The Science of Flipping - Real Estate Investing Tech to Solve a BIG Problem | Paul Wakim

Starting point is 00:00:00 Yo, yo, what is up, everybody? Welcome back to the Science of Flipping podcast. I am your host, Justin, and I have a great special guest on. But before I get to my guest, as always, our number one sponsor, MinutePages.com. If you are a real estate investor and you need a presence online to create credibility, influence, and authority in your marketplace, there is no better place to get your professional real estate investor website than MinutePages.com. Head over there now to get your website. All right, guys, we are back at the Science of Flipping. I have a great guest. Paul Wakeham is joining us today from Town Square.

Starting point is 00:00:58 My friend, how are you? I'm doing well, Justin. Thanks for having me, man. I've been a fan for a long time, and I'm looking forward to talking to you. Yeah, right on, dude. Thanks for having me, man. I've been a fan for a long time, and I'm looking forward to talking to you. Yeah, right on, dude. I'm very excited to talk to you. You and I have just spent a decent amount of time actually talking because I'm very interested and intrigued about what you've been able to develop. But before we get kind of into that, I want people just to understand who you are, the space you came from. Started out a real estate photographer, then became a real estate investor, and now you're

Starting point is 00:01:26 a real estate tech guy. That's right. And so that's a very cool direction that you've been able to take. And so let's talk a little bit about that for a moment, to that journey that brought you to the place where you're trying and succeeding to some level to change the real estate space specifically for us real estate investors and even more specific for wholesalers. Yep. Yeah, definitely. So all of that started getting to where we're at with Town Square today really started back whenever I was young in middle school and even in elementary school, I saw what my grandparents were doing. My grandparents were successful developers in Palm Beach, Florida, and successful real estate agents in the same market. And I saw what they were doing with real estate. It always kind of stuck with me.

Starting point is 00:02:16 And then throughout high school, I had the quintessential rich dad who was the dad of my best friend. And he was a landlord. He owned all types of houses and explained real estate investing to me. And then right out of college, after I graduated with a very bad GPA, because I was too focused on making a business right out of college, I started a real estate photography business with my girlfriend at the time, now my wife. And that led me down the path of really getting into real estate as an agent. As a photographer, we've grown that business to be one of the largest real estate photography businesses on the East Coast. And then as an investor and getting really deep into the world of what makes sellers

Starting point is 00:03:01 tick so that I can help them buy and sell houses as an agent and buy their houses as an investor. So yeah, all of that has led to town square and creating a technology company, but lots of real estate investing stuff. There are some really interesting stories of like buying a house for a dollar and then selling it to my landlord. Lots of stuff we could talk about there. That is, I mean, man, we can go on a deep dive just about fun, creative deals. And, uh, you know, let's just talk about that one. Cause that is interesting. So you bought a home for a dollar and then you sold it to your landlord. Did you end up living in it as a tenant? No, thank God I didn't know. So I actually ended up photographing it, which was cool. So, um, whenever I was a real estate photographer, I was the primary photographer. I drove around and

Starting point is 00:03:47 listened to podcasts all day long, paid attention to social media and what everybody was talking about on social media and just got totally enthralled with real estate investing. So I was walking around one day and thought I could build an algorithm if I knew all of the data that I needed to predict who was going to sell their house next. Fast forward through the algorithm days, we can come back to that. But my first version of the algorithm predicted that a house down the street from where I was living was one that would sell. It just so happened that it's one that I was walking my dog past around the same time that it spat out those results. And it took me about two and a half years to buy it. But I worked with the family who was partially involved with the house and my attorneys and got the title totally clear and ended up purchasing this house that was totally destroyed, but in a good neighborhood,

Starting point is 00:04:45 definitely the worst house on the street. I ended up purchasing it with a totally clean title. I had $187,000 of medical debt cleared off of this title. Yeah. And yeah, sold it to my landlord after two and a half years of trying to buy it. Good for you, bro. I love that. I love that. Well, so let's take that. Yeah. And let's drive that into something that you're currently working on. It's a passion of yours. It's a business of yours. You have clientele. And really, it's trying to change our game, right? As someone who actively wholesales nationally, coming into contact with you and your business has been eye-opening, quite frankly. I've always been taught from years and years ago,

Starting point is 00:05:36 one of my closest friends currently, Kent Clothier, I met back in 2009. Nice. And he was speaking on stage and I was one of the guys in the audience. And he was talking about, go where the money flows. Your buyers are essentially everything to you. And his whole point is he came from a grocery store industry where he was reverse engineering the game, meaning he would go to his clients and say, what do you need? Then he'd go out. Let's just say it's Heinz ketchup. He'd go and go find Heinz ketchup at a number that was lower than what his buyer wants. And he'd go out, let's just say it's Heinz Ketchup. He'd go and go find

Starting point is 00:06:05 Heinz Ketchup at a number that was lower than what his buyer wants. And he would make a fee in the middle in the grocery store industry. And it always resonated with me all these years. And obviously him and I are very close and he's now created reverse wholesaling as a topic and a strategy in the real estate space. And it just has always been the case, especially since the hedge funds hit town around 2010 in Phoenix, the iBuyers now most recently in the last three, four years. Yep. The ones that have the money really navigate and push the industry. And so for your business, Town Square, that really is kind of paramount when we talk about the business. To me me it's great to be

Starting point is 00:06:46 able to get deals but if you don't have the buyers you don't know anyone who has the buyers you don't know where to find the buyers and you're just going to go out there and scramble it doesn't really do any good right and so what you're trying to do um and i want you to tell your own story i'm just giving you my my background on on how i view it you're trying to similarly do what Kent was trying to tell people to do like hey start to focus on buyers or buyer relationships so you know you can move the deal once you get the deal right stop just only focusing on oh I need to go find a way to get a deal make sure you have the buyers or at least people who have the buyers to bring so you can move the deal so tell me where this town square started

Starting point is 00:07:25 how did this all come about yeah so i alluded in that story to uh whenever the one where i bought the house for a dollar um to an algorithm that i had built and i say that word very loosely don't take me too seriously when i say the word algorithm because i certainly was no expert programmer but um as i was a real estate photographer and learning all about real estate investing, I thought, man, if I could predict who was going to sell their home next, I'd be able to buy a house for a dollar and then sell it to my landlord. Okay. So I built an algorithm in 2018 to 2019. And then I met my co-founder, business partner, his name is Mitch, met him in mid-2019. And we decided to improve upon that algorithm. That was really the impetus for Town

Starting point is 00:08:15 Square was, man, if we could build real estate technology that is underpinned by the ability to predict who was going to sell, much to what you were saying, Justin, we were thinking, how do we get the deal? How do we get the deal? How do we get the deal? The buyers will be there, ability to predict who was going to sell much to what you were saying justin we were thinking how do we get the deal how do we get the deal how do we get the deal the buyers will be there the buyers will be there so we built that algorithm but then we realized over the last three years really since we built that algorithm the importance of buyers so we built this crazy accurate algorithm for the pittsburgh penn Pennsylvania market, my hometown. And it all fell apart, unfortunately, whenever COVID hit.

Starting point is 00:08:50 But then we iterated. We raised some money. Town Square today, thankfully, is a VC-backed business. We raised some money. We iterated. We pivoted a bunch of times. And then we arrived at where we are today, which is really on the other side of the real estate technology or real estate investor technology industry. We were focused in the beginning on acquisitions. How do we predict who's going to sell so that we can acquire those houses?

Starting point is 00:09:14 Today, Town Square is purely dispositions focused. How do we help our users appeal to their buyers and appeal to other investors so that they can partner so that they can get more deals done in a more efficient way? Yeah. So you now are focused on bringing as many active buyers to the marketplace as possible and having a town square for us investors to go to to say, Hey, I have a deal in Augusta, Georgia. I haven't been able to sell it. Does anyone have buyers in Augusta, Georgia? And then let's just say you would pop your head up. I know that's not the technical way it happens, but you would say, Hey, I have some deals that I've moved in Augusta. I have some buyers. I'll try to move it for you. And then you and I create a JV that allows me to move a deal that I can't move and you to get paid on a deal that's not even yours because you already have the buyer. Yep, that's right. So you can do three key things on Town Square. You can post your deal to the marketplace to see if there's a buyer that's

Starting point is 00:10:21 there that's interested. You can send your deal to your contacts in your network, your buyers. And then just like you just described, if you don't have contacts or buyers that are interested, you can see who else in the town square on the network has buyers that are potentially interested in that deal. And then share your deal with that person and have that person say, yes, this deal meets my standards and it meets my buyer's standards. I'll send it out on your behalf. You can leverage the goodwill that I have built with my buyers and the relationships that I maintain with my buyers. But first we have to partner on this deal and I need a piece of it via a JV. So those are the three primary things. And yeah, you can send it to your deals. You can put it on the marketplace and just say, Hey, who's, who's got somebody, or you can go reach out. So for example, in the

Starting point is 00:11:17 example I said about Augusta, Georgia random, I would be able to see in the back office or the database that you have buyers in Augusta. I would see it somewhere. I would say something. You would put a name on Paul that would say, Paul has your buyer. Yep. Yeah. So inside of your post, we call it you, you know, one, two, three, main street, Augusta, Georgia, you go to the marketing tab and you send it out to your buyers. You publish it to the marketplace, but then you go to the marketing tab and you send it out to your buyers, you publish it to the marketplace, but then you go to what we call the sharing tab, the feature set, we call post sharing. You go to the sharing tab and you can see, you would see Paul Wakeham is there and he has uploaded 7,482 buyers, whatever it is that are in Augusta, Georgia, and that Paul has said are interested in properties like mine. If your property didn't meet my buyer's criteria, I wouldn't show up

Starting point is 00:12:11 in that market. Because I have to upload my property first. All those criterias get laid out. And then anyone that has uploaded any amount of buyers that fits those criteria, you would show up. That's right. Yeah. So because I uploaded those buyers and said, my buyers are interested in this kind of deal, I show up and you can share your deal with me right on the platform. We can discuss, we can exchange documents and we can sign documents. And then on the platform, are there the JV agreements and that kind of stuff on the platform that they can share and do, Or is that up to the user? Yeah, that's up to the user. We just provide the tools. I've been asked that a couple times. And to be honest, man, I don't want to provide legal documents to anybody.

Starting point is 00:12:55 No, it's not a big deal. And a JV agreement is as simple as it gets, right? So yeah, it shouldn't be too much of an issue. Well, that's incredible. And so it really is trying to solve for something that many of us, especially if you're spending money marketing, you come across deals that you can't move, right? And you're like, well, this is a lead and it's a contracted deal. I spent money on it. It may have cost me $3,000 to get this contract, right? Yeah. I would rather go. And by the way, there's no reason it has to be a 50-50 deal, right? Not at all.

Starting point is 00:13:28 I've done a lot of deals where I've gone to someone and said, listen, I'm happy for you to sell it, but there's a cost to this deal that is real to me. So I'm gonna remove that cost and then we can share 50-50. So at least I'm recouping the cost first. You can structure those as any way you absolutely want, right? There's no right or wrong in terms of a partnership, a JV agreement, whatnot. It could be, I'll give you a fee to sell

Starting point is 00:13:51 it. It could be anything you want. A lot of people just assume it has to be 50-50, not always the case. But I can promise you, if I'm the one trying to sell your deal, because I have the right buyer, I'm going to be like, hey, you can use me or not, right? I mean, here's what I would like. So it goes both ways. Because if Paul has the buyer, and he's trying to like, oh, I want 50% of the deal, but I don't want to give up 50% of the deal, then it's just well, then I don't want to use you. And so he might lose out on a deal that he can make something on. Vice versa, he says, Hey, well, if you don't give me 50%, I don't want to do it. And then I lose out on a deal that I'm might be

Starting point is 00:14:30 able to make money on. So there's there's a balancing, there's a dance you would have to do, right? Yeah. And so that's just up to you guys. It has nothing to do with the platform has 100% to do with the two users. Yeah, that's right. But we give everybody the tools. So you can chat, exchange documents, like I said, and sign documents, like I said, right on the platform. And you can see everybody's contact information. Really, whenever I think about Town Square, I think about it like a network of sorts. It's a marketplace. It has these cool tools built on top of the marketplace. But really, I've never really had success in business unless I'm connecting with somebody that has a big reach like yourself, Justin, or has money to invest or has the expertise.

Starting point is 00:15:16 So we're much more focused on the connection between investors than we are on email technology or something of that sort. You know, the connection, the network piece is very, very important to us. Love it. Well, so if you were going to try to sell someone on this, and I want you to be open to say, this is exactly what it is. And if this is a good fit, go to townsquare.com. And what's kind of your elevator pitch, right? Or what would cause intrigue for someone to say, I'd like to go see what this is about? built on top to support your off-market property business, like the marketplace where you can post your properties, like the email tech where you can send out your deals, and most importantly, that network component where you can connect with other individuals in your market or outside of

Starting point is 00:16:14 your market to share in everybody's resources and be compensated for it. If you're somebody who has a really good relationship with buyers or has maintained a really strong buyers list or a great network of investors that you know you want to sell deals to or that you can sell deals to, the pitch is simple. If you have a list, upload it, sit there, and see if anybody is going to come to you and try to sell their deal to your buyers and then monetize your buyers list without having to spend any money on acquisitions. Now, the other side, if you're a buyer, we're adding a lot of things for individual buyers to quickly vet and one day finance deals directly from Townswear. Love it. Love it. I mean, both sides. Yeah, that's fantastic. I mean, it really is solving for some issues that people have. And listen, if you're just someone that already has a big buyers list, to me, this is somewhat of a no brainer, right? Like if you're already selling deals, and you don't really have a problem, this isn't for you to necessarily sell deals, but you might get people to bring you

Starting point is 00:17:15 deals that you don't have. And that's just gravy on top, right? There's no cost to it. There's no marketing cost. Whether it's 50, 40, 30, 20, a fee, it's free money to you. So to me, those that have a list that are experienced like myself and may not need to go find, but I can go upload all my buyers right now. And you guys might come to me and I'm going to make essentially free money. So I think that's a huge takeaway, especially for my audience that's listening to this right now. That can be huge. Yep.

Starting point is 00:17:49 We'd love to have you on the platform, Justin. I think that maybe after this call, we get you signed up. Do a deeper dive, right? That's right. That's right, man. That's right. But yeah, it's been a journey and a half to get here. It started with that photography business and really working my way through being an entrepreneur, but a professional and dealing with clients and then getting into

Starting point is 00:18:11 helping homeowners and buying and selling houses as an agent to now building technology for this industry. It's been interesting for sure. And now raising money and talking to guys with billions of dollars to spend on burgeoning technology companies like ours. It's all fun. It's been an interesting game to play and I'm happy to be here. Yeah. It's interesting when I'm able to advise on just business, right? It's interesting to see the seasonality of people's experiences and where they've come from and where they're at and where they're going and how all that kind of changes. And what I'd say is, especially in a time like now with the economy, the way it is, those that are able to adjust and adapt based around real-time data,

Starting point is 00:18:56 real-time, not historical, but real-time data, they're the ones that are going to win in a big way, right? They're not just going to what's happening, they're gonna thrive. I think you're on the cutting edge of stuff right now. I think you creating market share, I think right now when economies start to- Turn over. Yeah, when they turn over, when there's change, when there's flexing, when it's not as steady, this is where entrepreneurs can create market share, right?

Starting point is 00:19:25 In our space of real estate investing, you can double down on marketing, you can increase, you know, lead flow, you can really create a market share, right? In the space of technology, you might have people that are going out of business or their users are falling off in a massive way. And because their business isn't as successful as it used to be, right? So they're cutting costs, right? And so they might see something like this as a way to keep up with the times. And I'll tell you that adaption, not adoption, but adapting to the changing times real time based around real time actions, they'll win. So keep doing what you're doing is what I'm trying to tell you, right? And keep pivoting, keep adapting, keep trying to better it because it's interesting to watch the journey

Starting point is 00:20:12 you've been on where it's at now. And I'm assuming if you're on the podcast again, somewhere in the future, we'll be at a different place then. Totally. Yeah. So that's exactly what's happened. Thanks, man. Thank you. Yeah. And to your point about the economic environment and things changing, I think that just my two cents is I think that we're honestly on the verge of a really humongous opportunity for everybody in our industry to take advantage of that flexing or the changing and the adapting of the market. I think that probably beginning of the summer, we're going to see the media still screaming about interest rates being

Starting point is 00:20:50 so high and there being a recession, but then the Fed is going to say, all right, well, we have to start lowering interest rates so that we don't destroy the entire economy. And then all those big buyers are going to come back into the market and say, I have the deepest pockets in the entire world and I need to buy houses. And I think that anybody who's able to make it through this time and flex with the market and keep their business lean and do everything that you just said is going to find themselves in a really, really, I call it a sweet spot right at the beginning of the summer as the interest rates start to go back down and the media is still screaming about a recession. I just had a conversation with my team today about making sure we don't lose sight

Starting point is 00:21:33 of the iBuyers and the hedge funds. iBuyers are going to stick around. There's a lot of turmoil right now. They didn't do it right, et cetera, et cetera. I forget. Someone just stepped down from being the CEO, whatever. Yeah. They still have billions to spend. The point being is that model, the residential real estate, I just saw two people, businesses, by the way, JP Morgan Chase is allocating a billion dollars to buy single family residents in 2023. And JLL is allocating a billion dollars for single family residents in 2023. That's one year, a billion dollars. They're not going anywhere. They may have tightened up.

Starting point is 00:22:09 They may have slowed down. They may have, because their money costs money too, right? So they're not immune to interest rate hikes, but they see the asset class. And that's what I want to impose on people. And that's what I'm trying to impose on my team in terms of let's make sure we stick around markets that those buyers are always going to find as sexy markets. Right. I used as an example, Augusta, Georgia, we have sold to the hedge funds in Augusta, Georgia. Right. And we have sold in Macon, Georgia, and we have sold, I mean, again, we we've sold everywhere, but just because we're not

Starting point is 00:22:46 as heavy there now, we don't want to just like pull our foot off the gas there because they will be back, right? They're refined, just like you, just like me, they're refining their systems, they're refining the business model. So I'd encourage all of you. First of all, no one should be a one-trick pony. If you only rely on your hedge funds, you're in a tough spot right now, that is for sure, which is why Town Square exists. Because if you had Town Square, even though maybe you were making millions of dollars selling to the hedge funds, once they went away, and they did, and those people are feeling it, you still had Town Square, right?

Starting point is 00:23:22 Yep. So, that could keep the engines burning at a high level with fuel. But all in all, they're coming back. And I think it's important for everyone to know those relationships will be in town square, I would assume, right? Whether you have them or someone else in the space has them. And just be aware that the real estate market's not going to crash. They're going to come and stand it up. It's an asset class now that is irrefutable to them. And so I would just say, stay in the business, keep doing what you're doing. Take something like Town Square and try to find a way to put that into your business. Whether you're the one that has the buyers or you have the

Starting point is 00:24:01 deals and you're having a little hard time right now because your buyers are pressing pause or slowing down or all the other challenges that we see in the wholesale space, well, I guarantee you buyers are still buying and you just may not have the right ones. Yeah, you're totally right, Justin. A couple quick statistics that I have to splurt out. Whenever I was raising money for Town Square, one of the key slides on my pitch deck, it's been a couple months now, so I don't know if the numbers are 100% accurate, but one of the key slides was of all of the multifamily units in the US, I think that market is valued at like $3.2 trillion or something like that. Again, don't quote me on the exact numbers, but of all those multifamily units, some crazy number like 55% of those units are owned by

Starting point is 00:24:53 institutions, not mom and pops, but over 50% are owned by institutional buyers because to your point, it's a tried and true asset class. Less than 2% of all single family residential and small multifamily are owned by institutional buyers. And now these guys, I've had conversations with the head of acquisitions for some of the largest institutional buying houses in the country. They see, okay, there's that 53% delta. People my age in their 20s don't want to buy houses, they want to rent. So how do we make up that multi-trillion dollar difference between we know we can run giant multifamily as an asset and own the entire market, at least the majority of the market? How do we translate that into the single family market? And like you said, to just reinforce your point, they're not going away because they know there's that 53% plus delta between those two numbers and the efficiency is there for them to run single family rentals, just like they run multifamily rentals. 100%. And so I think that's a great spot because I think there's a lot to talk about,

Starting point is 00:26:15 which we could spend hours talking about. But ultimately I appreciate, first of all, I appreciate you coming on. Where can everyone go look at town square and get to town square and kind of dive in there? Yep. So the URL is town square stuff without all the vowels as our, as us cool techie guys do course the texts. Yes. T W N S Q R.com. Um, and then you can find town square across social media, just at T W N S Q R. Um, and then if anybody wants to connect with me, shoot me an email, you can send me an email at paulatwnsqr.com. Love it, dude. Appreciate you being on. You're really trying to change the way that the business is run.

Starting point is 00:26:52 I love that. Always being on the cutting edge. It'll definitely continue to grow. I encourage it. And we'll continue to have conversations, dude. Sounds awesome. Yeah. Thanks for having me, Justin.

Starting point is 00:27:02 It was a pleasure. And I've been following you for a long time. I appreciate the knowledge that you're putting out into this space and the help that you're providing to people. I think you're doing great stuff and I really appreciate you having me on. Right on brother. All right. Thanks guys. See you on the next one. Peace.

The Science of Flipping - Real Estate Investing Tech to Solve a BIG Problem | Paul Wakim

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