iBuyer Real Estate Blog

On iBuying with Bob Kociecki [Podcast Episode 3]


iBuyer Podcast Episode 3

SHAMUS: Hi there and welcome to the iBuyer podcast. I’m your host Shamus SamerDyke and you are at your one stop shop for all things iBuyer. So today I’m being joined by Bob Kociecki. He’s the president of Bright Homes based out of Orlando, Florida. And as somewhat of an interesting background in the iBuyer space, dealing with iBuyers and some interesting insights coming from a builder’s perspective, having also been on the investment side of things. So we’re excited to talk to him and Bob, if you want to say hello to everyone.

BOB: Hi everyone. Glad to be here.

SHAMUS: Yes. So do me a favor, Bob, you’re going to know it better than anyone. Why don’t you just give everyone a quick rundown of your history?

BOB: Sure. I’ll give you the kind of nickel tour of my background in this business. So, right after the housing downturn hit, you know, I had been previously investing in commercial and residential real estate and I hooked up with American homes for rent out of Chicago back in 2012. At that point invitation, American homes for rent, I met a lot of the other REITs both Wall Street and non-Wall Street, we’re getting started. Hooked up with American homes for rent, ran their Chicago office and quickly started opening up offices up and down the East coast for them. Spent about three and a half years with American homes for rent. Ended up as their senior vice president for property management and for the Eastern us. Great experience and understanding how to accumulate large number of homes, get them renovated, get them tenanted and make income producing assets out of them in a very big way and in a very big hurry.

After I left American homes for rent, I joined Altisource portfolio solutions. Altisource is a multifaceted real estate company both on the servicing end and as well as every other aspect of real estate. I think they touch every single part of the real estate transaction. And then, with Altisource to build a real estate investment trust, which was then called Altisource residential now called front yard residential, help them build their platform, manage their properties for them. And today there was successful 15,000 plus unit real estate investment trust dealing in the low and affordable housing sector. But while I was at Altisource, I started and ran a fund called BRS better neighborhoods where Altisource allowed me to use money that the company had to buy houses advantageously, renovate them, tenant them, and then I pooled all those houses together and sold them to the REITs that I had been working for previously.

It was a great method for a REIT to get a house that was renovated, fully tenanted, cash flowing from day number one. So my fund actually provided a valuable service in that sector still. Bright homes came onboard May/June of last year. I went to work for DLP real estate capital, which had partnered with pride homes. And I quickly found myself running bride homes and DLP builders were an eco-friendly, solar ready powered builder in Florida and we span from the East coast to the West coast of Florida building affordable solar ready homes.

SHAMUS: Wonderful. It’s a heck of a background.

BOB: Thanks.

SHAMUS: You are very welcome. You know, the first thing I noticed, you know about your background as a whole is one thing that I harp on this podcast all the time is that people forget that just because iBuyer is a new term, the concept and the industry have been around for decades. Am I right?

BOB: Absolutely right. I mean before the internet, if you remember driving around, you would see signs for, we buy ugly houses.

SHAMUS: Right.

BOB: I mean that was pre-internet, but that’s kind of the first formation in my mind anyway of how this business got started.

SHAMUS: Right, absolutely. And you can tell, you know, just looking at your background, just about everything you were doing at almost every juncture up until very recently, you were basically a large scale iBuyer, right?

BOB: Yeah, absolutely. I mean, when you think about how we were buying houses, we were valuing them just, just similar to what all the iBuyer do today, using the AVMs, getting into to inspect the house, running our pro forma analytics on what that house would look as an as repaired value or ARV, understanding what our margins would be and then pulling the trigger on buying that house, acquiring it, renovating it, and then selling it. So yeah, exactly what the iBuyer platform is all about.

SHAMUS: Right, right. And maybe only difference like you said is, you know, at the time you weren’t doing it with an algorithm over the internet making your offers.  

BOB: Yeah. I mean, technology has taken this iBuyer business into the stratosphere and it’s only the beginning of that part of the business yet that we’re yet to see the results. But with the algorithms that are in place today by all the big players, their evaluations are even more spot on than ever in the past.

SHAMUS: Absolutely. I mean, just the sheer amount of data that these guys are scraping and pulling together at a per minute basis is astronomical.

BOB: Yeah. We always talked about it in American homes for rent and even with my fund, you know, we were a real estate business, but really at the heart of it, we were a data operated business and all comes down to the big data and understanding how to use it to your advantage and if you can help out a consumer in the process by offering them a fair price and a quick way to get out of their property, I think it’s a win-win situation.

SHAMUS: So, I could agree with you more, 100%. And you know, at the end of the day it’s a for profit company, you’ve got to make some money, but with everyone, you can make sure everyone involved walks away feeling better than when they started. What better? Right,

BOB: Exactly, right. I mean there’s no better way to look at it than then having a win-win when you walk out the door.

SHAMUS: Right, absolutely. So one thing in particular, you know, as you mentioned in your bio that I wanted to touch on was when you were, I believe this was when you were in Altisource, correct me if I’m wrong and you were buying homes, getting them rented, packaging up and then selling them to the REITs. Was that Altisource?

BOB: Yeah, it was Altisource, and then the company that I ran and the fund that was underneath the Altisource umbrella was called BRS Better neighborhoods.

SHAMUS: Got you, BRS Better neighborhoods. So when you were doing that, I personally just find that very interesting. And what, the reason I bring, I wanted to touch on this specifically was, you know, is this something, based on what you guys are seeing now that you’re seeing some of the current iBuyers leaning towards, do you see any of that happening with the open doors and whatnot, are they not necessarily renting the homes, but do you see them packaging them and selling them off to the REITs or is it per staying pretty much retail from what you’ve seen?

BOB: Yeah. So what I’ve seen is mostly retail from the current iBuyers strategies. But what you mentioned is actually a very clean takeoff. You know, when you’re operating a REIT, you’re operating in the realm of the size of like an American homes for rent or invitation or even if you’re at a progress, you know, size where you’ve got 30 to 40,000 properties, you need meaningful conduits to add to your inventory. I mean, everybody wants to grow, everybody wants to grow quickly, but they also want to grow very advantageously mean they don’t want to overpay for houses. So when the iBuyers go out there and they make their offers and they’re able to secure a deal, you know, the consumer wins because he gets an out for his particular property. The iBuyers hopefully, you know, prices in the algorithms correctly. They can make a profit as well. Most of the iBuyers have not all of them do renovations on their properties. So one of the biggest challenges a REIT would have obviously is a holding period of time from when they buy a house and that holding period gets extended from the time it takes them to renovate that property. Then the time it takes them to lease that property. So it would be a logical step that if the iBuyers has a number of properties in inventory in a market where a REIT wants to expand, that they would definitely hook up.

SHAMUS: Okay. Now what about taking that from the other side? Okay. Now the REITs and by that I mean, take your, say a builder for example, like yourself, maybe not you guys specifically, but somebody who’s building homes, you know, maybe they keep a portion of them that they sort of build to certain specs and the thought that maybe they turn around and immediately flip these two an iBuyers, have you seen any of that happening, say an open door coming in and buying 10 homes from a builder brand new, knowing that they still have a bit of a margin on them to put it back on the market?

BOB: Yeah. So that’s a very interesting take on it. For my fund BRS better neighborhoods, we get exactly that. We would obviously go to auctions, we would look at off-market, on market deals, but we would definitely also work with builders and we work with a number amount of the Jacksonville area, particular some in Georgia and Atlanta where we were based. But we would definitely be able to go to builders and approach them and say, you know, we’ll take 10, 20, 30 houses in your development. And again, looking for the win-win relationship, a lot of developers when they’re closing out of development might have four or five houses that, or four or five lots of they haven’t built on yet that they want to kind of get out of and dispose off. And they would often do that at a discount. So my fund would be able to come in there, make an all cash purchase, buy the remaining lots in a particular subdivision, build those houses and then rent them. So that’s a very possible scenario. You know, with bright homes, we haven’t been yet approached with that because we have a little bit of a unique product in the marketplace, we’re building solar ready homes. That’s a little different than the typical buy box of most REITs.

SHAMUS: Right

BOB: So I do think that as more REITs start to expand their horizons, you know, a company like bright, which I run now, build solar powered homes, that’s the next evolution of the phase, right? When you start looking at who are you going to be capturing to rent homes to or to sell homes to. It’s really the millennials that are coming of age now and going to be driving the housing market for the near term future. You know, they want, clean, renewable energy in terms of houses and they’re likely to pay more rent for a house that offers that and is brand new. So that platform actually works for the Wall Street and non-Wall Street REITs.

SHAMUS: Okay. Yeah. Wonderful. So now with your experience, and I know we have, you and I have spoken about this in the past, when you were in Atlanta, you dealt directly with a couple of the iBuyers, correct?

BOB: That’s correct. Yeah. So we, we dealt with them in a number of different capacities. One was because we had a property management company and a renovation company that managed the renovations basically nationwide. We were able to connect with one of the major iBuyers and we became what they call their backup property management and renovation companies. So basically an insurance policy, for what they were doing out in the marketplace that if anything were to go wrong in a particular market or they needed assistance in a particular market, we were there to step in to help with property management and renovation experience. But on the buy, we also work with a lot of iBuyers because you can imagine, iBuyers generate a huge amount of seller leads. You know, people that want to sell their house are intrigued with the iBuyers process. Some may want to get out quick, some may not, but they want to understand that process works. So we would work with those iBuyers and either help them kind of recycle the leads where they’ve had a seller reach out but maybe couldn’t put together a deal with their particular iBuyers.

SHAMUS: That specific house was outside of their buy box, whether it was maybe the wrong year built or wasn’t the right bedrooms, bathrooms, because of like you said, that buy box is so specific. You guys were able to sort of pick up some of the Slack so to say in that.

BOB: Yeah. And that’s a great way to put it because that’s exactly how it is, right? Every single iBuyers has a particular geographic market buy box and because they’re so algorithm based, they generally don’t go outside of that particular buy box. And then we’re able to come in there, we were able to come in there and maybe on the fringes of that buy box or something wouldn’t fit what an iBuyers might want to buy. We were able then to approach and try to make that deal happen. So that would be a big source of our leads for properties. And then also if an iBuyers did buy a house, and for some reason they weren’t able to renovate that house and sell it as quick as they thought they would or if they bought it and they went into that house and then determine that, Hey, the renovations were much more extensive than what they had originally planned to do, we would be able to step in there and buy that house directly from that iBuyers, take it off their balance sheet, put it on ours, complete the renovations, put a tenant in there and then pull it and sell it.

SHAMUS: So I like that last part you just mentioned, because you know, it goes to speak to, you know, one thing we hear a lot is that, you know, a lot of people are afraid. I mean, that’s the best way to put it, of having iBuyers in their marketplace. You know, they’re worried that, you know, these big companies are coming in and they’re screwing them out of a deal or screwing them out of a home or this or that or realtors are worried. But you know, just by what you dug into there, what you’re really saying, at least what it sounds like to me is that these companies, these iBuyers are willing to step outside of themselves and assist or work with people in their local marketplace to create sort of a synergistic effect within that to best serve the customer and the property itself. Is that right?

BOB: You are absolutely correct. You know, I’m a realtor, you know, and I’m licensed in five States, have been for a long time. And I think what ends up happening is as far as, you know, as a real estate agent or realtor or someone that’s in that business, when you see something like an iBuyer come in into a market and spend a lot of money on advertising, your first reaction is exactly what you said, right? Which is, I’m a little bit afraid, like, what are these guys going to do? Are they going to be the 800 pound gorilla in my market? Are they going to dominate with what they do? Because of all the advertising and expensive promotion that they do in every single market. But the reality is you start peeling the onion back and you realize that there are a lot of opportunities to do business with these eye buyers.

You know, one easy one is lead generation. I mean, these iBuyers don’t buy everything that they actually have a lead on because they have such a tight buy box. So they generally work with local realtors or local flippers, and work with them like they did with my fund to kind of harness those leads and continue that process and getting that consumer where they ultimately want, which is a sale. So, you know, they work with local companies and renovations. They work with local realtors. There’s a lot of different touch that happens in the iBuyers platforms. So the initial reaction might be, I’m afraid because they’re coming into my market and they’re spending millions and millions of dollars on advertising. But again, as you peel away that onion, you start to understand that there’s a lot of ways that the realtor and real estate community can monetize what these iBuyers are bringing to the market.

SHAMUS: I’m so glad you put it that way. Because you’re absolutely right. And it’s something that we’ve harped on multiple times as well on the show, is that yes, is it different, is it new? Yes. Has anybody truly figured out exactly what it means? No, not yet. It’s still so new. We’re only, you know, think about it were only what, 12 years into social media as a whole. I mean, Facebook started in 2007 and we’re just now really starting to figure out its potential. We’re only a couple of years into this whole iBuying experience. So I love that the way you put it, because you’re right. Is it a little intimidating? Absolutely. But as you said, you peel the back of the onion, there’s a ton of opportunity even if it’s just as simple as being able as say a listing agent, offer your seller a guaranteed backup offer from day one. I mean, even if it’s just as simple as that, that one thing could be a way for you as an agent to build your portfolio of listings to, you know, sell homes quicker, increase your commissions. I mean there’s tons of ways to look at it, but exactly like you’re right, it should be looked at as an opportunity, not a threat.

BOB: Yeah, it’s an opportunity. And, and you know, real estate agents and anybody that works in real estate always has to look at reinventing themselves and really making and adding value for the consumer. And if you can harness the power of what these iBuyers do and present that as an option, you know, to your client, again, it’s another tool in your toolbox for you to use, whether you’re a listing agent, whether you’re a buyer’s agent, you know, all of those tools should be available to you and available to your clients. And again, I think it’s how you present that to your client and how you can add value during that transactional process.

SHAMUS: Right. I think that was so well put, so well put. Now, we try not to keep anybody too long and you’ve already given us more than enough of your valuable time. So I just had one last particular segment I’d like to hit on with you before we go ahead and sign off. And that’s particularly in your field as a new construction home builder. How do you, where do you see the potential benefits for somebody in your position as a builder to either work with or alongside iBuyers in your local marketplace? Besides what we talked about for possibly packaging and selling, do you see any other potential ups or even any potential cons to that situation? Having iBuyers in the marketplace with builders?

BOB: Yeah, so I think one of the opportunities that we’re starting to tap into is working with the people that are selling to the iBuyers. Right! When you’re a seller to an iBuyers, your next step is to do what? Buy a house, right? You’re moving from one house to another house, maybe moved from a condo or a townhouse to a different house, moving to a different area. Right! I see there could be a huge potential for the iBuyers, not only to capture that transaction where they’re buying a property, but then also harness that particular lead to then sell them another property, which a new builder will be perfectly formed to. So we would call it a trade-up program. Right? You’re selling your house, maybe you’ve lived in it for 10, 15, 20 years.

SHAMUS: Say that one more time. You said trade up.

BOB: Trade up program. Yeah. Trade up program.

SHAMUS: I liked that a lot.

BOB: Yeah. So we work with a lot of consumers that come and look at our new homes and they say we love it. It’s a brand new home. It’s energy efficient, it’s solar powered. I’d love to get into it, but I’ve got a house I’ve got to sell before I can buy your house. Right? So we would love to partner with iBuyers from that point of view because we get our seller, our buyer, what they want, their house sold, they sell it, they get to buy our house. Again, win-win-win. iBuyers wins, seller that sells to the iBuyers wins, they buy one of our new home builder, one of my new homes that we build or any new home builder. Right! So again, it’s peeling back that onion and understanding how you can make use of what technology you know, that these iBuyers have created.

SHAMUS: Right. No, I think that was very, very well put and something I hadn’t even considered, before on the show is trying to figure out, you know, what could be some possible benefits and work arounds and work together is, and I don’t know how they didn’t even think about that, but yeah, the trade up program and it’s like you said, it’s mutually beneficial. The iBuyer gets a chance to better service their clients and most of these iBuyers are also, you know, have a brokerage component. So maybe that’s a way for them to be able to increase their margins a little bit. Meaning they could even maybe potentially pay more for the house because they know they’ll get a commission on the backside by having them then go to a company like yourself where they’re buying a new home, right?

BOB: Exactly! And everybody wins in that transaction because we have, you know, we have a number of people when you think about new home buyers, the perception is where they’re buying their first home, right? So they’re moving out of an apartment or out of their parents’ house or their family house. But the reality is a lot of people that are buying new homes are trade up buyers. They already live in a house, but they don’t want to deal with the, you know, 10 year old roof, you know, or AC system that’s about to go out, right? They really want to get a brand new low maintenance house. But they need to get out of their old house first to do that.

SHAMUS: Right, right. Bob, I think you really nailed it, hit it on the head there. I want just want to say thank you very much for coming on the show with us being willing to talk about this and give your insight as I said, which is very unique. Then you know, most of the people that we’re speaking with because you’ve had, you know, you tied your fingers in each pie, or in many pies within the real estate industry over the years. So I appreciate you taking the time to chat with us today. The last thing I just want to ask just for everybody watching and listening, if people are interested in finding out more about bright homes or yourself, where can they find out more information?

BOB: So the easiest way is to go to:

brighthomes.com

You’ll learn all about bright homes and our ecofriendly solar ready homes. And if you want to reach out to me directly, you’re welcome to get me on email:

It’s bobkay@dlpre.com.

SHAMUS: Beautiful! Bob, again, thank you so very much for coming on today. We appreciate you spending some time and can’t wait to see what Bright Homes does here in the future.

BOB: Thank you for having me. Enjoyed it.

SHAMUS: Take care Bob.

BOB: Bye. Bye.