JF2460: Using Data In Real Estate Investing Process With Aaron Norris

Aaron’s first experience with real estate happened when he was only 5 years old. Finding treasures in the properties that his father purchased was the coolest thing.

Over the years, he tried a lot of different things until getting back into the real estate business. However, now he approaches it from the tech angle, using data to make the investing experience better for everybody. He also teaches real estate, data, and research to other real estate investors, helping many people use the data to better their businesses.

 

Aaron Norris  Real Estate Background:

  • VP of Market Insights for PropertyRadar
  • Started in real estate at 5 years old fixing houses with his father’s flipping business
  • He is currently building his 12th build-to-rent property and has 20 years of experience in private construction notes 
  • Based in Los Angeles, CA
  • Say hi to him at: www.propertyradar.com 

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Best Ever Tweet:

“I found that there are typically opportunities in any market; the question is how to structure the deal” – Aaron Norris.

TRANSCRIPTION

Theo Hicks: Hello Best Ever listeners and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks, and today we’ll be speaking with Aaron Norris. Aaron, how are you doing today?

Aaron Norris: Great. Thanks for having me.

Theo Hicks: No problem. Thanks for joining us today. A little bit about Aaron, he is the VP of Market Insights for Property Radar. He started investing in real estate at the age of five, helping his dad with his flipping business. He is currently building his 12th build-to-rent property. He has 20 years of experience in private construction notes. He is based in Los Angeles, and the website is propertyradar.com. Aaron, do you mind telling us some more about your background and what you’re focused on today?

Aaron Norris: Sure. I did start flipping houses with dad at age five. My first memory is sucking cockroaches off a wall as the family was tearing up the carpet of a really ugly house that my dad bought. I enjoyed growing up as a kid finding treasures. I just thought that was the coolest thing.

After graduating from high school, I did end up moving to New York City and becoming a professional actor. In between gigs, I fell into Wall Street doing merger and acquisition presentations, and sort of fell in love with the data side. I got into marketing and PR, and long story short, I ended up in the hard money loan and real estate investment business with my father, Bruce Norris, who’s actually been on the show, I think, a couple of years ago.

Last year — I have always wanted to be in technology, so a tool that I had been using for a number of years, Property Radar, went national in November and I got brought on as their industry expert, and I work with media. So on top of my real estate career – I still do private lending and building houses – I work with media and I teach real estate investors, realtors, and mortgage professionals to get dangerous with data. It’s not just for Wall Street anymore.

Theo Hicks: So you kind of got a lot going on. What’s your main focus? What do you spend most of your time doing? Is that Property Radar?

Aaron Norris: Yeah, Property Radar keeps me very busy. Educating nationwide, working with different real estate investment clubs, and really cluing real estate investors into what kind of data is available. Mortgage, people, property, and the opportunities into really backing into a niche, spending less money and being able to talk to the right people more often. I call it right-down marketing. Right person, right channel, right time, right message.

Theo Hicks: Let’s talk about that. You said that data isn’t just for Wall Street anymore, and you’re teaching people how to use data… Do you work with all types of real estate professionals or do you focus on a specific type of real estate professional?

Aaron Norris: I think we’re best known for real estate investors. It started 13 years ago, Sean O’Toole was buying at the courthouse steps, did over 100, ended up on 60 Minutes because he saw the writing on the wall, and launched foreclosure radar before the foreclosure crisis even occurred. He completely disrupted the data game then, where a local real estate investor would be spending 1,000 dollars per county, if you’re going to go to the courthouse steps, all of a sudden, it’s under 100 dollars a month. It was really life-changing if you were at the courthouse steps.

Real estate investors are probably a big niche of ours, from people doing subject-to, to the development of accessory dwelling units, to equity sellers, vacant properties… We have over 200 fields to be able to do some research. So you give me a niche and I’ll probably not only tell you which data criteria you should use, but maybe creative ways to save even more money to better reach your target audience.

Theo Hicks: Perfect. The outcome for them, when people are coming to help them find data – is the outcome to find more deals, to generate leads, is it to underwrite deals, to select the right market, or is it kind of all the above?

Aaron Norris: It is all the above. One of the biggest mistakes I still see is a real estate investor who’s twisting in the wind because they haven’t decided what their chocolate is. We have a conversation about chocolate versus peanut butter chocolate as who you bring to the business; the peanut butter is the data, and when you can marry those two is when it is most effective. I sort of have this 5 question thing that I ask investors. “Are you an introvert or an extrovert?” “How much time do you have to be in the business?”, “How much money do you have to be in the business?” “How much experience do you have?” Then finally I ask them what their background is.

I’m a professional artist from New York City and how I got into this is a very different route. But I’ve been able to be successful because I have a very clear idea of who I am, and what I don’t like and what I do like. You talk to me about, even though I’m an extrovert, door knocking; that’s not the existence I really want. So I’ve really learned that I love being a landlord, and what that means, and creating deals and value. But somebody who’s an extrovert that doesn’t have a lot of money… “Okay. What are the different paths we can send you to where you’ll get more successful more quickly, and really fall in love with the business?” If you’re an introvert with no time, no money, and no experience, and I tell you to go door-knocking, you’re going to hate me.

Theo Hicks: Yeah. Let’s talk about something that would be universal. Let’s talk about finding a market. That’s something that is one of the first things you do before you’re actually looking for deals. If I come to you and I say, “Hey, Aaron. Where can we find the best data to find the best market to invest in?” We’ll just use rentals so you can be more specific. “I want to buy and hold rentals.” What would you say to someone like that after you’ve kind of gone through those five questions and you find out that [unintelligible [00:05:40].11] that works for them?

Aaron Norris: Great question. Especially when it comes to rental, it’s really a matter of cap rate and what your target rate of return is. So it’s going to vary. I’m going to give you a really specific example. One of the things I’ve been talking about a lot for the last several years is accessory dwelling units here in California. I was buying in California at the bottom of the market, so it really hurts my feelings in 2021 to buying a rental, because the numbers really just don’t make sense. What I’m going to buy it for and what I’m going to be able to rent it for after doing repairs. It’s just not appropriate. However, accessory dwelling units, if I can build in Los Angeles an 800 square foot structure for 125,000 dollars and it’s going to rent for 2,500 dollars a month, then that completely changes the game.

I’ve found that there are typically opportunities in any market. It’s just how to structure the deal, finding the opportunity, and that’s that hyperlocal niche, knowing it better than anybody else. So cap rates and looking at an area that you’re comfortable with… A lot of real estate investors don’t like being more than a couple of hours away from something that they’re comfortable with, or having boots on the ground that represent them. It’s just backing into the area, feeling comfortable with the inventory that you’re getting into, and knowing that you have a team that you trust that can take care of you.

Theo Hicks: Where will you send them? I wanna make sure I have a clear understanding. If you told someone that they didn’t know about cap rates for the market they’re in and the rate of return, do you then say, “Hey, here’s all the data you need” or you tell them “Hey, here’s where you can find the data”? Or it’s going to depend on how much money they have and the time they have, what direction you send them?

Aaron Norris: Sure. A lot of that’s going to be the situation that they find themselves in. If they don’t have any money, the data that they’re going to have to start tracking down, they’re going to go down the path of absentee owners and that’s inventory data that we definitely have within Property Radar. Finding owners that maybe have owned for over 27 years and trying to get in the way of those deals, talking to them about structuring deals. I really think that there are deals in any market. I always like to start in my own backyard. It’s just making the numbers work for where you’re at and what you’re comfortable with. So absentee data, rental data, it’s always in Property Radar. I didn’t want this to be a pitch fest, so I’m trying to be mindful.

Theo Hicks: No problem.

Break: [00:07:49][00:09:51]

Theo Hicks: Something else you said too is you’re talking about the accessory dwelling units in California. What types of data sets, what sort of things should people be looking for? Say they’re picking the market in their backyard and they want to know what’s the best opportunity for that area. California it happened to be an accessory dwelling unit. You can use that example, or just be more general, but what data should they be looking at to figure out what’s the best real estate to buy?

Aaron Norris: Sure, this is a great example of different ways to use data. We have over 200 fields, so there are lots of different ways to approach this. Number one is strictly from the size of the lot. I was actually on a housing commission tasked with “How do we build more affordable housing?”  and they were talking about some things, “My guys, we’re thinking small.” So I pulled up Property Radar and I showed them “Let’s look at properties where the lot square footage is 10,000 square foot and where a one-story house is 2,500, leaving us enough room on the lot to build a small accessory dwelling unit or secondary structure of around 800 to 1,200 square feet.” We found out there were 5,000 lots that met those criteria. Half of those were owned by real estate investors and half of those further were real estate investors who lived out of the area. My suggestion to them was to reach out to those, because if you want them to build it, these are experienced landlords, they know how to be a landlord, have access to private capital, and can build these things at a good price and get you more units. So you can do it strictly from a function of the data on the property.

Another way to approach it is maybe you know a specific area where there’s an alley. Where if you’ve got a primary house that butts up against the front of the street and the alley is in the back, you can basically create a duplex situation where the person in the secondary unit in the back can approach from the back, which is really great.

I also have zoning possibilities. Say in public records, I can look up R3 lots. So something that’s zoned R3 where there’s a triplex, but on-site is only a single-family residence. Chances are you can end up increasing those. In California, let’s say that happens. That means if there’s a single-family home on the property, you can end up scraping that or figuring out a way to build three permitted units. In California, that means you can also build three ADUs. So you go from a single-family residence to, in essence, six units on one lot.

Theo Hicks: Wow.

Aaron Norris: Nerd alert. [laughs]

Theo Hicks: Yeah, that’s interesting.

Aaron Norris: One more thing about that. Guess what kind of financing is available for that? Even though it’s six units, it’s a three-unit with three accessory dwelling units. For the sake of lenders, they see that as a three-unit, so you’re still under Fannie one to four.

Theo Hicks: So how did you come up with these? I’m just curious. Those are three very specific things. The size of a lot that has extra space to build on, the alleyway for the duplex, up-zoning… Is that something that you just kind of had a brainstorming session and came up with it on your own, or did you hear it somewhere? Where did you come up with that?

Aaron Norris: I have run several podcasts over the years, I’ve interviewed the state senators that have been charged with forging this work of accessory dwelling units, because we’ve been in need of more affordable housing; I interviewed the people who are doing the production side… What’s the average square footage you need to quickly know when somebody calls you like, “Hey, I want to build this”, what are the first questions you asked to know that it’s appropriate to even show up? So interviewing a lot of people and just experience in real estate investors who have gone down this path and built it. I’ve just been around a long time, I guess. I’m getting old.

Theo Hicks: What about data to find investors?

Aaron Norris: This is a good one and I’m so glad you asked that. Inside Property Radar you can search local flippers. Why I like this is it can capture flippers but also iBuyers. Finding out the buy box, if you will, of what they’re buying and why. A lot of times if you look for the flippers in your area, you’re able to see are they focusing on 1500 square foot, three-bedroom, two bathroom? Who’s your competition? Can you start to follow them? See what kind of level of rehab they’re doing in the market and how fast are they turning it? That kind of insight is so key, especially if you’re new to a market and, if you’re entering as a newbie. Success leaves clues, you don’t really need to recreate the wheel; you need to make a decision if you can and will compete with those people, or you work around them and find a niche of your own that nobody else wants.

Theo Hicks: What are iBuyers?

Aaron Norris: iBuyers are cash-as-is Wall Street backed buyers. Zillow, Redfin, Offerpad, Opendoor, Knock… they come in a few different flavors. But here in California, Texas, Florida, if you’re a resident and you log in to Zillow, you’re going to have a button that says “get your cash offer.” If you’re in Sacramento, Arizona, Phoenix, a lot of other markets and you own properties, you probably got mailers from Opendoor. They spend hundreds of thousands of dollars in the markets that they enter, offering the very same thing that real estate investors do – as-is cash, flexible closings, all that kind of good stuff. However, they don’t do the ugly ones. They do the easy ones more and more. They don’t want to do major rehabs and they certainly won’t deal with people problems.

Theo Hicks: What about investors, in the sense that I’m doing a project and I want to have someone be a passive investor in my deal? Is that something you get to do as well?

Aaron Norris: Yeah, we track mortgage data. So yeah, you’re saying if you’re trying to find private lenders? Yeah, that’s something that you can find in public records. As people are recording transactions, you can hunt them down.

Theo Hicks: That’s fascinating. I think overall it’s just once I figure out what I’m trying to do and the parties involved that I need to know about, I just figure out exactly how I can learn as much as I possibly can about those people. If I’m like a fix-and-flipper, then I want to focus on the competition, what they’re doing, I want to figure out who’s going to be my ideal buyer and get data on them… It sounds like if I just come to selling a property, you will be able to kind of just figure all that out for me?

Aaron Norris: Well, we have a fantastic support team… But when you bring the chocolate to the party, it’s fun. I’ll give you a real-life example. Last week, I had a good friend call me, and her specialty is she loves the 55 and over crowd; she really loves helping them, she’s got a really strong network of estate planners, attorneys, CPAs, fiduciaries, all that kind of stuff. She uses Property Radar, and I’m like, “Okay, let’s play. Let’s look for people that own free and clear” so there’s no mortgage, that we’ve got their email address. Property Radar pre-appends emails and phone numbers to ownership. So we’re looking at owner-occupants, single-family homes, in this specific area of California – how many people own free and clear?

We create this list and then we start looking at insights like, “How long have they owned the property?” “Why would they want to sell?” If I’m going to start marketing to people, let’s try to be strategic. I could do a blanket mailer, but why blow my entire marketing wad when I can get a lot more strategic, so I can talk to the right people several times, instead of blowing it all at once.

We had a lot of fun developing that list and I gave her several ideas on how to back into that niche, which is super niche-y… And different ways to help underwrite and marketing. I was like “You need to be working with your local favorite CPA that specializes in working with seniors, fiduciaries. You need to join this estate planning group.” There are different ways that hyperlocal professionals can really back into their niche, not just by the data, but some of the strategic partnerships as they form.

Theo Hicks: Exactly. Alright Aaron, what is your best real estate investing advice ever?

Aaron Norris: Just get started. Pull the trigger. It sounds simple, but I see way too many people sit on the fence.

Theo Hicks: It’s interesting, because a lot of people, the main reason why people don’t get started is that analysis by paralysis. They are kind of overwhelmed by the data. Maybe a follow-up question to that, especially working for or being an expert in data and the benefits of data, how do you balance those two things, of not following analysis by paralysis, but at the same time, not just completely ignoring data? What’s the right amount?

Aaron Norris: I would say focus on who you bring to the party. If you can find a niche that you can be really passionate about, I promise the data is there to back you up. The mistake that people make is trying to be somebody that they’re not. They show up to a real estate investor club, they go to these online forums, and get inundated with all the different strategies that are out there, and it doesn’t resonate with them. Part of the analysis paralysis, they try to be something that they’re going to be very uncomfortable being. It’s okay to be you. There’s room for you in the business. It’s just discovering what that looks like and then backing it up with the data and killing it.

Theo Hicks: I love that. Alright, Aaron, are you ready for the Best Ever lightning round?

Aaron Norris: Let’s do it.

Theo Hicks: First, a quick word from our sponsor.

Break: [00:18:00][00:18:38]

Theo Hicks: Okay, Aaron, what is the Best Ever book you’ve recently read?

Aaron Norris: The Future Is Faster Than You Think. I like to study lots of technology.

Theo Hicks: If your business were to collapse today, what would you do next?

Aaron Norris: I would probably go into the nonprofit space for a while and take a break.

Theo Hicks: What’s the Best Ever way to give back?

Aaron Norris: Time and talent.

Theo Hicks: Tell us about a time you lost money on a deal, how much money do you lose and what lesson did you learn?

Aaron Norris: I bought from a very popular wholesaler and was so excited. I probably didn’t do enough due diligence. We walked through with a tenant. I lost probably 30 grand in the first 2 years because of the deferred maintenance that I missed.

Theo Hicks: On the flip side, what’s the Best Ever deal you’ve done?

Aaron Norris: It’s the same deal. Oddly enough, California saved my behind. I sold it a few years ago for double, and I turned it into three brand new houses that were each rented for what that one rental was rented for.

Theo Hicks: Okay, that’s the first time the best deal and the worst deal were the exact same deal. So that’s your word for the day. Alright Aaron, what is the Best Ever place to reach you?

Aaron Norris: If you ever have any questions on data, go to community.propertyradar.com. And if you have a question, I’m the one who answers.

Theo Hicks: Well, it’s been a very fascinating conversation. You gave us a lot of examples of creative ways to use data to solve really any problem that you have as an investor, or just to get started in general. I really liked those three examples you gave about identifying opportunities that, I would imagine that there’s not a lot of competition in that, because not many people would even think of that. For example, identifying buildings that have alleyways, because it’s very easy to convert that into a duplex, because of the two entry points. Or looking at the size and the zoning to see if you can build more. You also mentioned [unintelligible [00:20:25].24] for markets, data for finding investors, and then the five questions or the five things that people need to think about in order to determine what’s the right path for them.

That kind of also plays to your Best Ever advice, which is to get started, but at the same time, making sure that you first identify the one thing that you want to do, again, based off of introvert/extrovert, time, money, experience, background. Then going through the data, as opposed to starting out with the data and kind of use the data to figure out exactly what to do, because you’re really not going to do anything. What’s more important is who you are and then using the data to crush that specific niche. Thank you so much for all the examples you gave and sharing your Best Ever advice with us, Aaron. Best Ever listeners, as always, thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.

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