[00:03:16] Robert Leonard: Talk about, before we get into Doorvest, let’s talk a little bit more about that, that small portfolio you say you built, you know, it was a double digit real estate portfolio and you did it by the age of 24. Tell us a bit about how you got started and what strategies you were using.

[00:03:27] Robert Leonard: Kind of walk us through your process there.

[00:03:30] Andrew Luong: The backstory was found my way to startup land, working in mainly sales. Before that, I was like a struggling pre-med student. I just couldn’t. Withdrew from calculus my first time and then they made me take it again and I ended up failing because they didn’t let me withdraw twice that.

[00:03:49] Andrew Luong: That was kinda the, the backstory to Andrew and somehow that degenerate ended up in startup land and had a good paying job and enjoyed my work, et cetera. And given that I started to have an income and a masses in savings, et cetera, that led me to exploring ways to find financial security for myself.

[00:04:06] Andrew Luong: And I think it’s probably a similar story to you. I was kind of looking for cash flow. Real estate. After lots of Googling and listening to podcasts and things of that nature, real estate kind of became the avenue for that. It was like if one home generated, call it a thousand dollars in rent per month, then if I could multiply that across sort of 10 plus homes and it’s fully paid off or something, this becomes sort of my passive income and I could go and on a beach at least.

[00:04:30] Andrew Luong: That was kinda the initial. That led me to exploring where to buy my first assessment home. I ended up landing in Sacramento, California, which is roughly a two two hour drive from San Francisco where I was living at the time and still living now. The crazy part was, this was in 2014. It was a, I ended up buying a three bedroom, one bath, $96,000 home from a dude that bought it for 40,000 right out of the bottom of that last recess.

[00:04:58] Andrew Luong: And I remember thinking at the time, I was like, this guy, I probably hit the peak of the market. This guy got a double, a hundred percent return in a handful of years. Like, uh, where’s this market gonna go from here? But anyways, I bought the 96 K home. There was a resident in place already too. My goal, I mean, I had a really busy day job.

[00:05:19] Andrew Luong: My goal was to find something that was as turnkey as possible. They had a resident in place and so I ended up buying that house. It was 96 K home that rented for thousand a month, and then along the way made like literally all the mistakes in, in the textbook that happy to go into, but.

[00:05:36] Robert Leonard: So why did becoming a doctor not work out?

[00:05:39] Robert Leonard: And I want to go into that deal and dive into your real estate a little bit more. But I’m curious why being a doctor didn’t work out.

[00:05:43] Andrew Luong: When I look back, I kind of look at my career. The analogy that I often use is kind of like a, like a Roomba, like the robots that clean your house. They’re just going straight, straight, straight.

[00:05:56] Andrew Luong: And then they hit a wall and they’re like, Oh, there’s a wall. So then it turns and it goes and it hits another wall, and then it turns and it goes again. And at some point it cleans up the entire house. And so that’s kinda how I felt about that leg of the journey and many more legs down the road as well.

[00:06:11] Andrew Luong: But, uh, the short of it was I was hoping to be a doctor because it seemed like a really straight, clear cut path to making a decent income with good benefits and all that good stuff that I think I was taught to strive for as an adult. The issue was, uh, I, nothing stuck. I kind of alluded to this earlier, but, um, like I couldn’t get through calculus.

[00:06:32] Andrew Luong: I couldn’t get through chemistry, I couldn’t get through biology or any of these other classes. And so at some point I had to throw in the towel and sort of switch directions.

[00:06:43] Robert Leonard: Do you still own that property today, the one that you mentioned up in Sacramento?

[00:06:46] Andrew Luong: I don’t. So there was a handful of homes that I bought in rapid successions, similar to that one.

[00:06:54] Andrew Luong: Well, one of the major learnings for me was that 96 K home was the cheapest home in the entire city at the time. Um, and so at the time I was like, Okay, well what’s the best renter price ratio? And it was typically the lower price the home, the higher the renter price ratio. And so I found that home. Turns out it was in a really tough neighborhood.

[00:07:13] Andrew Luong: The home was a little bit older as well. Consistently getting turnover and break-ins and like I could tell you have a story of one time it was, I had a turnover, The home was. I went to check up on the home and there was like a homeless lady cooking, and then she got pissed when I opened the door to enter my house.

[00:07:31] Andrew Luong: This was, hopefully this paints you an image of kinda what this looked like. Long story short, it, it was just really difficult to hold onto to home for, for the long run, but I ended up making good chunk of profit on that and so grateful that that was my start. But unfortunately, I don’t own that, that home.

[00:07:49] Robert Leonard: As soon as you said it was the cheapest property in the city, I knew that it was not in a good area because the cheapest property in a town is never in a, in a good area. So I knew, you know, being a little bit more experienced now than maybe you were then I knew it probably wasn’t a, a good area. So where’d you go from there?

[00:08:04] Robert Leonard: You decided that was not the strategy you wanted to use. What, what did you start to buy and what, how did you invest after?

[00:08:11] Andrew Luong: The first four were very similar to that. I don’t recall the exact numbers, but 96 was that first one. Maybe the most expensive was 110 or something. The crazy part is around that time, they all rented for about a thousand, a thousand maybe 11 or or so a month.

[00:08:27] Andrew Luong: Had sort of this nice on paper rent to price ratio. For probably four years or so, I held onto those homes consistently. Face turnover, all these horror stories of like the home turnover. I sort of do renovations, put in new appliances, people break in, take all the appliances, I go put a new appliances and then we gotta lock everything and like board up the windows and all that.

[00:08:51] Andrew Luong: Crazy. And by the way, like I, this wasn’t my full time job. This was, uh, like Fridays after work or Saturday morning when I’m off work or something like that, I drive up to Sacramento and kinda manage all of this. That was kind the initial cohort of homes that I purchased and owned. And then after that experience and sort of the heartache from that, I began to graduate into sort of slightly less yielding homes, but homes that tend to be in higher quality neighborhoods and perhaps less turnover, et cetera.

[00:09:23] Andrew Luong: I moved up to nicer parts of Sacramento at the time, and then ultimately I ended up in Texas and that’s kinda where the majority of my current portfolio.

[00:09:33] Robert Leonard: Why did that not scare you outta real estate? Like why did you not let that deter you? A lot of people would just be like, after this experience, I am done.

[00:09:40] Robert Leonard: I am not buying anymore real estate. I mean, it sounds like you did some self reflection. You’re like, Okay, I made the mistake of buying in the wrong area. So maybe if I don’t do that then it’ll be better. But I’m just kind of curious, what was your mindset and thought process in terms of like why you didn’t quit there?

[00:09:54] Andrew Luong: I’d like to think that there’s sort of this mastermind, but I think there’s a combination of emotion and sort of, uh, the quantitative side. From the emotional side of it, it was like I was just this really stubborn guy and there’s probably a stubbornness mixed with some naivete where I was like, Okay, well I just gotta figure it out, right?

[00:10:12] Andrew Luong: Like, um, it seems like there’s something working, but it seems like if I tweak some things, for instance, if I moved up market a little bit, maybe I could sort of prevent some of these issues that, that I. That stubbornness that pressed me to keep trying and keep iterating on kinda my real estate investing model.

[00:10:30] Andrew Luong: There was that part, and then of course there was the other side of it where, I mean, after three or four years, I could see clearly the benefits of owning the homes from the rental income that I was generating from sort of the upside appreciation that I happened to back into and things of that nature and.

[00:10:47] Andrew Luong: But mixed with those two points, uh, it, it became clear to me like I wanted to own real estate. The goal was not to purely optimize for short term income, but really finding great homes that I could continue to massive portfolio and hold on for long.

[00:11:03] Robert Leonard: What I always find funny or interesting about kind of people who buy properties in this area, and not necessarily your situation, but just generally about buying real estate in subpar areas, is that they’ll usually point to the returns and almost always the returns are in an Excel spreadsheet and they’re like, Well, look.

[00:11:20] Robert Leonard: This is gonna be an amazing returning property. And you even said, Well, I, I went up to a, a lower yielding property. And what’s interesting is that in my experience, is those properties that are in bad areas on paper, yes, they look like they return significantly more than others. But when you actually look at the real returns that you receive as an investor, A lot of times they’re actually even less than the properties that on paper are yielding more because you almost always underestimate vacancy on in your Excel spreadsheet in these areas, you almost always underestimate repairs, maintenance, et cetera.

[00:11:49] Robert Leonard: And so when it actually happens, these costs are way more than you expect. And so that leads to the return actually not only being lower than what you estimated in your analysis, but also lower than what you might have been able to get with a property that on paper looks like it’s yielding.

[00:12:05] Andrew Luong: A hundred percent.

[00:12:06] Andrew Luong: I think that was the naive of the day of me getting into it and, uh, probably kind of what you’re alluding to. Like you, you’ve seen this time and time. It was like you plug in the rent, you plug in the mortgage, the property taxes, some like maybe property management fees, et cetera, and you’re like, boom, this is like a great return.

[00:12:23] Andrew Luong: And if you compare this one, this hundred K home, so like this 70 home or so at the time, like hundred K beats. If you don’t factor in the fact that like you’re getting all this turnover and I don’t even know how to factor in break-ins or forecast break-ins, et cetera. That rings very true. I mean, honestly, in hindsight, I kind of regret not going a little bit upstream because I do think if I went a little bit upstream, I would’ve been able to hold onto some of those homes even till it’s today.

[00:12:51] Andrew Luong: But hey, it’s ok. You live in Learn, I suppose.

[00:12:55] Robert Leonard: How did you end up in Texas? So take us from a little bit Northern California, right? Sacramento to Texas, and maybe some of the other markets you’ve experienced.

[00:13:05] Andrew Luong: The majority of the learnings were like these, like I was drawn to these large cities. They, they weren’t sort of like the New York or Bostons of the world where it’s like ridiculously overpriced, but like these like large metros in the US that had lots of liquidity from sort of an inventory standpoint, but also from like a resident demand standpoint and a really robust economy.

[00:13:29] Andrew Luong: Sacramento kind of fit that bill, but given the profile of homes that I was looking for, there just wasn’t enough of it. And so kind of started looking out, out of state now that it felt like I had some confidence in sort of my ability to buy and look at real estate. Texas became an really an interesting market.

[00:13:46] Andrew Luong: I mean, it looked like there was a lot of institutional demand for the markets in Texas. It looked like it was still relatively afford. Without being sort of the cheapest homes in the cities, et cetera, And it looked like sort of the yields were good in neighborhoods that I felt good about being able to hold for the wrong run.

[00:14:04] Andrew Luong: Landed in Houston and bought a handful of homes. There were those single family as well.

[00:14:12] Andrew Luong: Yeah, also single family. Dabbled with like small duplexes and whatnot along the way, or small multi-family along the way, but, uh, was always kind of drawn to a single family given. Something that I really always liked was the fact that the liquidity element, like if you bought a handful of single family homes, if for whatever reason I, I needed some cash, I’d be able to perhaps sell one off versus rolling all of that into kind of a multi-family.

[00:14:37] Andrew Luong: And if I needed cash, I would have to sell off the, the.

[00:14:41] Robert Leonard: Yeah, we’re gonna talk a little bit more about the single family asset class in a little bit, and I have some opinions there too that I wanna, I wanna chat about. But you loved real estate so much through these experiences. You decided to start a real estate company called Doorvest.

[00:14:53] Robert Leonard: What made you wanna start Doorvests? Why not just continue to keep your sales job scale, real estate, build a big portfolio? Why start a real estate company?

[00:15:01] Andrew Luong: It’s very personal and probably similar to kind of what we touched upon earlier. It was like this Roomba that hit a wall and then sort of pivoted from there.

[00:15:11] Andrew Luong: The long story short was like had a startup job, Started buying a handful of homes again, sort of nights and weekends. I got sick of startups. I was like, this is sort of a pipe dream and like I should just go work at a big company and make more money, great benefits, work less hours, et cetera, make more cash so I could buy more real estate so I could get closer to retiring on a, This was literally what I thought of at the time, and as I kind of got closer and close trip to that, there felt like something was missing.

[00:15:41] Andrew Luong: I think this was a very privileged viewpoint, but I was sort of at the top of my earnings career, and I’ve never gotten even close to that even now today as well from a, a salary standpoint. Like what, what felt like to me a good portfolio of real estate, but I felt unhappy. I felt like there was probably something missing too.

[00:16:01] Andrew Luong: I ended up going to work different startup. It was a company called Human Interest, and it was a company that was more aligned with kinda what I cared about personally. So Human Interest was a startup that did 401ks for for other startups. Up sort of the personal finance angle. And then it also gave me the ability to scratch my itch, uh, around working in startups, contributing more, having some, I guess, purpose.

[00:16:25] Andrew Luong: I know it’s pretty cliches speak about that, but in the uped, human interests continue to do real estate investing on the side. Um, and then along the way, friends. And I’m sure you’ve experienced the exact same thing and not e even more than me, but friends, coworkers, friends of friends would consistently come to me like, Hey, I have some savings.

[00:16:50] Andrew Luong: I’ve been dabbling with investing. Maybe I’ve traded some stocks and have some crypto, et cetera, and I heard you do real estate. Like, can you show me how to get started? It sounds like an awesome. I ended up building up sort of this playbook. It was like a 15 point checklist of like, here’s how you find an agent and here’s how you look at markets, and here’s how you analyze a home and like it, it went down the entire list and I would hand it over to these people.

[00:17:16] Andrew Luong: And probably over the course of five years, 60 plus conversations or so handed over to them, send them off on their way. I’m like, Hey, give me a ring. Shoot me a text. Like, I’m here anytime. Like, I love this stuff and I’ll, I’ll walk you through every single piece of it. Usually I didn’t hear back. Maybe sometimes I’d hear like, they’d be like, Oh, what’d you think of this home?

[00:17:38] Andrew Luong: And I’m like, I like it because of this. I don’t like it because of this. You should just write an offer and get an inspection, whatever it was. And then I would send ’em off on their way. Three months later, we would catch up. Maybe we were hanging out, maybe we bumped into each other with some friends or whatever it was.

[00:17:52] Andrew Luong: I’m like, How did you do? And they’re like, Well, couldn’t get started. Actually have more capital now because I’ve been saving up for the last three. Can I just give you this cash and you do it for me? And for some reason it took me like 60 plus conversations for it to really click. There was some sort of gap here, but ultimately that, that ended up being sort of the, the genesis of,

[00:18:18] Robert Leonard: And so that’s what Doorvest does now? Is that you help other people buy single family rental homes?

[00:18:22] Andrew Luong: Yeah. In a nutshell, we make it easy for folks to, to buy an investment.

[00:18:28] Robert Leonard: Where does Doorvest fit into there? Like how do they make money? How do you guys make money?

[00:18:32] Andrew Luong: I guess it kind of starts with the customer journey. Taking a lens from sort of the, the robo advisors on the financial services side, and then pairing that with sort of real estate investing.

[00:18:44] Andrew Luong: How much did a consumer have saved up as a down payment? What sort of returns or cap rates or yields were they hoping for? What’s their general risk profile like? Are you sure you want this super high yielding home? Or do you actually have a like an awesome day job that you don’t need this cash to sort of live on?

[00:19:02] Andrew Luong: And maybe we should focus on sort of a home in a great neighborhood, et cetera, Or maybe something in between. We’ll start with the customer and their investment preferences. And then we’ll source. We’ll source a home, we’ll buy it, we’ll renovate it, we’ll lease it out, and then bring back sort of the finished investment home to the customer.

[00:19:19] Andrew Luong: They’ll purchase it from us. We get a cut of that transaction, and then once they close and take title, we’ll operate it and get sort of a cut as an asset management fee. Lastly, hopefully if customers get a good home that they like, they have happy residents that are paying rent, that, that sort of thing, and save up for their next down payment.

[00:19:36] Andrew Luong: Hopefully they come back and begin to add more home management, which is position.

[00:19:44] Robert Leonard: So you’re making money on a monthly basis as like a property manager would say eight, 10, 12%, something like that. But what does the model look like on the front end? You said you take a fee during the acquisition. What does that look like?

[00:19:54] Robert Leonard: Is it, you know, I know agents obviously take commissions. Is it kind of like that? Are you guys acting as the agent? Like what does that look like?

[00:19:59] Andrew Luong: Similar but different. We focus on homes that need quite a bit of rehab, 2020 5% of acquisition price in. Homes, as you know, that need quite a bit of love, sell for a discount cause they can’t sell on the open market.

[00:20:15] Andrew Luong: We’ll buy the home on customer behalf with our own cash. We’ll renovate the home on customer behalf with our own cash and then we’ll sell it back to the consumer. We target about a 5% cut on that. So you can think of about a two K home on average. What we’ll make about 10 on sort of the transactional.

[00:20:33] Robert Leonard: So are you guys sending, are you doing cold outreach like a, a typical investor would, Are you sending postcards, letters, cold calling to find all these off market deals like a normal real estate investor would?

[00:20:45] Andrew Luong: Yeah, so we’re doing sort of the direct stuff and then we work a lot with wholesalers, which I’m sure since you’re in real estate you get the texts and the calls and stuff all the time.

[00:20:54] Andrew Luong: What, We got a postcard yesterday. Nice. Yeah, we get stacks like we as a company, given our large portfolio, we get stacks of mail all the time with that as well, but we work a lot with wholesalers as well. Why wouldn’t you just keep

[00:21:07] Robert Leonard: the deals for yourself? I think that would be a lot more lucrative. I mean, 10,000 if you’re doing it at scale, obviously that can, that can add up.

[00:21:14] Robert Leonard: But I mean, buying a property, renovating it, et cetera. If you do a cash out refi, you could be into these homes with, you know, very little capital still left in the deal if you do it right. Sounds like you guys are getting some good deals off market. I mean, it just seems like a more lucrative model. So why this model?

[00:21:29] Andrew Luong: There’s two answers. There’s kind of the business answer and sort of the emotional or psychological answer. The psychological piece is like, I mean ultimately the hope and the aspiration of Dova the company is to be able to help sort of everyday people own, participate in real estate without sort of the risk and sort of the heartache that I experience myself.

[00:21:50] Andrew Luong: And so that’s kind of part of it. 70% of our customers are first time homeowners. One of the stats I was particularly proud of, um, and so how do we kinda expand this reach and hit more people that, that sort of thing on the business. I think that every day retail investors, sort of folks that are getting 30 year fixed mortgages, et cetera, like they’re able to generate really good returns for themself, given that they have cheap cost of capital, they have government subsidized tax advantages.

[00:22:19] Andrew Luong: I think we’re able to deliver on a good investment while still being able to make some money as a company too. I think that 10 K is kind of where we’re at today, but at scale it also looks really different and we should be able to participate. This is, uh, hot off the press, but, uh, we’re getting ready to launch our first version of Embedded Mortgage that should streamline our customer experience and then also help us make a little bit more, more money, and then over time doing more mortgage title, things of that nature, um, and layering on o other financial products to make it, I guess, more lucrative for the company.

[00:22:52] Robert Leonard: Embedded mortgage just means that the person that’s purchasing the home can get a mortgage through you guys, and I’m assuming you outsource that to another firm. They do the actual underwriting and mortgage origination, and you guys just take a fee for providing that lead to them.

[00:23:06] Andrew Luong: You said it better than I could have said it myself.

[00:23:08] Robert Leonard: I wanna go back to kind of the off market piece for a second. So let’s just total random numbers here, but just for e round numbers too. For easy math. Let’s say you purchase a home, super distressed needs work. You purchase it for a hundred thousand, it needs $50,000 worth of work, so you’re into it for 150 now because you did that.

[00:23:24] Robert Leonard: It’s work 200. The person that’s investing in that deal, do they buy it at the market value of 200 and you keep the spread between one 50 and 200, or are they still buying it at a little bit of a discount to the market value?

[00:23:38] Andrew Luong: If that was the instance, and this has happened before too, they would buy it at a little bit of a discount to market value.

[00:23:45] Andrew Luong: And actually at scale, our hope is to almost always be able to sell at a little bit of a. And I think at scale we’ll be able to do that because our cost of borrowing debt to fund these transactions goes down, our efficiencies go up, things of that nature. The more sort of illustrative figures are, usually we’ll buy a home for about 50, then we’ll put in about 40 all in cost, and then the customer will buy for about 200.

[00:24:11] Andrew Luong: 200 should be within range of market value. Sometimes we’re a little bit under market.

[00:24:18] Robert Leonard: How are you financing those acquisitions? Are you using hard money?

[00:24:22] Andrew Luong: Funny story is, uh, the first 40 or so homes we used Hard Money. It was, and then we personally guaranteed it. Uh, and so it was myself and my co-founder and our cto, Justin, we personally guaranteed sort of the, the first 40 or so homes.

[00:24:37] Andrew Luong: And what happened was, we would get to about five loans with a hard money lender and then they started getting skittish cuz they were used to funding people that are buying one house every three months or something like that. And so at one point we had five or six different hard money lenders that we had active transactions with and I remember going to one of our board member, like invested in like really success early investor in Honey Service, Titan, all these major successes.

[00:25:05] Andrew Luong: He’s done very well for himself financially. And I was. Hey, well, we’re personally guaranteeing all this and like our net worth is not that big. Like, uh, if something happens, like we need you to bail us out personally, and he kinda chuckled at it. But anyway, the first sort of 40 or so homes were, we’re funded with hard money.

[00:25:25] Andrew Luong: Now we’ve kind of graduated bond that and kind of have a revolving line of credit that funds the acquisition and the renovation costs first. How are you managing all that cons? Our team, lots of folks from whether it be institutional real estate backgrounds, so you can think of like open door and invitation homes or folks that have kinda done this themselves, sort of on the sides.

[00:25:47] Andrew Luong: Similar to, to me in the past, folks that have sort of managed lots of renovation projects. They’ll oversee the projects and then we have sort of a network of GCs that, that we’ve happened.

[00:25:59] Robert Leonard: So the GCs aren’t on your team. You’re going, say you’re going to Houston. You’d go into Houston, find a really good gc, build a relationship with them, and then use them for however many projects you can.

[00:26:08] Andrew Luong: Exactly. So that’s kind of the playbook is like, as we’re opening up markets, we’ll go in and establish the relationships. We’ll give them a project, we’ll follow along in the project, Hopefully they do a great job. And then it, it works for both ways. And then we start piling on more project. And then because we’re handing them, I mean if you, the average GC that works with Dobe, last time we pulled the figures was about five, five active projects at the time with 4K projects on average as well.

[00:26:35] Andrew Luong: And so they’re getting a lot of business from us if they’re able to deliver. That kind of gives us some scale efficiency and sort of like cost advantages, things of that nature.

[00:26:44] Robert Leonard: How hard has that. Is that like one of your hardest pieces of your business? I can only, I mean, I know there’s, this whole model is difficult.

[00:26:52] Robert Leonard: Finding off market deals is difficult. Capital’s difficult, like I get that. But I’ve dealt with contractors myself. There’s just not a lot of ’em. Period. And then kind of going down from that, there’s not a lot of good ones. I can only imagine that at scale that this is gonna be.

[00:27:08] Andrew Luong: I mean, overall, if we think about the business, sometimes people ask me like, Oh, like what if another competitor comes in and like tries to copy your model or something like that.

[00:27:18] Andrew Luong: And like the reason why DOS existed was because it was a very deeply personal problem that we were hoping to serve. Like I think. A handful of people that are looking to build a really big business and make a lot of money, and they go to whiteboard and whatnot, they’re like, There’s no way we should try to take this on.

[00:27:34] Andrew Luong: There’s just so many hard and moving pieces along the way. And so to answer your question, there’s many hard pieces and I, I do think sort of that the renovation piece is a, it’s a double edged sword. On one end, it’s really challenging everything that you mentioned there, and then you compound that at scale.

[00:27:51] Andrew Luong: At any given time, we’re probably doing 20 or 30 active renovations across multiple markets. And so you kind of compound that and it gets even more challenging at scale, but on the other end, it also puts us in a strong position to be able to buy awesome real estate, really bulletproof the homes and make them rental hardened, and then command sort of the 5% that that we’re targeting.

[00:28:14] Robert Leonard: I mean, when it comes to competitors, the reality is there are other, I mean, essentially if you just boil down into the simplest form, there are other turnkey providers. I mean, that’s a kind of essentially what you guys are doing in a sense. So, I mean, there are tons of other ones, but what’s interesting is that you guys are more, a lot more.

[00:28:29] Robert Leonard: Given that you’re in the valley, you’re a lot more kind of focused on tech, I guess I would say is that you’re like more a tech company or at least valuations and things like that are coming more from a tech company perspective than maybe some of these other turnkey providers that if anybody’s ever like looked at their websites, it, it looks like they’re the historical kind of real estate company that you would imagine is that they’re, they’re like stuck in the kind of olden days a little bit with technology and things like that.

[00:28:52] Robert Leonard: So I think you guys were more of the modern version of that is, is that kind of what you would agree?

[00:28:57] Andrew Luong: Yeah, I mean if you were to boil it down sort of a, a modern day turnkey provider is kind of at the core of it. I think certainly when we started out, it was just like Justin and me and a handful of people manually doing everything.

[00:29:12] Andrew Luong: And so it very much looked like any other turnkey provider as we’ve continued to develop and sort of invest in engineering, et cetera. Like I think over time it looks more like a platform. And so kinda our aspiration is like, and obviously such a long way to go, but our aspiration is to sort of build the Amazon of investment home ownership.

[00:29:32] Andrew Luong: Like how do you start with a consumer and their preferences, whether they stated it or whether it’s based on their behavior. And then find homes that we think match their criteria and then hopefully they can check out entirely online. Yeah, I mean, something that’s been really cool is like most of our customers have never seen the homes unless of our customers have sort of been able to buy the home sort of within the comfort of their couch or their laptop, that sort of thing. And continuing to make that easier over time.

[00:30:00] Robert Leonard: On a monthly basis is the only fee you guys take the property management fee?

[00:30:03] Andrew Luong: Yeah. As of right now, just the 10% property management fee is kind of where.

[00:30:09] Robert Leonard: So when you sign up for an account on your website, there are three benefits that are listed for Doorvest.

[00:30:15] Robert Leonard: Kind of gives examples of why people should join Doorvest, and two of them really caught my attention. We already talked about one of them, which was being able to purchase exclusive off market real estate deals. I think that’s really cool. The second one is that the first year of rental income is guaranteed.

[00:30:32] Robert Leonard: I was pretty surprised to read that I, I was not expecting. So how and why does Doorvest guarantee the first year of rental income?

[00:30:38] Andrew Luong: A lot of this boils down to sort of the nuts and bolts of the business. We took a step back, remember that we’re buying all these homes and we’re renovating and we’re placing a net new resident, Sort of the default rate on kind of the, the first year, especially if we have sort of stringent resident underwriting criteria, uh, should be.

[00:31:00] Andrew Luong: Our belief at the time was like, if we feel so good about our residents, why don’t we put our stamp of approval and kind of back and put our, our money where our mouth is on that? And so that’s kinda how we ended up with the resident guarantee.

[00:31:14] Robert Leonard: So what if you can’t find a tenant in the first place for that property?

[00:31:17] Robert Leonard: I mean, if you’re, you’re buying in good areas, you’re making the homes really nice, it’s probably a really low probability, especially I think even more so with single family homes maybe than some other types of assets. But what, what happens in that?

[00:31:27] Andrew Luong: That’s never really happened because we’re focused on segments of the market where there’s a lot of resident liquidity.

[00:31:34] Andrew Luong: It’s not like we’re buying like a sample size of one home, like the most expensive home in like the nicest neighborhood where maybe there’s one resident that might rent it. It’s sort of like middle of the pack. And so if that’s case, it’s really a rents. So our average rent is about 1700. If we for whatever reason, mispriced it, which doesn’t have it too frequent, If we go down, call it 50 bucks, a hundred bucks, perhaps we should be able to fill it within sort of a matter time.

[00:32:02] Robert Leonard: So I said earlier that we would get to this, and I’m interested in hearing what you have to say. Single family properties are just, they’re hard to scale. I’ve experienced it myself. I’ve had six or seven in my portfolio at one time. I know each process is, you know, as you scale, it just is a little bit d.

[00:32:18] Robert Leonard: And this leads to a lot of people moving away from single family assets to commercial properties, short-term rentals, larger multi-family properties. I mean, the reality is closing on a duplex, a triplex, fourplex, five units, six units, 10 units really is not much more difficult than a single family home paperwork’s the same kind of process is very similar.

[00:32:37] Robert Leonard: You start getting bigger than that. It changes a little bit, but for the most part, you could probably do up to seven 10 units, and it’s very similar to a single family. And you’re making a lot more money than, but you’re putting in the same, uh, effort. So why is Doves currently so focused on single family properties and do you see that changing in the future?

[00:32:53] Andrew Luong: Yeah. Tell me about it. I have a pretty busy job and I’m buying a DOS home right now. And there’s like, I think I just got this last night. It was like, uh, for my mortgage lender, it was like 15 conditions on the mortgage and it’s like all this paperwork and uh, I agree it’s really painful in general. I think the reason why we focus on single family as of right now is just the accessibility in general.

[00:33:18] Andrew Luong: Like a single family home is cheaper than a duplex right across the street, et cetera. We’ve done sort of small multi-family. I think that the largest one was probably a or so. The focus is on accessibility, I think in due time, and so maybe we should talk again in five years or something. We’ll expand to other asset classes.

[00:33:38] Andrew Luong: Who knows what they’ll be. And I think it’ll be a strong function of customer demand, uh, before the time being. Accessibility is kinda the, the biggest criteria. Single family is kinda the, the starting point. And then hopefully over time we could, in the immediate future, we could layer in sort of lending products to even bring down the, the capital barrier a bit more.

[00:33:56] Robert Leonard: Yeah. I was just gonna ask that. Is the down payment still required 20%? Like a typical, traditional loan would be for an investment?

[00:34:02] Andrew Luong: Yeah, 20%. It’s kind of the standard. I’ve seen 15, a couple from a couple lenders, haven’t really looked into it, but that does carry pmi as far as I understand.

[00:34:14] Robert Leonard: I’ve seen a couple 15 as well, but generally it’s 2025, and I’m sure in this market it’s probably even pushing closer to 25, maybe even 30 in in some cases.

[00:34:21] Robert Leonard: Now, the scalability, I mean, point blank sucks with single family homes. What is nice, at least in my experience, and you’ve probably had a similar experience, I’m curious to hear if you have, is that you can often find, get a really good tenant base with a single family home, especially if you’re buying in good areas, which it sounds like you are now.

[00:34:40] Robert Leonard: My single family homes are always in great areas. And so that led to families renting it rather than a single guy or a single guy and a girlfriend or, or vice versa. You know, just kind of more of like an apartment style. And so these people, they take care of it, they treat it like it’s their own home.

[00:34:55] Robert Leonard: They have a nice yard, maybe a garage, et cetera. So they really treat it as if they own it, you know, it’s their family home. And so I’ve noticed that that leads to really good tenants, which leads to really easy management. Have you noticed kind of the same.

[00:35:07] Andrew Luong: Yeah, I mean that’s a hundred percent it too.

[00:35:10] Andrew Luong: It’s similar to my personal investing thesis. It’s just like high quality homes and great neighborhoods that I could sort of, I mean, effectively set it and forget it, right? Like, uh, buy the home, do like the painful stuff front, uh, and then kind of have it sit there and grow in value and generate rental income.

[00:35:26] Andrew Luong: The way for hopefully like decades is kinda the dream single family kinda fits into that criteria. For door best, the company. That’s also the case too. We’re focused on neighborhoods that tend to be more, quote unquote passive, less turnover and things of that nature that leads, that generally leads to a better investment for our customers.

[00:35:46] Andrew Luong: And then from a business standpoint, it makes it more feasible for us to manage that scale.

[00:35:51] Robert Leonard: So when you buy these properties, you’re buying ’em essentially with cash. I mean, you’re using a line of credit, but in terms of the seller, you’re buying with cash. Are you guys taking title Doorvest, Show up on the deed, Essent.

[00:36:02] Robert Leonard: Yeah.

[00:36:02] Andrew Luong: I guess one nuance to the business model is we lock in customer intent before we purchase a home. The general sort of inspiration there was was Tesla. If you think about Tesla as the company, they start with sort of a consumer and their car specs, and then they’ll ask for a deposit, and then they sort of procure the ho or the car based on the consumer specs.

[00:36:25] Andrew Luong: Similarly, we start with a customer and their investment objectives we’ll ask for. We’ll find homes based on their criteria in kinda the needs, love condition. We’ll bring it back to them. So we’ll match it to the consumer, and then if they like it, then we’ll ask them to sign a contract for it, and then we take the deed, stabilize the home, and then sort of bring back to the finish investment home.

[00:36:48] Robert Leonard: So does the deed go right from the seller to the investor since you’re doing it that way? Or does it go to you first and then to them?

[00:36:54] Andrew Luong: Yeah, it goes to, to us first.

[00:36:58] Robert Leonard: So do you have to pay transfer tax twice?

[00:36:59] Andrew Luong: Yeah. That’s kind of uh, the pain of it. But uh, over time kind of working to minimize that there’s sort of mechanisms where you can keep title open, et cetera, to, to be able to save on sort of the double cost.

[00:37:14] Robert Leonard: Yeah. Cuz you couldn’t transfer it directly from the seller to the investor because they don’t have their financing in place yet. They can’t get the financing on a property that’s still being renovated. Yeah, it’s a interesting.

[00:37:23] Andrew Luong: That’s kind of the double edged sword. Once again. It’s like, um, on one end we’re, we’re making this home financable by conventional 30 year fixed mortgages.

[00:37:32] Andrew Luong: As a result, there’s sort of like costs and the heavy lifting that we have to do up front for, for that.

[00:37:37] Robert Leonard: Once the property, you’re through that process, you’ve transferred the deed to the investor, they have the mortgage, everything is done. They own the property and Doorvest is managing it. Can they move it away from Doorvest?

[00:37:49] Robert Leonard: Can they just say, Hey, I don’t want Doorvest to manage this anymore, or I just wanna own it on my.

[00:37:53] Andrew Luong: The answer is yes, and it happens pretty rarely. But yeah, I mean, uh, ultimately the customer owns the home. They have full title to it. We’re just the property manager on the home. That’s probably not the ideal outcome for, for us as a business.

[00:38:08] Andrew Luong: Hopefully they buy a home from us. They stay with us for a long time. They save up for more down payment and add more homes in management. But they could definitely do as they see.

[00:38:17] Robert Leonard: Do they get a lower property management fee if they scale with you guys? Let’s say they get up to 3, 4, 5 with you guys, does their property management fee go down at all?

[00:38:25] Andrew Luong: Not yet. We, we’ve kind of flirted with, uh, how, how do we sort of work the mechanics of that, but, uh, yeah, at this point it’s kind of just 10% flat across the, the board. Do investors have to be accredited? No. I mean, ultimately you’re buying a home as I did when I was 20. And as you, you did in the past. And so effectively you’re, you’re, you’re just buying a home.

[00:38:48] Andrew Luong: Yeah. You’re not investing

[00:38:49] Robert Leonard: in a fund that requires any type of accreditation. Yeah. Makes sense. I’m sure it’s gonna vary from deal to deal, location, location, investor to investor, but just generally speaking, what kind of returns do your investors yield?

[00:39:01] Andrew Luong: The trailing average is, our cap rate is 6.2 on the cap rate.

[00:39:06] Andrew Luong: Of course, it varies from home to home, market to market and timing as well. But 6.2 is kinda the blanket average.

[00:39:15] Robert Leonard: How about on a cash and cash basis? So like how much cash flow generally are people getting?

[00:39:19] Andrew Luong: Numbers used to be higher before their interest rates went up. Uh, but right now, uh, about five or 6% is kinda what we’re targeting.

[00:39:28] Robert Leonard: And what markets are you guys in? Are you, I know you said you personally went to Houston for investing. Have you decided to stay there with DOR vest? Are you in some other markets in Texas? What does that look?

[00:39:39] Andrew Luong: For some odd reason, Houston was the first market for Doorvest as well. For just kidding, obvious reasons.

[00:39:46] Andrew Luong: Houston was our first market. Dallas was our second San Antonio, Atlanta, and then the, the two most recent ones were Columbus, Ohio, and Oklahoma City. Cool.

[00:39:56] Robert Leonard: I have a, I, all my single family properties are in Texas as well. All my rentals I live in, I live in New Hampshire like we talked about, but all my rentals, they’re all single family as well.

[00:40:04] Robert Leonard: They’re in Texas. They’re in a small town, about an hour and a half, maybe two hours outside of Dallas Fort Worth. So I might have to chat with you offline, be like, Hey, you gotta, you gotta go over this market. I wanna, I wanna buy some properties over there.

[00:40:15] Andrew Luong: Yeah. Wonder if there’s overlap. It’s possible where I’ll be operating near you or.

[00:40:20] Robert Leonard: So I mentioned to you, Andrew before that I do love talking real estate. I love learning real estate, but I also love business. Like I just love learning about every type of business. I love learning about all kinds of different business models, and you can probably tell throughout this conversation, I’ve asked a lot of questions about your business model, and one of those models that I like is equity crowd funding.

[00:40:38] Robert Leonard: And you guys are raising around on We funder, right? I don’t have necessarily a specific question about it, but I just, I wanna learn more about that experience, why you chose to go that path, what it looks like for your business, et cetera. Just tell me a little bit more about it.

[00:40:53] Andrew Luong: We, to date, have raised about 23 million in equity to fund the operations and the r and d and sort of like salaries and things of that nature.

[00:41:02] Andrew Luong: And then we’ve raised about 75 million in debt to fund the, the real estate, like, uh, the, what we talked about earlier, the, the renovations and the, the acquisitions. Part of the equity side of it, which is to fund the business Door Best, Inc. The majority of that we’ve raised through angel investors. We’ve raised through our friends and family like, uh, lots of folks that became part of the Door.

[00:41:24] Andrew Luong: Best story were the genesis of the Door best story. The folks that were like, Hey, Andrew, like can you show me how to invest in real estate? Those folks ended up becoming our first customers, and those folks became our first investors as. Along that same vein as we sort of brought doves to market in the last two and a half years, we started hearing Doves customers, folks that found us, bought a home through us, maybe bought a couple homes through us, saying that they really like the model and they wanted to participate and be an owner of Thes company as well.

[00:41:58] Andrew Luong: And so we found sort of we funder and sort of their community round as sort of a great avenue to be able to open Doorvests. To not only accredited investors that have their pick of any sort of company or asset class for them to invest into, but for non-accredited investors to kind of own a small part of Doorvest.

[00:42:19] Andrew Luong: The company, when we raised our, our series a summer of last year, we open up a small sliver for our customers to be able to participate in door bust. Again, as of recent, we’ve also opened up a small sliver as we’re putting together around right now to give our customers the ability to participate in Doorvests, the company as well.

[00:42:40] Robert Leonard: So when you invest in Doorvest through Wefunder, it’s through a safe. Can you explain for the audience what a safe is? Probably should

[00:42:47] Andrew Luong: Google it then I’ll probably do better justice than, than me try to explain legal terms. But the short of it is a, a Safe was invented by Y Combinator. Y Combinator is known as sort of the most successful startup accelerator.

[00:42:59] Andrew Luong: They brought companies to life like Stripe, Airbnb, DoorDash, a lot of household brands. And so they, they were some of the earliest investors in those c. Along that journey of funding these companies at the earliest stages, they found that one of the barriers companies being able to raise funding to get off the ground was just really high legal bills.

[00:43:22] Andrew Luong: And so they came up with sort of a, a mechanism, a standardized document to be able to fund startups while minimizing sort of the, the legal fees. Over many iterations, it became known as a safe, which is a simple agreement for future equity, which basically means you’re investing on a placeholder for equity the next time that a company does a formal equity round.

[00:43:48] Robert Leonard: So do you get it at the future valuation or do you get it at the valuation of the day you put the money?

[00:43:52] Andrew Luong: Within the documents, you dictate the cap on the future valuation. For ours, the cap is 60 million, which is the same valuation as our, our series A from last year. Folks that put in money, it’ll be a function of that 60 million cap.

[00:44:09] Andrew Luong: If we raise in our next valuation is higher than 60 million, then they’re rewarded and they get a discount cuz they get locked in at that 60. What is

[00:44:19] Robert Leonard: the future of store vest? Where do, where do you guys wanna go?

[00:44:22] Andrew Luong: The hope and dream is to build this multi-decade company that transforms the, the way people think about financial security.

[00:44:30] Andrew Luong: Again, back to sort of the, the personal story, like financial security is something that’s so deeply personal and to me, and then you mix that with real estate, which happens to be Americans’, number one source of net worth. How do we sort of build a platform where people could buy their first ever home or first ever investment home?

[00:44:49] Andrew Luong: What with door best and then from there sort of build financial services around it. The sort of the, the standard stuff that we touch on earlier was like the mortgage, the title, et cetera. But over time, what if we could build banking services and what around door best if we’re able to execute on that? I think we build this enduring public company.

[00:45:09] Andrew Luong: It’s kinda one step at a time as we try to make our way. There is the goal to go public rather than be acquired.

[00:45:16] Andrew Luong: The dream is to go public and in some timeframe, but the reality is, uh, we we’re kind of just focused on the next six to 12 months, and then we hit these milestones and then we keep trying to grow from there.

[00:45:28] Robert Leonard: So at the end of my episodes, I’d like to turn the tables and let the guest ask me a question. So, Andrew, what question do you have for me?

[00:45:35] Andrew Luong: I’ve been looking forward to this one. I combed through some of your episodes. I don’t think it’s been asked, but uh, maybe it has. If that’s the case, then that’s on me.

[00:45:45] Andrew Luong: But, uh, yeah, I mean I think your background is really interesting. It’s non-traditional. Um, there was elements of it where sort of I aspired to, if we went back six, seven years ago, whatever, like a role in finance was something that I kind of wanted to do. Never got around to doing it. Obviously I have many elements of it in sort of my day job now, but podcasting is also really.

[00:46:06] Andrew Luong: And I feel like you, you, by way of being a podcast host, have sort of this angle to chatting with hopefully interesting people. Lots of different stories, that sort of thing. Podcasting. How did you get into it? What’s the motivation? Curious to hear your story around it.

[00:46:23] Robert Leonard: Yeah, so I got into podcasting. I’ll kind of give you the short version.

[00:46:25] Robert Leonard: It’s a little bit of a longer story, but short version is I found a podcast 2014, 2015. It was called, We Study Billionaires, one of the most of popular stock investing podcasts in the world. I was listening to it all the time. First podcast I ever listened to, and 5:00 AM one day I’m driving to the gym. I forget exactly what year this was, maybe 2017, 2018 at some.

[00:46:44] Robert Leonard: And they mentioned on the episode that they were looking for a host for a new show. They had built a really well known brand, kinda like a TV station essentially is the best way I can explain it. Or like a radio station. And they wanted to leverage that brand to launch additional shows. So they said, hey, we’re looking for a host to launch another show.

[00:46:59] Robert Leonard: It’s gonna be all about Silicon Valley and tech. Like if you’re interested, reach out. And I remember, like I said, it was 5:00 AM I’m driving to the gym. I’m like, man, I would love to do that, but I don’t live in the valley and I don’t know anything about tech, so I guess I can’t do it. Just kind of forgot about it.

[00:47:13] Robert Leonard: And that was that. And then a couple months later, maybe six months later, they had the same ad, but this time it was for a real estate show. And I was like, okay, I can do that. I’m a real estate investor. I had very little experience, but I had a little bit. And so I said, all right, let me, let me see what I can do.

[00:47:28] Robert Leonard: And so I reached out and ultimately I got denied. And then I just kind of kept persevering. Persevering. One thing led to another and we launched a pivot or a, a spinoff show of we city billionaires targeted towards millennials, which is still today call millennial investing. That show did really, really well.

[00:47:43] Robert Leonard: And so then I ended up getting the real estate show as well, which is what we’re talking on today. And so, yeah, that, that’s how I got into podcasting in terms of why I wanted to do it. One was I just love talking about this stuff. It’s fun. I love learning, learning. I’m a learning machine. I’m always learning.

[00:48:00] Robert Leonard: So I was just excited about that. And then I also wanted to kind of give back in a sense of, I wanted to be the resource for real estate that I didn’t have when I got started, and Bigger Pockets was around. And they’re great for sure. But even back 2019, 2018, 2019, 2020, when this started, like podcasting wasn’t as big as it was today, so there wasn’t as many resources.

[00:48:22] Robert Leonard: So for me it was just like, I wanna be able to put my spin on things and yeah, just kinda share my story and, and connect with people and, and learn from awesome people like yourself. Like I also saw it as a massive networking opportunity. I mean, I’ve sat on calls for hours with Kevin O’Leary and you know, some like, just amazing people because of the podcast. And so that’s been really, really…

[00:48:40] Andrew Luong: Thank you for sharing and I’m sure the audience feels this way too, but, uh, very glad that you brought this thing to life. I think there’s a lot of value in it.

[00:48:52] Robert Leonard: Thank you. I appreciate that. Andrew, as we wrap up the conversation, I wanna give you a chance to tell the audience where they can go to connect with you.

[00:48:58] Robert Leonard: Find Doorvest anywhere you wanna send the audience to find your resource.

[00:49:03] Andrew Luong: Yeah, doorvest.com is a good start. Check us out. Would love to have you and kind of hear your thoughts on, on the platform. Uh, and then if you have any specific questions, definitely shoot it my way. andrew@doorvest.com. Love talking about finance, personal finance, that sort of thing.

[00:49:19] Andrew Luong: Also real estate. And then, uh, I don’t think I have the answers to everything. In fact, probably just a small sliver of things I think I have answers to. And so if anything, I could try to point you in the right direction. Awesome.

[00:49:30] Robert Leonard: Andrew, thank you so much for, I know you’re on vacation. Thank you for taking time outta your vacation to chat with me.

[00:49:36] Robert Leonard: Join me on the show. I really appreciate it. Enjoyed the conversation.

[00:49:38] Andrew Luong: Yeah, this was a lot of fun. Excited to keep it going.

[00:49:44] Robert Leonard: All right, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

[00:49:49] Outro: Thank you for listening to TIP. Make sure to subscribe to. We Study Billionaires by The Investor’s Podcast Network.

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