, lower middle class, single-family homes priced about 20% or 30%, below the median. That is a very safe strategy that will see you a lot of ups and downs. If you’re a long-term real estate investor, you are going to see a lot of those ups and downs. The price of those properties’ changes through the years. Whereas a few years ago, I was maybe selling a fully renovated 1,300, 3 beds, 2 baths for $115,000. Now, I might be selling it for $190,000. The place on the ladder is still the same.
I’m not going too low on the ladder, whether you have a lot of high maintenance, a lot of evictions, a lot of low-income tenants. That’s a lot of work. I’m not going too high in the ladder where you’re doing the fancy pool homes and the $500,000-plus. That’s a very price-sensitive area. The cap rates are nowhere near as good. My place has always been a couple of steps below that middle rung of the ladder. You’re always going to be pretty safe buying a nice suburban single-family home. Try and get one where there’s a high percentage of owner-occupiers. The places I targeted in Tampa were generally about 2/3 owner-occupiers and 1/3 renters which are above the norm for the country as a whole and that’s served me well and we went very deep in that segment.
That makes a lot of sense because there are always people looking to buy a home if you mean that first-time homebuyer. As I said, $250,000 and below is where I like to try to play at that price point. $250,000 may be different in Ashtabula, Ohio versus Tampa, Florida but wherever that market price point is for that first-time homebuyer and the attractiveness. That’s where we see a lot of the distress still happening. Are you seeing days on market and things like that are probably shrunk a little bit?
They’ve shrunk a lot. I saw some stats. It was already a very busy market. Let’s say in December of 2019, your days in the market were about 60 days, which is very quick, but now it’s less than 40 days. It’s 50% less than what it was. It is a seller-dominated market. It was already pretty tight in 2019. From late 2018 to 2019, it started tightening up and in 2020, it found another year in terms of the price surges and the demand and inventory shrinking from 3 months to 2 months. You don’t see that very often.
With less construction and new areas being built, you still have people moving to the Sunshine State from other areas of the country, whether it’s California. People moving up from New England and New York trying to get out of the big cities to someplace with a little bit of room and some sunshine.
The stuff that people liked about Tampa, they like it even more now. It’s got low taxes, which is always good. It is landlord-friendly, which is always good, but it’s still priced about 25% below the median US prices. We seem to get a lot of bang for your buck here. There’s a lot of space. You can get a nice house for what you’ll buy a shoebox for in Connecticut or New York or Boston or somewhere like that. A lot of people are moving for that reason. The economy is quite diverse. It’s recovered quickly. Tampa has turned out to be an extremely resilient place in terms of getting through COVID. I certainly can’t think of anywhere I would rather be in March 2021 than Tampa, Florida in terms of the climate, the culture and everything else. It’s in high demand. When you have a market that’s already good and an acceleration in the population growth, which it always has had strong population growth. It passed out New York to be the fourth most populous state years ago and hasn’t looked back since. It’s on the up and up.
Tampa’s got more industry than Orlando down the I-4, which is primarily tourism. That’s my next question. It is maybe a little early to tell as we’re still in the foreclosure moratorium and things like that for the most part. If we can roll it back a year, were you starting to see maybe an increase in distress listings a little bit, maybe some short sales popping up on the market a little more so than before? You may not track that but that’s always one thing I look at, especially in the bigger cities of states. If you start seeing an increase in short sales, that’s usually the first sign of an increase in distress in the market, especially Florida where it has a little bit longer foreclosure timeframe compared to Texas.
To be honest with you, you’re not for the simple reason that people are struggling to pay their mortgages. Number one, they’ve got forbearance so nobody’s kicking them out anytime soon. The main reason you’re not seeing any surge in short sales is that people have more than enough equity in their homes. They’re not underwater in their mortgage and therefore, no bank is going to let them sell it for less than the value of the mortgage. There are very few people underwater.
Median sales prices went up by almost 15% in 2020. I don’t know how anybody is going to be underwater in their mortgage. The lending criteria over the last few years have been a lot tighter than they used to be in the crazy days of 2005. Most people are putting down a little bit of money. You still had 96.5% mortgages and sellers contributing to the closing cost. People are buying houses with not a lot of skin in the game. If somebody bought something for $200,000 three years ago, their mortgage is probably $180,000 and the house is probably worth $230,000. There’s no short sale that is going to happen.
That makes a lot of sense there. One of the things that I’m always curious about, especially on a new construction site. You mentioned how banks concessions. Bank of America or Fannie Mae or FHA loans was willing to contribute the down payment and pay up to towards $7,500 towards closing costs too where people would get in with nothing down. One of the things that we see in different areas is people go and buy with nothing down. They have no skin in the game. It’s been such a weird twelve-month history. We see a lot of those places that are building new homes. We could see those, “New homes with $500 down, get in.” They have the budget for their mortgage and don’t have the accurate tax guys. I don’t know if you’ve seen any defaults on people at the one-year mark for six months a year when the tax appraisal comes back differently. Now, they’re being taxed on the full improvements versus the lien on the new build side. Are you seeing any of that by any chance?
I’m not seeing much. I’m not in that game but in terms of the distressed as a percentage of the total market, back in 2011 and 2012, you’re at the peak distressed versus normal. Probably 40% of all homes for sale were in some distress like in a foreclosure or short sale. It went right down to 7% or 8% when you get into 2018 and 2019, and it’s even lower in 2021 despite the unemployment spiking. Industries like hotels, retail and a bunch of other ones are struggling, but it is much lower and part of that is because it’s artificially lowered.
In one of my counties in Tampa called Pasco County, a few years ago, you might have seen 130 or 140 auctions a day. A few years ago, it might have been down to 50 and then down to 30. Whereas nowadays, you’re lucky if there are 6 or 7. There’s hardly any happening. It’s tiny and sometimes you see misleading headlines in the newspapers like Florida foreclosures that spiked. What happened is they shut them from March 2020 to July 2020, where there was none. They then went from 1 or 2 to 6 or 7. We now think foreclosures have tripled when it’s about 10% of what they would be in a normal year.
I hate seeing those fake news. It’s all relative. I always laugh about that. That’s why I love having local investors who know what’s going on in the market. You and I talked about this. That’s where I was leading about. We don’t see that much. We might build on one versus bidding on twenty at the auction and stuff like that.
There’s not that many of us buying auction properties. There are 6 or 7 players that are doing it. Whereas before, there might have been 30 or 40 deals going through and there’s enough for everybody. You literally might have fifteen, but you only have money to buy 3 or 4 on any given day. If you don’t get some, you’ll generally get a couple. Where if you have six people going for four auctions, you started seeing crazy stuff. People start dropping their standards. They start assuming the price will go up a lot in the next three months and they’re on a budget for probably 30, “Let’s do it at 24. We’ll figure something out.” People are making all sorts of rosy assumptions. I’m seeing there are a couple of properties where my bid price in January of 2021 was between $100,000 and $110,000. They’re three pretty similar properties and they’re all going for $125,000 to $135,000. People were outbidding me of my entire profit margin expectation. Let’s see what happens.
How does that compare up to $90,000 to $95,000 where you get a lot of weekend warriors that are overbidding to get a deal done and over-pricing the market because they want to get a deal done. They got money burning a hole in their pocket for the most part.
There’s a mixture. You’re seeing some newbies coming in and paying whatever it takes to get a deal and almost not caring if they make any money or not. That sounds like a recipe for disaster for a newbie. You have those guys that are coming in for the first time and not realizing what their holding costs are going to be, not even realizing maybe that they need to pay another 2.5% to the courthouse once they bid on a property. There are all sorts of stuff and then you have the big companies. Your Invitation Homes if you are trading homes. These big buy-and-hold players own tens of thousands of properties.
They’re happy buying a house and fixing it up a little bit and getting a 6% return. They don’t want a profit margin. They’re bidding it to get a 6% return. You then have flippers like me that need a margin between buying and holding, fixing it up and selling it. I’ll see all the sales costs that you have when you’re selling it as well. You’re competing. It’s difficult when inventory is low and you’re competing against people that don’t require a profit margin. I’m still getting a few. I’m still buying probably two a month but I’m having to look elsewhere for deals as well.
That leads to a couple of questions. One, we know that these big guys have cheap money, 1% or less so they can make 6% and it’s a 600% return on investment for them versus us. It’s a little bit different for borrowing at 6% and making 12%. It’s truly a 6% difference. First, for those who are asking that may not be in the Florida market who are familiar with the foreclosure process. If you’re bidding say $110,000 in an auction, do you have to have all that $110,000 at the close there for the day or do you have time to pay overtime? Do you have to pay a deposit? How does that work in the Florida market?
It’s not for the faint-hearted. It’s not for newbies because auctions are generally at 10:00 AM or 11:00 AM. They run in order. They are two-minute auctions so you put your bid price in. If you get outbid, they might extend the clock, but the clock runs down and whoever is the highest bidder is the bidder. If that was me, they will immediately deduct 5% of my bid price that I need to have in escrow. If I have $5,000 in escrow, I’m not allowed to bid more than $100,000 on anything. They will take your 5% and let’s say at 11:30 in the morning, you need to wire them the balance, all the rest of the money and the closing cost by 4:00 PM the same day. If you don’t, they’ll keep that 5% deposit and then relist it again in a few weeks. You’re assuming any title defects, any liens or any costs to deal with any people that might still be living in the property, tenants, occupants, squatters or whatever it might be.
You need a good title search. You need to make sure you’re not bidding on an HOA foreclosure that’s got a mortgage that’s still going to stay there, or that you’re not bidding on a second mortgage and there’s a first that’s going to be there, which is rare. The majority of them are firsts. Utility bills can be very nasty. Especially on houses that have been vacant for quite a while, I’ve had several bills that have been in the thousands of dollars like a $3,000 water bills. It’s atrocious. These water companies are adding every month and they’ve got you. When you ring them and say, “I need you to turn the water on,” they’ll say, “It’s $3,000.” I’m like, “That’s outrageous.” They’re like, “Do you want me to turn the water on or not? I’ve got a monopoly on the water.”
You’re going to have to do it. If you do that, you get your title after about two weeks. If you have a private lender and they want a mortgage, you can’t give them a mortgage for about two weeks. You’re going to have to fund that money, either with somebody who will give you an unsecured loan or with your own money. Despite all of those hurdles and restrictions, there are a lot of people doing it because you can get good deals. We’ve had a lot of fantastic deals in the auctions over the years.
Out here in Texas, you have to have all the money at the time of the bid. You have people with hundreds of thousands of dollars in cashier’s checks when they’re bidding on. When it’s bid, you’ve got to pay all the money in cashier’s checks before the end of the bid. They don’t hit the wire. It’s always interesting how different they are.
You have to be there physically which for me is crazy because I used to be bidding on foreclosure auctions in Tampa while I lived in Spain. I was doing that stuff and the great thing about Florida is that I can bid on Pasco County at 10:00, Hillsborough County at 11:00, and Sarasota County at 11:30 or multiple ones at the same time. I know people that have 5 or 6 screens in their office and they’ve got different auctions running at different times. You can bid whenever you want and wire the money if you’re the highest bidder. Texas is different because you need to be there with cashier’s checks. Not only that, you need lots of denominations of cashier’s checks because if you’ve got a check for $100,000 and you win something for $80,000, you’re giving them $100,000. You might be waiting a month to get back your $20,000.
It was a nice thing. Florida has their auctions online because we’ve logged in to see what typical properties that went to foreclosure that were similar to the ones we had to get an idea of what they would sell at the auction. We did that with multifamily, some smaller multifamily in West Palm Beach. We’ve done that in Hillsborough County, in Pasco and stuff like that. It’s one of the nice things that you don’t have to show up at the auction in the rain, snow or sunshine. You can do it from the comfort of your office.
That results in I’m competing with 25-year-old interns working for hedge funds in New York which I’d rather not be. At least if you have to turn up there. Your bid has less competition. There are some pros and cons.
We have it once on the first Tuesday of every month versus on a daily basis. It’s a different ballgame that way too. You talked about bidding in the foreclosure auctions. You don’t have to give away the good juice, but what are some of the ways that you’re leveraging to find other deals? What are the lead sources of marketing are you doing to find properties there in Tampa?
If you want to get any scale or any reliable inventory, you got to have as many ways as possible. You got to have a lot of strings to your bow. Auctions are one of them. We got very good at those. There are other private auction websites as well. They aren’t the public ones. You have places like Auction.com, Hubzu, Xome. You can look at Hudson and Marshall. They have inventories as well. You can create a username login and with those, you don’t have to pay all the money once you genuinely have 3 to 4 weeks to close it.
They all have little differences between hard money and deposits you have to pay and whatever else. They’re always good. A wholesaler is a big one. It is a very worthwhile exercise. If anybody has a specific market, they’re going to focus on networking with the local wholesalers to get yourself so those REIA meetings, announced that you want to buy properties, hand out your business cards to the local wholesalers and make sure you get on their mailing lists. I’m getting emails and text messages all the time about potential deals.
In the market we’re in now, if a nice one comes along, you better be jumping on it within 10 or 20 minutes and wiring them non-refundable deposit within 30 or 40 minutes, but you can still get good deals that way with good profit margins. I’m buying one that I got. It was an email that went out at 9:30 and I got a follow-up text from the guy saying, “Colin, you better take a quick look at this.” I looked at it, rang him at 9:40, and sent him the money at 9:50. There were 3 or 4 other guys trying to get it, even offering more money than I was so you have to lock them up very quickly. Either way, build those relationships, they are going to be good for you.
You can still get deals on the MLS, especially some REOs, properties that have been through the foreclosure auction but the bank have taken them back and then they’ve listed it with a local broker. There might be a lot of fixer-uppers. On the MLS or alternatively, there are a lot of dated houses, old-lady nice houses that were maybe 1970s and 1980s homes that haven’t been updated in 20 or 30 years. They make very good buy and hold rentals. If you want to buy them, spruce up the kitchen, replace the AC or whatever. They can make great rentals.
I’ve helped a few friends in Tampa do that. Sometimes, they can make good flips. Americans are a little tighter. Traditionally, we have bought plenty of properties on the MLS. Again, there are certain realtors that might specialize in getting the nice old lady houses or getting the REOs so you can do that as well. There’s the obvious one where you can do your own direct marketing and target absentee landlords, probates, divorcees or evictions. You can get creative with how you can find buyers who might be motivated to sell and send them.
People used to send letters but nowadays, you need to do more. You need to get that list. You need to send them letters. You need to be appearing sneakily on their Facebook profiles and your Google profiles. You need to be tracking their phone numbers and their email addresses and sending them voicemails and text messages. You do all that stuff which is what a lot of wholesalers do. You can get yourself a handful of deals as well. That’s a skill worth learning. That was never my particular expertise but it does work. Some people have had tremendous success in doing their own marketing and finding their own off-market deals.
Tampa has always been a big market for wholesalers. You throw a rock. There might be as many wholesalers as realtors. I’m joking here, but there’s always been a lot in that neck of the woods because there’s always been a lot of inventory for the most part. I love the fact you’re talking about social sleuthing and Facebook-stalking borrowers who are distressed people because we do the same in the note business in tracking them down and trying to get them back on track. You mentioned that the rental market strong there. One of the things that we like to always do is, what type of rent rate should we avoid? What I’m saying is the market rent rate for a property. I’ll give an example. In Detroit, anything at $500 or below is like a two-gun alley. You don’t want to go into that. Is there a rental low floor that people should avoid going under like $800 or $500? What that number might be? I know, it’ll vary by ZIP code a little bit but is there a number that you see right off the bat that you’re like, “That’s a bad area.”
There are areas in downtown Tampa that are quite rough. They still might be expensive to rent but there’s still quite a getaway. They might only be 2 miles from a condo tower with $800,000 condos but they’re in a very rough area. It’s nice if you drive by at 11:00 AM and there’s a bunch of dudes sitting outside in fold-out deckchairs having a Budweiser and nobody’s got a job. They’re not the kinds of tenants you want. If I drive by and I see a bunch of guys sitting outside in deckchairs shooting the breeze, I’m like, “I don’t want to own in here.”
They might rent for $11,000 for this tiny little house and the house might be worth $300,000 but I don’t want there. I go to the suburbs, the lower-middle-class suburbs, which are 30 minutes away from all the waterfront, the cruises, the big businesses and the big banks. They’re suburban properties, a lot of regular folks in there. In those areas, you want to avoid stuff that’s generally under $1,000 a month. Under $1,000, you’re generally dealing with maybe scruffier multifamily homes or homes that have a ton of deferred maintenance and slum landlords, and they don’t want to update anything.
The only kinds of people that will rent those houses are the people that won’t qualify for the nice houses because the credit scores might be too low or they might have evictions on their records, criminal records or whatever else. The ones I target are if you have a nice, cleanly renovated and rent-ready house in the $150,000 to $200,000 range. You’re generally looking at a rent nowadays at about $1,200 to $1,500 a month. Anything above $1,000 is generally okay. The main thing is to make sure you’ve vetted your tenants. Make sure they can afford it and they have a record of paying on time and good and clean history.
It’ll vary on market and that $1,000 mark is what I thought it might be at roughly. You still got to double-check all your due diligence. Anything below that, unless it’s a condo or multifamily, you have got to check into it. Make sure it is not in a rough area and the main source of income isn’t your tenant recycling the Budweiser cans.
Don’t get me wrong, I’ve got a fourplex where the rents are $600 a month. It’s okay because their income has all been verified and some of them have been living there for ten-plus years. The manager keeps them on a tight leash. They don’t give them leeway for paying rent late and whatever else. It’s generally easier to deal with someone paying $1,100 or $1,200. They generally aren’t going to have a crisis with an unexpected $400 car repair and everything gets thrown out of the sink for your entire rest of the year rent payments because of one unexpected car payment.
The tenants generally need their net income to be about three times the rent. If you’re in the $1,100 to $1,200 and they’re earning $40,000 a year, they’re generally okay to absorb those payments. That will always come up but if you’re in that other area where you’ve got these $500 to $600 rentals, that’s only okay if you have enough of them so that they balance out. If you’ve got two properties and they’re $600 a month, your income is going to vary a lot.
That’s a great counsel and I agree with you there. If you’re not in the rental game with a number of doors, your costs to maintain that will go down. It’s the same thing, you pick a strategy and stick to one strategy for the most part before you dive into a second strategy because you’re diluted a lot. I’m sure you would agree with this, especially taking all the different expos and things in education. When you see investors start adding different tactics or tools to their tool belt and they watered down their focus, those are the ones that render most of the trouble because they don’t have that strength in numbers of deals to offset your mistakes or tragedies or things happening.
Leading on from that, I learned that the hard way. I spent many years selling real estate all over the map at a modest success and a lot of crappy quarters, where there is hardly any money. In my case, it is much better to go deep before you go wide. Once you’ve gone deep and you’ve locked that in and you have people that can run it for you, then you can branch out into another area. If you’re a new wholesaler, and then you’re trying to get a single-family home over here, and then a multifamily 30 miles in the other direction, and then a pool home 20 miles in the other direction, and then a manufactured home 10 miles over there, you’re never going to have any meaningful success.
You need to focus on an issue. You need to pick a couple of ZIP codes, a couple of price ranges, property types, motivated seller types, whatever it is you want, and trying to get deep on that before you spread out. If you try and do too many things at once, too many property types at once, you’re not going to work. One of the ways we were able to flip many houses, for example, we often had 15 or 20 renovations on the go at any one time, is because they were all in the same area. They’re all the same type of house. They’re all within 2 miles of each other.
Not only that, but we were doing the same thing to all of them. All the kitchens were the same. The paint was the same. The vanities were the same. The paint on the fences was the same. Everything was the same. I’m sure our guys were sick of putting the same tile backsplash in every home, but you freshen it up every couple of years and that’s it. Until you can get those scalable properties, don’t start trying everything else. Imagine if you’re trying to renovate a $50,000 house, a $300,000 house and a $500,000 house in totally different areas. It’s so much work for not a whole lot of return.
That’s a beautiful way you’ve said because then it becomes cheaper to buy your tile, your carpet, your paint in bulk because it’s got the same vanilla flavor that sells. I love what you said about being in one area too. Your buyer that may have missed out on one can go next door down the street to find another one that’s very similar to what they may have missed out on or not being able to get approved for in time as you were moving that property. The looky looks are your new buyers for the most part.
A lot of the stuff I’ve sold over the years has been to out-of-state investors, particularly in California, where they’re looking to buy solid rentals. A lot of these guys are dealing with people that might have had an $800,000 condo in the Bay Area that they inherited from their parents, and they’re getting the 2% return. A lot of those guys did 1031 exchanges into six houses in Tampa with change left over after they finance it and they triple their cashflow. When you’re dealing with these investors that are looking to buy a nice rental, you need to sell them on the concepts. You need to sell them on your reputation, on your competency, on the neighborhoods, on the product type and the property manager.
Once you get through all that, the houses are widgets. They’re little concrete boxes that throw up rental income and pay down your loan free and give you some tax advantages. It doesn’t matter if you get in 123 Main Street or 4, 5, 6 Main Street, it doesn’t matter. They shouldn’t care especially if it’s an investor. A homeowner will care but if you’re selling to investors, landlords as I did over many years, if you have a lot of inventory in a similar area, they don’t care much. They’re only looking at the bottom line.
With the fix and flip you’re doing, are you using your own money or using other people’s money to finance a lot of stuff? I know that you mentioned a bit about hard money, but how are you financing it?
It’s a mixture. I’m not doing the same volumes I was so I’m able to use a little bit more of my own money. I do put private money on most of them. At the minute, all of them that I own, I have private money on. Some of them are local friends here in Tampa that have successful careers in their own right or company owners. They have a couple of $100,000 that they’re happy to put to work. There are some out-of-state folks that have a lot of experience in real estate investing, but they’re now getting thrown into retirement age and they don’t want to manage. The property manager manages the tenants and deals with the boilers and the roofs and all the rest of it.
They’re happy to give me a line of credit, whatever it might be, for $100,000, $200,000, $300,000 or $400,000. There are a couple of wealthy doctors and surgeons or that similar thing. They have jobs that earn them a lot of income. They’re putting some of that to work so they will lend it out as well. You build those relationships slowly. You need to show them three times more information than they need. Have nice proposals showing what your plan is for the property, what your profit margin is, your renovation budget and your holding cost. Put it in a nice little package. Have your loan and mortgage documents ready. Have a title agent ready who can record the loan for them and mail the originals. Have everything figured out. You don’t need to Google it to figure it out. Ask somebody who has done it and ask them to teach it to you either for free or pay them $500 to teach you how to do it. It’s going to be worth it if it can get you potentially millions of dollars in loans for your next 10 or 20 deals.
I have used private money a lot. I’ve avoided the traditional hard money loans, which are from professional lenders. As to businesses lending money, it is a viable strategy but I was generally borrowing money at 8% interest, no points, no closing fees, no appraisals, no surveys, and a lot less red tape and paperwork, which is great for me. If you can do that, that’s a lot nicer. Other folks have to do the hard money. They might have to borrow initially at a 12% interest rate and 2% origination fee upfront, and then a $300,000 appraisal fee, and a $300 admin fee. All that and tons of red tapes digging into your tax returns, your LLC docs and all the rest of it. That’s a little bit more painful but it’s doable.
You can take and help you scale up. They have the pockets and they can help you to scale up but you need to build an extra margin for those extra loan costs. You can’t scale any business in real estate without borrowing money. You need to learn that side of things. We did our first probably 7 or 8 flips with our own money as a proof of concept. Is there a market for this? Can we buy them? Can we sell them? Do we know how to fix them up? After that, we’re able to approach private lenders.
If you don’t have that luxury of being able to find your first handful, then you’re probably going to have to look at either paying very high rates or maybe doing joint ventures with a more experienced investor who knows how to run the numbers better than you and you’ll do a lot of the heavy lifting. He’ll oversee it, be a little bit of a mentor and guide her and take half the profits that are well worth it, doing it for the first 4 or 5 deals until you can move onwards and upwards. Don’t worry too much about paying the high fees. If it works and you can make money, do it. The fees will get better as you move along and gain experience.
It was the experience of putting your pitch decks together and having that experience or somebody on your team that can help enable that. That allows for you to have reduced money costs the more you market out there. With you having such an international flair in the market, are there any markets out there you’ve been keeping your eye on? We’ve seen increased distressed assets in Italy, Spain and Greece or even back home in the UK. We know real estate’s expensive in the UK. Is there anything you keep track of internationally?
I did a lot of business in the UK back in 2012, 2013 and 2014. I marketed a lot of students’ apartments where people would buy an old abandoned property within a fifteen-minute walk from the university and converted it into 50 bedrooms with a communal kitchen and living areas on each floor and a gymnasium on the bottom. They were great. I used to sell those things for £60,000 to £70,000. The developer often offered a rental guarantee of maybe 7% or 8% during the first two years. They were near a good university in this huge amount of demand.
There are tons of international students going to places like Liverpool, Manchester, Birmingham and London that we’re paying top dollar to rent these brand-new university flats because if you can imagine back a generation ago, most student accommodation was very low-end, scruffy, moldy, leaky and everything else. Nowadays, it’s like a hotel if you can afford it, so I did well from that. I moved on to Florida. It has taken up much of my time and we’re scaling that up. Brexit happened and then COVID happened where university students couldn’t even go back to college anymore.
Brexit stopped international students from traveling. I did some distress sales in London back in 2009 and 2010, some commercial stuff. It’s similar in Dublin, I did some apartments in 2012 and 2013, when they were extremely distressed but the prices have gone through the roof in all the major cities and even some of the secondary cities. To be honest with you, I look at Spain a lot. My wife is Spanish. I lived there for many years and I have friends that have real estate businesses but the margins are thin. Access to money is difficult. The cap rates are low that I cannot do somewhere like Florida or even move out to Ohio or Alabama or Jacksonville. It’s a much more dynamic market.
It’s difficult to appreciate that if the US is the only market you’ve ever been involved in. To have a 30-year fixed loan that you can get for ten or plus properties. To have credit unions and local banks that will lend you money to buy a 20, 30, 50, 100-unit apartment complex. To have private lenders, professional and otherwise that will lend you money to scale your fix and flip business. To have REIA meetings with people that are guiding you. To have mastermind groups for people that are telling you how it works and how to scale up. It’s a totally different league here compared to if you don’t have practically any of that stuff.
I have a friend in Madrid that buys apartments and fixes them up and he’s looking to get 50% finance. He’s spending hundreds of thousands of dollars of his own money on each deal. I still own a property in Madrid that we used to live in and it’s worth €500,000. We used to rent it out for €1,500 a month. The cap rates are terrible at 2% or 3%. Why would I do that when I could buy three properties and rent them all out for €1,500 until a change out of €500,000? I’m summarizing, there are people making good money in Spain and Italy and Ireland and England but for some reason, you have to be five times as smart and as hard-working to make €1 million in real estate in those places compared to here. We’re lucky to have the resources that we have here to do it.
I have a couple of important questions. Guinness or Irish whiskey, which do you prefer?
I like both. Guinness first and then you get whiskey when you’re full of Guinness. If I had five pints, I want to get a couple of whiskey chasers.
Irish car bombs go along with them. You can get them both at once. In football, who’s your team? We’re not talking about Tampa Bay football even though I know Tampa Bay won the Super Bowl. You may be a fan there but I’m sure you got the original football roots. Were you a big fan of any specific club in the Premier League or anything like that?
Manchester United was my team growing up. Roy Keane, a famous Irish man, was their captain during a lot of the ’90s. He was a fantastic player. I used to watch them winning the Champions League. In university, I remember that very well. They beat Bayern Munich in 1999. They were losing 2 – 1 in the last minute and they got two goals and extra time to win it. It was amazing. When I went to live in Madrid, Spain, I started supporting Real Madrid. They’ve had a fantastic soccer team as well and a fantastic culture of soccer as well.
We’re getting a team here in Austin this 2021 for the first time. We’re pretty excited about that. I’ve been watching a lot of that stuff. I’ve been watching a lot of the Amazon documentaries on Manchester City and some stuff there to get familiar with it. We’re looking forward to having it here in Austin, for the most part, but that’s always interesting to see. I love your experience. I know you’re passionate about helping people. You can hear it coming across with what you’ve shared here, how to get started, doing things and getting started there. Are you working with other investors? Are you helping them, coaching them or anything?
I do help people with general coaching. I do help them have those templates and systems and documents that they need. Simple stuff like how do I structure a deal, how do I find the lender, how do I get loan documents, how do I work out what the after-repair value is? What types of spreadsheets do I use to work out? How to present my offer? How to work out the numbers? How to sell it? I do have a bunch of people, mostly local people but also out-of-state people. I like doing it. It’s not like I make much money out of doing it. I enjoy giving back because I’ve received a ton of wisdom from people further up the ladder than I am and I still do. I spend a lot of time and money on masterminds, learning about how to scale and how to be a better person, how to have more money and more time simultaneously. There’s no limit to the fun you can have in real estate and the types of people you can network with. It works both ways. The people above me on the ladder and people below me on the ladder. I love dealing with them. I like networking.
I agree with it. The passion comes across. Have you got a name or two who’s been helpful in your dream here in the States?
David Shaw, my ex-business partner. We were working together for twelve years. We split up about a year ago amicably. We worked together. We figured out all that stuff together in the early days. We had a lot of ups and downs and a lot of fun together. We had the right personality balance to move our way forward. We had tremendous last few years. We’re doing our own thing and building our own businesses for the benefit of our immediate families. What he wants to do for the next five years for him and his family is different to what I want to do. We both had enough accumulated knowledge and success together that we’re able to do that while still staying in touch with each other and bouncing ideas off each other. He’s been probably the biggest impact on my career so far. I do get on the phone and Zoom with other people out of state, fix and flippers, out-of-state property managers. I was looking to invite a bunch of people onto my podcast and quiz them, ask them everything I wanted to know which I’m sure you do as well.
Let’s talk about the podcast here. You’ve been doing it for a little while. You’re having a lot of success. Let’s talk about how do people find out about it? What’s your focus on it?
It’s called Colin Podcasts about Real Estate. That’s what it is. Type that in. It’s me talking to people that I like and asking questions that I want. I’m a curious person by nature. I always have been. If I can go on a slight tangent, if you can encourage yourself and more importantly, your kids to develop an interest in reading from an earlier age, that’s huge. You can get someone to read books, get into that habit of reading every night, even if they’re super tired. You do them such a big favor because it improves their curiosity, their imagination, their vocabulary and their writing skills. It’s brilliant if you can do that and I got into reading from a very young age and that’s where a lot of my curiosity, passion and willingness to learn, experiment and take risks followed from that.
With the podcast, I get a lot of wholesalers, fix and flippers, realtors, lenders, property managers, currency specialists, multifamily syndicators, a little bit of everything. I have real estate coaches on the show, people that are there to get you enthusiastic about real estate. They’re there to talk about their journey, their ups and downs, their goals, their wants and needs, and what they love from it. I’m still figuring it out as I go along. I’ve done 40 something episodes. It’s a lot of fun. It comes out every Thursday.
It’s a lot of fun being a podcaster. We got such a great mixture of people. A lot of real estate investors and experts have a positive mindset because we’ve all been through ups and downs, good deals and bad, and have developed a thicker skin, but we all have that servant mindset. We want to give back to help others avoid those same type of mistakes to get up the ladder faster and help those out as best as we can. Everybody can tell that’s a big part of your heart. You mentioned you’ve got some goals here for the next few years and you’re making some changes. What is your biggest goal for the next few months that you’re focused on?
I’ve been living in Tampa for many years and doing well in real estate, but my wife is Spanish and my kids are half-Spanish, half-American. I don’t even consider them Irish. They should be but they’re not. We’re moving back to Spain in July or August 2021. We’re relocating back to Spain and we’re organizing the logistics of that. I’ve managed the renovation of our house in Spain remotely. That was a bit of fun and organizing schools for the kids.
I’m setting up a lot of systems where I can continue my real estate investing here in the US from Spain. I used to do it from Spain a few years ago and I’m going to do it again. One of the things I’ve set up to create additional passive income streams and make it easier for me to get involved in real estate is that I’m launching a land-flipping business called CGM Land at CGMLand.com where there’s a guy who renovates a lot of houses. It seemed nice, the idea of buying a piece of land for $50,000 and turning around and selling it for $75,000 without having to schedule a bunch of permits, repairs, deal with realtors and all the rest of it. I’m looking forward to that.
I’m going to be doing a bunch of seller finance deals to create passive income streams. You may buy something for $20,000, sell it for $50,000 with a $20,000 deposit and then a five-year note with 11%. You can get good interest rates on those. I’m looking forward to creating those passive income streams from land investing. I enjoy lending to local wholesalers and local flippers as well. Some of the guys I coach, I lend them some money. I still do a little bit of teaching people about foreclosure auctions.
I’m still actively involved in a lot of stuff, even the fix and flips that I do. I’ve gone deep in these neighborhoods and I know all the people I need to know. The people that will do the roofs, the ACs, the kitchens, bathrooms, the property management, the inspections, the drive-by, the permits. They’re all on speed dial. I’m still flipping houses here from Tampa but I don’t look at them anymore. I don’t live there. I’m going to keep doing that from Madrid.
It’s a mixture of continuing to network. I want to 10X my business in the next few years. The land is going to be a big part of that. I want to increase my passive income twice as fast as my active income. When we can travel, I’m going to keep traveling but I have a lot of stuff going on, but the big one is getting my family moved and settled into Spain. I’m blessed to have a good passive income stream coming in from real estate and a lot of possibilities for new active income streams this year and beyond.
Madrid is a beautiful city. We’ve had a chance to spend a little bit of time there. If we were to move abroad to Madrid and Barcelona, Spain was probably one of those countries we look at the most because people are awesome. The food and the wine are phenomenal.
It is dangerously good, the food and the wine, I do miss that a lot. Ireland’s got nothing special food-wise and it’s very expensive to get good food, even here in Tampa. You have to pay a fortune to get good food. In Spain, you get amazing food for ridiculously low prices. I do miss that a lot.
Have you ever been able to find any haggis there in Tampa?
If I know and if I did, I wouldn’t order it. I wouldn’t trust haggis outside of Scotland, to be honest with you.
Tampa is one of the cities in the country that we are syndicated on the radio stations out there in that neck of the woods. What’s the best way for people to reach out to you, connect with you and see what you’re doing?
The easiest way is to go to my website. It’s called ColinInvestments.com. You’ll also find me on Instagram, Facebook, and LinkedIn under either Colin G. Murphy or Colin Investment. Check out those links. If you go to the website, you’ll see a lot of videos, podcasts, reports that are all free to download. There are buttons there where you can schedule a twenty-minute chat with me. That’s a good place to start.
Thanks for coming on the show and sharing some great nuggets. It’s a great conversation. I’d love to give you a call here on St. Patrick’s Day and host a pint with you virtually.
I love that. It sounds good.
Colin has provided a ton of nuggets. Go check them out and listen to his podcast. Go check it out. I’m honored to be one of his first 40 episodes. I’m glad to be part of that. There are many different things. You can take many amazing nuggets and such great counsel that Colin provided there. That’s one of the things I’m excited to have him on. We didn’t just talk about the Tampa market but we talked about how he’s putting systems in place, doing this remotely, selling real estate from anywhere because he’s using marketing systems and virtual teams to make things happen. You can do real estate from anywhere. You don’t have to be there and look at every single property and be a control freak about everything. Systems and focus, go deep before going live, and you’d be a lot happier person. Go out, take some action and we’ll see you all at the top.
- Colin Podcasts About Real Estate
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- Facebook – Colin Investments
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About Colin Murphy
Colin is a full-time investor who lives in Tampa Florida with his wife and two children. Over a 16 year career, he has bought and sold more than $100 million worth of real estate in the US and UK markets, including 350+ fix and flips in Tampa between 2015-2020.
He has experience in a wide variety of real estate-related activities, including buy & hold, fix and flip, wholesaling, tax liens, tax deeds, foreclosure auctions, note investing, private lending and more.
In addition to investing, Colin is a licensed Realtor in the state of Florida, enjoys podcasting, networking with fellow professionals and generally creating useful content for those who want to achieve financial freedom before they get too old to enjoy it.
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