From First-Time Investor to Portfolio Builder

Episode Overview

Host: Daniel Shaked (Home365)
Guest: Andrew Luong, Co-founder & CEO of Doorvest
Duration: ~62 minutes
Topic: Turnkey SFR investing, risk management for first-time owners, renovation standards, financing options, and building long-term rental portfolios

Key Topics Covered

• Why first-time investors benefit from a turnkey path to buy, renovate, lease, and manage rentals
• Cash flow vs. appreciation: trade-offs, volatility, and neighborhood quality
• Standardizing renovations, warehousing inventory, and managing scope at scale
• Financing options and when to put more money down to stabilize cash flow
• Operational realities: vacancies, delinquency, fraud, and squatters
• Marketplace balance: sourcing supply vs. matching real customer demand

Complete Detailed Transcript

[00:01] Daniel Shaked: Welcome to Real Estate Investing Open Kimono by Home 365. I’m Daniel Chakad and here we’re exposing real estate’s biggest traps with brutal honesty, no fluff, just raw truth to help you win. Let’s dive in. thrilled to welcome Andrew Long. That’s how you pronounce. A visionary CEO and co-founder of DoorVest, the game-changing platform that’s making real estate investing accessible to everyone. With a passion for financial empowerment, is transforming the complex world of rental property ownership into a seamless online experience. Get ready for insights from a leader who is redefining the American dream. Andrew, thank you so much for coming over. Happy to have you here. How are you?

[00:45] Andrew Luong: Yeah, excited to be here doing well. It’s been a crazy busy week, but excited to hang out with you. And I finally get the chance to hang out with you because you’ve been dodging me this whole time too. excited to chat.

[00:57] Daniel Shaked: Was I? No. We’ll fix that. We’ll fix that. But definitely, I’m excited to talk to you. There’s quite a lot of overlap between the companies, but definitely the real estate market is so huge. The biggest asset class of the world. There is a place for everyone to collaborate, cooperate, and whatever. And I’m curious to learn more about DoorVest and about yourself. Maybe before we talk about yourself. Can you walk me through the typical door vest clients experience? Experience who is your client? Who is your like typical client that you target? Just. Get us familiar with your offering.

[01:38] Andrew Luong: Yeah. Yeah. Yeah, for sure. so a little bit of background, I got into door vest because I personally got into the real estate investing myself in 2014. it stemmed from this place of like, how do I build financial security for myself? And also like, how do I build some passive income so I could go live, on a beach? the financial security spot was very noble, because, Like our family faced a lot of financial hardship growing up. And so I felt like real estate was sort of the path to deliver financial security for myself. The retire on a beach, I very clearly, as we talked about before, chose a entirely different path. I raised a bunch of venture money and I’m just grinding many long hours on it. Yes, yes. But,

[02:25] Daniel Shaked: And here your bitch is away. Now that’s Dream’s distance. Okay. Now you have partner. Yeah. Okay.

[02:33] Andrew Luong: so anyways, I was doing that sort of as this, nights and weekends thing, which I think both of our, businesses are our customers, are probably doing a similar thing. and then along the way, friends and coworkers would always ask me and they’d see that I, maybe over the weekend, I flew to Texas to look at homes or something. And they’d see that and they’re like, wait, we have the same jobs. We probably make the same income. I also have savings and I’m also interested in real estate. Can you show me how to do this? and I would give them the playbook, right? It’s like a, how do you find an agent and how do you find a home and how do you write offers and then get a mortgage title insurance, and then you got to close on it and renovate it, least manage, do some bookkeeping, your taxes. And then you should probably build out a port. Yeah. Super simple. here’s the playbook. You got it. Yeah. did not work obviously in hindsight. and so, just.

[03:22] Daniel Shaked: Exactly. That’s what you’re talking about. Okay.

[03:31] Andrew Luong: over and over, I bumped into people after I shared the playbook in three or four months. And everyone would say, could not get started, like, can you just do this for me? And so at some point that became the genesis of Dorvest. And I share that because that’s, thank you. That’s how we’ve designed the platform as sort of this online turnkey way for people to buy, manage and sell investment properties. So

[03:48] Daniel Shaked: Love it.

[04:01] Andrew Luong: We’ll start with usually a working person. I’d probably say the average consumer is in their early 40s or so, 50 % of which are first-time homeowners. So maybe they’re living in a spot where it doesn’t make financial sense for them to purchase a primary residence. They happen to be buying their first piece of real estate, which is an investment property with us. We’ll get in front of them. We’ll then source homes, usually off market. We’ll find homes. We’ll bring it back to them. We’ll ask them for their feedback. And if they say yes, then great. We’ll buy it, renovate, lease it, and begin management. So sort of fully stabilized. Doing a lot of work along the way, but that’s effectively the experience.

[04:55] Daniel Shaked: Interesting. So you are saying basically that’s the first time real estate buyer most often. 50 %

[05:02] Andrew Luong: 50%. So it used to be higher. Yeah, yeah. In like 2021, I think we’re at about 70%, actually. And they just given the dynamics of the market, we’re down to about 50%. But 50 % are first time home buyers that happen to be in the

[05:16] Daniel Shaked: I’m curious about that. Basically, people would be living in a rental property, like their primary residence, but still become investors and basically fund that probably renting out experience with their rental property or a couple of those rental properties.

[05:35] Andrew Luong: Yeah, exactly. So actually, I’m in that bucket too. So I rent an apartment in San Francisco, like the… It’s true. It’s true. Yes, I cannot… Yeah. So we rent a humble one bedroom apartment in the city, pretty close to the office. Obviously rents are quite high. And then also have a…

[05:43] Daniel Shaked: Wow, man, San Francisco, it’s like 50 houses in other places. So you have to rent. Okay, okay.

[05:58] Daniel Shaked: Mm-hmm.

[06:03] Andrew Luong: real estate portfolio sort of in more affordable markets out of state. And so I think quite a number of our customers are similar to that too. Maybe they’re living and working in one pocket and hoping to build out an investment portfolio with us.

[06:20] Daniel Shaked: You mentioned that they are probably in their 40s. I would think it’s even less than that. would think that this is kind more for a Gen Z type of thing, maybe millennials, right? I millennials are probably getting closer to 40 already.

[06:25] Andrew Luong: Yeah.

[06:31] Andrew Luong: Yeah. Yeah, I think we’re probably like mid to late millennials is kind of the target audience right now. Cause I’ll say you have to have like a job, like a reliable job and probably some promotions along the way and savings, et cetera.

[06:41] Daniel Shaked: Okay, interesting.

[06:46] Daniel Shaked: Right.

[06:51] Daniel Shaked: Right. So what’s the typical user journey? Let’s say I’m interested in buying a property. I’m like thinking about real estate investing, never done it before. How do I find you? What’s my journey and experience working with you guys? What would that

[07:04] Andrew Luong: Yeah. So, yeah. So, you’ll find us usually digitally, maybe it’s an ad, maybe your friend bought a home once a dinner with you got excited, shared the home and sent, sent you along our way. and then also the third bucket is, maybe you already have an existing home with us. so right now about 30 % of our, of our, our homeowners have purchased at least two homes. So they’ve repeated with us. So, the buckets are almost. Yeah. Yeah.

[07:29] Daniel Shaked: Hmm, amazing. That’s great.

[07:33] Andrew Luong: And that’s what we hope to do over time, as people have a good experience and save up for their next down payment, et cetera. But anyways, we’ll get in front of you. We’ll learn more about your objectives. how much, like, are you interested in a certain market? How much were you looking to put down or pay for a home? Are you looking for a very, like, yielding home? So maybe it’s a cheaper home that has a strong rent to price ratio. Are we just looking for like a really nice home in a great neighborhood that you never really have to think about or something in between? And then we’ll go to market. team, our acquisitions team is constantly sourcing homes. They’ll bring it back and then we’ll put it in front of you. And then from there, you tell us like, do you like this? Or if you don’t, that’s fine. We’ll ask for a little bit of feedback and then we’ll keep going until we find something you like.

[08:30] Daniel Shaked: I need to pay you anything to commit to anything or can I just be like in process with you forever?

[08:36] Andrew Luong: I think at some point you get sick of talking to us. So at least in the consultative process, you’ll probably get sick of talking to us after a while. I would say though, we’ve seen quite a bit of folks that sort of spend time window shop with us for years. For one reason or another, we haven’t had the chance to really dive into that. But that’s been interesting for us too.

[08:40] Daniel Shaked: Okay, got it. Okay.

[09:04] Andrew Luong: Maybe you’re poking in and around and maybe you’re waiting for a personal life circumstance, like a bonus or something to pull the trigger. But anyways, yeah, you don’t have to pay at that point. We will ask you to pay a reservation fee when we match the home and when we’re taking it off of the marketplace and starting to do the work and so on.

[09:25] Daniel Shaked: But that property is completely on my name. It’s titled as my property. It’s not owned by owned by Dorvest. You don’t have real estate on balance sheet, I guess.

[09:38] Andrew Luong: So we’ll temporarily warehouse the homes because we’re buying them. They need quite a bit of work too, usually about 25 % of acquisition price and renovation. So we’ll own it for a brief moment, but once it’s ready, you buy it, you take full title, and then we just help you operate it.

[09:45] Daniel Shaked: Okay, got it.

[09:57] Daniel Shaked: Okay, so you basically also do the entire flipping side of that thing. And how involved am I in this process of scope, of project management, of paying for those expenses? How does that work? I’m curious.

[10:02] Andrew Luong: Yeah, exactly.

[10:13] Andrew Luong: Yeah. So something that I’m sure you can appreciate is that our businesses are really fricking complex. You know, there’s just so many operational moving pieces. yeah.

[10:25] Daniel Shaked: I’m talking to a lot of my friends, it’s funny you said that, founders of SaaS companies, whatever. And I’m telling them, guys, you can’t invent a more complicated company and process than property management or real estate investing, all that. So many nuances, so many different personalities, so many different… Like every house is different, every tenant is different, so much variability and volatility.

[10:33] Andrew Luong: Yes.

[10:43] Andrew Luong: Yes, yes, yes.

[10:49] Andrew Luong: Yep. Yes.

[10:54] Daniel Shaked: to automate and build technology around that thing, it’s like the hardest thing ever.

[10:59] Andrew Luong: Totally. Yeah, yeah. mean, tell me about it. It’s like every tenant is obviously different. Even when you say every house is different, it’s like not only is every house different, it’s like every roof is different, every fence is different, every mailbox is in a different place. And so there’s like a hundred different components to this house as well too.

[11:20] Daniel Shaked: and locations and regulations and permits and cities and laws and everything.

[11:23] Andrew Luong: Yes. Yes. Yeah. Yeah. Yeah. Yes. So the reason why I bring that up is your question about like scope. So we have our own renovation standard that will apply to every home. And so we’ll apply that to every home. The homeowner or sorry, the home buyer. Just it’s just a binary. Do they like it or not? And so Some homes will do a little bit more work because it needs more work. Some homes will do a little bit less work because it needs less work. But the work is pretty standardized across the board.

[12:03] Daniel Shaked: So you are setting the scope of work and basically your company is actually managing this project as well.

[12:09] Andrew Luong: Yes, exactly.

[12:12] Daniel Shaked: How is the world of financing colliding with this process? If I need a mortgage, how does that work? Do you also do that or do facilitate with your partners?

[12:19] Andrew Luong: Yeah. Yeah. Yeah. Yeah.

[12:27] Andrew Luong: Yeah. So we have a small brokerage business too. Usually it’s mainly a value add to our customers. mean, it’s not like we’re making a ton of money and it introduces a whole nother layer of complexity. But sometimes people like to just have one person to go to. And so we have a small commercial mortgage brokerage that will do some work there. But the majority we’re referring or you could bring your own. as well too.

[12:57] Daniel Shaked: Got it. Perfect. Okay. And then I bought a great deal with you source. What happens there? I’m a first timer. I’ve heard stories about various rules of thumb, know, 1%, whatever percent I’m envisioning that this property is going to cash flow like crazy, $500, whatever. Where is that thing meets the reality? Like what’s happening?

[13:09] Andrew Luong: something.

[13:15] Andrew Luong: Hahaha.

[13:19] Andrew Luong: Yeah, well, actually, I’ll take a quick step back.

[13:24] Daniel Shaked: And you actually did physically, you actually physically stepped back. So if you can go, okay, exactly.

[13:29] Andrew Luong: Who else have word? No. The first property that I was fortunate to buy was the cheapest three bedroom house in Sacramento in 2014. Met the 1 % rule back in the day too. And I think my biggest regret was trying to meet the 1 % rule because I wish I went a little bit upstream where I wouldn’t get all these break-ins and squatters and all of the stuff that we work, you and I both work on and deal with on a daily basis.

[14:01] Daniel Shaked: Andrew, but when we are seeing, when we are looking on, like browsing on Instagram or TikTok and we have those influencers shooting themselves talking about, you know, how do you build wealth now, 100 properties within two years. Nobody mentions squatters.

[14:14] Andrew Luong: Hahaha Great. Great. Yeah, exactly. And, and it’s awful. mean, I’ve had personal stories. We have stories at the company all the time. It’s, man. So the same home. Yeah. Yes.

[14:23] Daniel Shaked: Go ahead. I love the personal story. Go ahead. Yeah. I’ll tell you a story. I’ll tell you a story about squatters as well. Like brutal one. But let’s see whose whose story is more brutal.

[14:34] Andrew Luong: I think mine is a nuisance. Yours might be more brutal. Yes, that same home. It was the cheapest three bedroom in Sacramento at the time. Fortunately, I did great. I also don’t own it anymore and I left a lot of money on the table because I just couldn’t deal with the break-ins and the squatters and just like the volatility of it all, which is why instead of hitting the 1 % rule. Maybe I could have done a 0.8 or something, bought something a little bit nicer and I really think I would still own it today. which is one of my biggest regrets. Actually, there’s a, there was a batch of homes that I bought together that I don’t own anymore. And it’s unfortunate. one, yeah, one time, resident moves out. I’m going to see the house because I need to get it turned by the way, I was self-managing. That was also crazy.

[15:00] Andrew Luong: But I went to go see the house because I needed to get a turn. I step into the front door. I look straight in. There’s like a lady cooking and she turns around. She screams at me and she’s like, what are you doing in my house? I’m like, my gosh, it’s actually my house. But I’m obviously not arguing with you. So I used to actually always back into the front driveway. So in case an incident like this happened, I could leave the house pretty quickly. Fortunately, I did at that time. But yeah, what about you? What’s yours?

[16:08] Daniel Shaked: So we get an online inquiry, know, a lead coming in, we need the property management company service and we’re like great, we’re talking to that person and that person represents around 100 something properties owned by Japanese investors. Okay, I will not name the name of that company but anyway that’s what they do.

[16:31] Andrew Luong: That’s a big deal.

[16:35] Daniel Shaked: They sell the appealing US real estate overseas. By the way, we’re seeing that quite a lot, at least according to various stats, 50 % of real estate investors, especially in a safari space are international. A lot of money. Yes, yes, at least in our portfolio, it’s even higher, I think. a lot of money is.

[16:49] Andrew Luong: Hmm. wow, interesting.

[17:00] Daniel Shaked: attracted by the US real estate from all over the world. Whenever things are not stable enough, inflation, macro economy, money is floating into the stable US real estate. South America, Asia, just name it. One of those properties is located somewhere in the north side of Las Vegas, not the best part but we couldn’t figure out.

[17:14] Andrew Luong: I bulled ya.

[17:26] Daniel Shaked: and they are saying look there was something is happening on there if you can go there and just take a look and eventually it’s a complex of like 40 units multifamily like if I’m mistaken four buildings of 10 units each like in a complex every single one of them is with squatters needles people living in the crawl spaces

[17:44] Andrew Luong: Okay, yep, yep.

[17:55] Daniel Shaked: We had to hire security forces to secure this entire thing. But I can’t forget the picture of the security guard basically looking like a SWAT, like a Navy SEAL with all the weapons and everything. It’s a private security company. Grabbing people by their hair from below the crawl spaces and they are like another one and another one and another one. I mean, was like crazy stuff. I’ve never seen a picture like that. And eventually we had to secure this place for like

[17:56] Andrew Luong: my god.

[18:08] Andrew Luong: my gosh.

[18:21] Andrew Luong: Alright guys.

[18:25] Daniel Shaked: almost a month or even more to do their rehab, renovations and more than that it’s a horror story. All of them had a valid lease but not from the homeowner, from someone who scammed them.

[18:41] Andrew Luong: Yeah. my gosh.

[18:43] Daniel Shaked: There was a scammer who was actually listing those properties. but they didn’t own them. So you can imagine the amount of hassle. All of that is owned by international investors who barely speak English and can’t understand anything. And that’s like a complicated situation to manage. So your story, I think mine is kind of worse, but it reminded me of that thing. So it’s like a scar in the company, that street name. When someone mentions that street name, we are like, man, we lost all our hair.

[18:50] Andrew Luong: Wow. Yeah.

[19:05] Andrew Luong: my god, yeah.

[19:11] Andrew Luong: man, yeah. That’s why you lost there. Yeah. my gosh, man. Like, I mean, obviously, I mean, knock on wood, unfortunately we haven’t had anything that extreme, but before, but it is just so, I think the word is actually sad to me too. It’s like, the amount of fraud, out there. so we’ve definitely had.

[19:20] Daniel Shaked: Business? Yep.

[19:41] Andrew Luong: people that move in with fake leases. Maybe someone scammed them on like a Facebook group or something. Maybe they just signed a fake lease and decided to move in until until there was sort of an eviction date, etc. But but it’s unfortunate because for several reasons. One, I think from a like, on the other side, we have a homeowner that’s also paying a mortgage and has a has a home that hopefully at best is not trash. and is not generating income for many, many months. So that’s one. On the other side, it sort of makes you numb to like when people have real issues, you know, because it’s so hard to sift through, like, is this fraud? Or is there a real challenge here, too? But this is the business. I think that’s sort of the part that I think is very real. and also very important about our work. It’s something that’s really meaningful and impacts a lot of

[20:44] Daniel Shaked: This is where I’m thinking that especially for new investors, people who are novice, working with a company like yourself, doing that entire vetting and process, making it passive the first time or maybe the second time, before you gear some experience and you have the stamina for all that type of issues that might happen. It makes perfect sense to engage with a company like yours to solve and ease on that pain. Because unfortunately, as you’re right, there are quite a bit of stories which you have to be aware of. On one hand, real estate is an amazing store of value and it’s a great asset to diversify some of your cash into, if not most of your cash into. But it has its issues. First of all, you are an investor. Investing meaning taking risk, predicting the future. It’s not a bulletproof process. It’s not saving account in 401k, right? So doing the first transactions with professionals is super important.

[22:01] Andrew Luong: Yeah, I believe it. mean, that was actually how I was hoping to get into real estate my first time too, which is like, okay, I actually found a home that was resident occupied. was an investor that bought a bunch of these out of the recession last did great. And it was supposed to be occupied, ready to go pretty turnkey, cetera. Unfortunately, none of that actually played out. I do think it’s important for early investors to do some of this stuff with training wheels, I think. And with that too, like start with a small chunk of possibly your savings that you feel good to plug in and then see how you like it too. Definitely agree that real estate is not for everyone.

[22:53] Daniel Shaked: It’s not for everyone. People think it’s passive. Sometimes it’s not passive at all. It requires a lot of activity but it can be passive if you invest at the right properties. You are aware of the risks that you are taking. You mentioned your previous property, the first one in Sacramento, which on paper should have been yielding an amazing cash flow but it’s only on Excel.

[23:16] Andrew Luong: Yep, yep, Yep, yep, yep.

[23:22] Daniel Shaked: What do you consider as a good deal? If I’m just having money and I don’t know, mean, teach me, recommend me, what would you offer me as my first experience? What should that look like? What type of property is that? Where is this property? I’m a Googler, I’m Googler working at Palo Alto, walk me through this thing. I have some money.

[23:38] Andrew Luong: Yeah.

[23:43] Andrew Luong: Yeah, yeah, yeah, you know.

[23:49] Andrew Luong: Great. So assuming it’s your first deal. And okay, so I, you know, I think about it pretty simply, which is like, find a high quality home in like a high quality home in a neighborhood and a market that you’re excited about, primarily the market, I think. And so

[24:01] Daniel Shaked: Mm-hmm.

[24:15] Andrew Luong: Let’s just use Ohio because that’s one of our focus markets. Obviously, there’s many other markets that people could get excited about as well too, but one of the sub markets in Ohio, let’s say that that’s a market that you believe in. You think there’s some macro tailwinds. You’ve seen that there’s technology companies that have been moving there. You see some good fundamentals. There’s good job growth, good job growth, good wage growth, et cetera, and good population growth.

[24:21] Daniel Shaked: Okay.

[24:45] Andrew Luong: But find a find that market that you’re you’re excited about. And then from there, find a home slash neighborhood that you’re you also feel good about. And I think this is the the part where maybe I was overly scarred from my first experience, but I highly encourage people to pay up a little bit instead of optimizing for what spits out the highest cash flow number. Like really look at a home that you think is high quality as well too. strong neighborhood scores, strong school scores, et cetera. Obviously within reason and within budget is kind of the second piece. So that’s how I think I would go out about the home quality itself. And then I think lastly, like make sure that whatever you do. Like at least on paper, make sure that it pencils a little bit of cashflow. like, I strongly believe that one shouldn’t buy a home that is from the start already negative and every month you have to go feed it. Because I think at some point, maybe your life circumstances change or maybe you just get sick of it over time. At some point, you’re not gonna want to keep feeding this home. And I think that will cause you to sell early. And so to counter that, maybe you really like a home and it’s just really expensive and therefore it’s not going to cashflow with 20 % down. And so would highly encourage you to put more down such that at least once you cut this check, could let it, you could set it and you’re not every month thinking about feeding the home. And then from there, I think let’s find something else for you.

[26:41] Daniel Shaked: Right, right. You know what? I think people are sometimes too focused on cash flow. And I understand why. But on the other hand, if I’m a Googler, I don’t need another $200 to keep my lifestyle. So maybe you trade that $200 cash flow for peace of mind, knowing that this property might maybe

[26:56] Andrew Luong: Right. Yeah, yeah, exactly. Yeah.

[27:11] Daniel Shaked: Cash flow lasts but it will appreciate more and you will have less issues of volatility. It depends on your stamina for unknowns and risks. It’s like stock investing. Which stock would you go for? S &P 500 as an ETF or some very sexy pink sheet kind of stock?

[27:36] Andrew Luong: Yeah, yeah, exactly. mean, I, I think it boils down to the pro forma slash Excel cashflow versus what we think will happen in reality. And oftentimes, not always, but there is generally a correlation between the price of the home, the fact that the rents do not scale with the price of the home. And therefore the higher price homes, the nicer homes tend to have less cashflow. Of course, there is a ban that you could operate within to make a viable investment. Like probably a $3 million home in San Francisco that runs for, I don’t know, 15 grand a month probably isn’t the, maybe, I don’t know, but probably isn’t the, or, well, one, isn’t affordable and two, probably isn’t the best long-term real estate investment. But I do think in general, people should aim for a little bit higher. But also I think this is where I believe I’ve come across this product of yours before, is the one where I think it was like the profit protection one where you guys offer some assurances and that’s sort of a different mechanism too, right? Like maybe you could trade some of that cashflow, a couple hundred bucks, pay up for the management plan and therefore minimize some of that volatility.

[29:01] Daniel Shaked: That’s exactly. Thank you for mentioning that. But that’s exactly what we are trying to do. People are owning homes but are not aware of the issues that might come up during the holding period. It might be as we mentioned, squatters or just the delinquency which takes six months to evict, right? Or a longer vacancy because of whatever that’s going on in this market. Or even if your AC breaks now, it’s like $9,000 in certain markets.

[29:19] Andrew Luong: Right, right, right.

[29:31] Daniel Shaked: which is basically your five years of a cash flow of those 200 bucks a month in just one maintenance event. So we as a data company, are able right now to predict various issues that might happen around the people residing in those properties, like vacancies, delinquences, grants, average times, everything. And also we are at a good place now predicting what’s the likelihood for that AC to break down. So we price everything into like

[30:01] Daniel Shaked: almost like a premium that protects the profit line. It’s tricky but it’s working and especially for busy professionals, busy individuals, are basically selling predictability and passiveness and that type of assurance. Our target audience is pretty much similar I think in a way because people who are trading peace of mind for money, that’s our clients.

[30:31] Andrew Luong: Yeah, totally. Yeah. I really admire and think you guys are really onto something with that product as well too. It’s like back to taking the same example from earlier, like this individual that’s working at Google makes a lot of money, probably makes more money than I do, Ken and Lee too. And you’re not really optimizing for a couple hundred bucks. And especially if that couple hundred bucks comes with a lot of volatility and headaches.

[31:01] Andrew Luong: that will then, that will, that might then make it such that you sell early. Because really, as with all investing, it’s really about the time in the market. And you really got to be able to hold on to these, these things for a long one to capture the upside.

[31:19] Daniel Shaked: But Andrew, you are also doing the management part, right? Is that for all of the properties acquired or can I manage myself if I want? Or do I have to manage with you guys?

[31:28] Andrew Luong: Yeah! Yeah. mean, we give people the option. think probably a hundred percent go with us too. I think the value proposition for the end consumer is that you did the renovations. You’ve seen it end to end. there’s one throat to choke on this. so, sorry. Yeah, exactly. Exactly. Yep.

[31:52] Daniel Shaked: and manage it for me. You bought it, you renovated it, manage it for me.

[31:59] Andrew Luong: Yeah, exactly. And so I think it’s generally a feature. But of course, if people have a strong preference otherwise, it’s your home.

[32:08] Daniel Shaked: Got it. Got it. So what’s the hardest part in your business? I mean, today, like, where’s the challenge?

[32:15] Andrew Luong: Are you speaking? Operationally or strategically or any. I see.

[32:22] Daniel Shaked: What prevents sleep right now?

[32:33] Daniel Shaked: If you are looking at macro economy, for example.

[32:37] Andrew Luong: Yeah, yeah. Yeah, you know, I, that’s, that’s probably it. It’s like, I think we all recognize that our businesses are subject to the worlds around us. as much as we will a lot of things into existence, the world also determines a lot of, what happens to all of us too. and so I think we are in a environment where the cost of debt.

[32:38] Daniel Shaked: Is there anything there?

[32:56] Daniel Shaked: Right.

[33:05] Andrew Luong: So the cost of borrowing across mortgages, course, credit cards, which a lot of Americans have, et cetera, is really high. That’s one. Number two, we’re also in an environment where people have been pinched by inflation for years now. So even if the inflation rate is 2. something today, it’s 2. something on top of higher numbers for the last couple of years. And then thirdly, We see all these layoffs happening and companies are just battening down the hatches. And so I think my biggest worry is what does that do to the consumer? Both from a, we have new customers that are confident and ready to purchase homes and build out their portfolio? Sure. But also like the residents too, like the residents at the end of the day are the consumers. And so. That’s a piece that I think we’re in a tricky spot. Fortunately, it keeps playing out okay. And actually, think we’ve seen some of the mortgage rates come down recently. I think that the administration has a strong incentive to bring rates down for the government debt as well too. And so let’s hope that we keep trending in that direction. And then I think we might be able to get through the clear, but it is a tough spot, I think, for the consumer.

[34:28] Daniel Shaked: and operationally, I mean in the business itself, what’s the biggest challenges that you guys have and like how do you cope with that?

[34:38] Andrew Luong: Yeah.

[34:39] Daniel Shaked: I know it’s a big one, what’s the biggest?

[34:43] Andrew Luong: Yeah. Yeah, I think,

[34:51] Andrew Luong: It’s sort of the push pull between supply and demand. like how quickly or exactly. like sourcing, acquiring and renovating takes a lot of people, a lot of money. And we can only invest in that when there is adequate demand for that.

[34:59] Daniel Shaked: the source inside of the business.

[35:20] Andrew Luong: And so sometimes we have a lot of demand. And so we ramp that up. Sometimes we have less demand because maybe people aren’t feeling good for whatever reason. And so we’ve got to throttle that down. And so I think constantly balancing the marketplace of the supply and demand, I think is probably the immediate question that, or the immediate operational piece.

[35:44] Daniel Shaked: So the sourcing part is kind of complex one you are saying and the rehabbing and actually getting people with a great deal. Get them in front of a good deal.

[35:53] Andrew Luong: Right, exactly.

[35:58] Daniel Shaked: And what do you think is the future holding for that? mean, in terms of, yeah, we mentioned the interest rates which are impacting. How are you thinking about it? Like where’s door vest in… 3 to 5 years. What’s the dream? No, no. 3 to 5. One year is like for our VCs, for Excel, right? I mean, we’re…

[36:18] Andrew Luong: Ooh, you didn’t say ten, you didn’t say one year.

[36:25] Andrew Luong: Yeah. I look, I what I have, you know, I think what I’ve really learned in this, tougher real estate market is actually the, it’s validated my conviction in the product that we’re offering to the world because in a, in a great market, in a bad market, people come in with the exact same story, which is I believe in real estate. saw

[36:46] Daniel Shaked: That’s great.

[36:53] Andrew Luong: my parents own real estate, I saw some of my friends that own real estate and all these people did really well. And I want to get into real estate as well too. And it’s too hard, it’s too complicated, there’s too many moving pieces, there’s too much volatility as we’ve talked about before. that story has been unwavering in both cycles. Granted, people are transacting much less because there’s less things that pencil right now and like people

[37:09] Daniel Shaked: Really?

[37:22] Andrew Luong: There’s job insecurity and all those things. And so that part I feel strongly about. And then also just beginning to see how the repeat rate. So in call of 2022, we had about 20 % of our customers were repeaters were up to about 30 % at this point. And so that sort of gradually grown and that’s proved out to us that if we could continue to do a good job, people continue to build out their portfolio. which we think helps them with their own financial security and obviously helps us build the business too. So I think more of that along the way, I think we’re building a platform and we’re hoping to continue to layer on more financial products. So the mortgage piece was something that we started doing recently. Is there other things like that that we can do over time? That’s probably how I think about us in the three to five year range. What about you? How are you going to get?

[38:22] Daniel Shaked: Look, our strong point or point of strength is the long-term management. It’s not the transactional side. We are happy to manage properties for people that already have them. But if someone comes and we do have it more often than not, people are coming in either new clients or our own clients and they are asking… for recommendations like I have some money I want to invest in real estate like and this is where we refer to our partners to do the transactional piece but then we’ll do the management I mean management by itself is so nuanced it’s so hard it’s so and by the way I’m surprised I asked you operationally and you said operationally harder to source than to manage I’m like in the notion or perception that management is hell hard to do so

[39:03] Andrew Luong: yeah.

[39:16] Andrew Luong: Maybe we get a little, I mean, it is very hard by the way. Maybe we also get a little bit lucky because we get to choose the home that we manage, right? Because we’re sourcing against our criteria and then the customers are sort of within that box. Yeah, yeah, for sure. Managers is really hard, man. Yeah.

[39:34] Daniel Shaked: Okay, perfect. But that’s important what you are saying. You are basically underwriting the quality of the homes by actually sourcing them. So now I understand that really to source a good one that you can hold and deliver happiness to your clients over long term, that’s a key thing. It’s not just to transact. It’s later on to make this customer repeat customer, buy more, refer more clients and be happy about the process. Which is not by the way happening with

[39:52] Andrew Luong: Great, yep.

[39:59] Andrew Luong: Yeah, totally.

[40:02] Daniel Shaked: like a regular realtor whom you might find somewhere who has only focused his commission transaction and part ways as soon as possible. You are there for life. You are a partner for life there basically.

[40:15] Andrew Luong: Yeah, exactly. And that’s sort of our pitch to our audience too. That’s sort of the, again, it’s double edged sword, right? Like we’ve had so many learnings from the past. Like sometimes we’ve had customers that really, really wanted more cashflow, more cashflow, more cashflow. And we’re like, okay, fine. We’ll go get lots of cashflow. We bring it back on paper. It has a lot of cashflow and then it becomes to be a… it turns out to be a nightmare. And we’re on the hook for that too. We’re on the hook because we have to be the, one, our team has to work on these homes, fine, we get paid to do that. But two, we also have to be the people that come back to you and say, hey, your house got broken into because of a home. And so it’s the double-edged sword, I think, having to.

[41:05] Daniel Shaked: For sure. Some investors, especially the new ones, those that are not experienced enough, they believe that the problems are actually caused by or due to the management companies. It’s not that the management companies are all there to solve problems that are happening by a real estate investing strategy. Like if you are taking on a C-minus or whatever class property, it’s going to be C-minus no matter what management you’re going to invest into this property.

[41:36] Andrew Luong: Totally. Yes, absolutely. Obviously, I think we’re preaching to the choir and you and I experience a lot of this day to day. I think there’s an element of things that we can control, right? Like the level of our service, the communications that we deliver to our customers, the transparency, etc. But there’s also many things we cannot control too, which is like, for instance, if we got a sour apple, Because unfortunately, there was a bad resident or something happened, cetera. there’s pieces there that, yeah. And it happens, right? It’s part of it.

[42:11] Daniel Shaked: They might be great residents but they got laid off now and they don’t have the money right now so they become less of a good resident. But it happens, that’s the reality. We’re in a business of people and wherever there are people there might be problems at times. Cool. So tell me about your company culture if you may. Who are your employees? How do you source them? What are you looking for?

[42:20] Andrew Luong: Right, Yep.

[42:29] Andrew Luong: Totally, totally.

[42:36] Andrew Luong: Yeah.

[42:41] Andrew Luong: Yeah. interesting. Yeah.

[42:42] Daniel Shaked: Because again, it’s like a tech company and a very heavy operational company, right? How does that thing blend?

[42:47] Andrew Luong: Yeah, I think two things that I like to think are two lines that I think really stands out to me is we’re serious people, but we don’t take ourselves seriously. And so hopefully you’ve seen it in my demeanor. Like I care so much about what we’re building. We work incredibly hard. But also we’re, we try to be good humans. We try to do things with a smile and a laugh when we can. life is hard enough as it is. And so I think that’s probably one of the most defining traits of our team. yeah, and related to that, I think we look for folks that have a lot of passion and conviction, but we pair it with a lot of humility too. Maybe that’s also being in In real estate, right, it’s so volatile. There’s so many ups and downs all the time. You have to really care to be able to deliver on results consistently. But you also have to have the humility to be able to back down and sort of survey the landscape broadly.

[44:58] Daniel Shaked: That was a weird one.

[45:00] Andrew Luong: It’s all good. It’s all good.

[45:02] Daniel Shaked: That’s weird. I’m happy. at least it’s not our software.

[45:08] Andrew Luong: Hahaha!

[45:10] Daniel Shaked: There are issues with other softwares as well. Let’s keep on from, let’s keep on, we’ll speech that together. don’t worry about it. Action, go ahead. Yeah.

[45:13] Andrew Luong: Hahaha! Yep. Sound good. do you want me to go again or?

[45:23] Daniel Shaked: Yeah, yeah, at certain point I lost you probably like a minute ago or so. So we were talking about the teams and.

[45:28] Andrew Luong: Yeah, yeah, Yeah, probably two things that really come to mind for me. First is we’re very serious, but we don’t take ourselves too seriously. And so hopefully you’ve seen it in my demeanor too. Like I care so much about world war building for the world. I work a lot. And I think that that’s very much true for every team member of ours too. At the same time, we could have a we can have a nice laugh about the struggles that we go through and a smile on our faces too. I think that’s something that we care deeply about. The other piece is also a lot of conviction paired with a good dose of humility too. Conviction means you really believe and you can charge through walls. Humility also means sometimes you can pick up your head, acknowledge that maybe. that wasn’t the right approach, et cetera. And so those are probably the two pockets that you would see with our team. But what about you? How do you think about the culture at Home Physics?

[46:42] Daniel Shaked: think we share quite a bit of the same understanding. I’m looking for very motivated, excited people that understand that we’re actually aiming to do good in this universe. I’m always telling people we are so privileged to deal with the two almost most important parts of people’s lives. Money and lives, families. is where memories are built for tenants. your homes. This is where you raise your family. On the other hand, we’re managing other people’s money. Aside of health, which is super important, those are the two other factors that people care about. You have to be genuinely excited about this mission. That’s the reason why. You have to be self-starter, motivated, getting shit done kind of type of person. Not being afraid of doing mistakes here and there as long as you’re doing stuff, pushing things forward. We respect that more than anything else. Of course, people who are obsessed with our clients, customer obsessed. And it’s hard. On one hand, we are a tech company, a data company. We are obsessively automating every possible aspect of property management. On the other hand, we are dealing with tenants, squatters and things like that. And this is where we have two audiences blend together. Non-tech people, like operational real estate type of people and

[48:07] Andrew Luong: Totally.

[48:12] Daniel Shaked: and engineers and at times as a young company it might be sometimes a challenge. Culturally it’s an interesting point to manage but definitely look I’m looking at motivated people, people that are actually from my perspective if you are doing like how to say that. Marathons, triathlons, those types of sports, you know what it means. And you over come pain and you get up early, probably at 4 5 a.m. and then you do that painful stuff. That means you are disciplined, right? You are disciplined and you are not giving up. You are not a quitter. So that’s important. So that type of background is more important which university you study in or whatever.

Guest Information

Andrew Luong is the Co-founder and CEO of Doorvest, a technology-enabled platform for turnkey single-family rental investing that sources, renovates, leases, and manages properties for individual investors.

Episode Keywords

Doorvest, turnkey real estate, single-family rentals, cash flow vs appreciation, renovation standards, financing, property management, investor risk, fraud prevention, repeat buyers, portfolio building, Andrew Luong, Daniel Shaked