David Friedman: Fantastic, Frictionless Investment Property Ownership

Guests: David Friedman, Daniel Ramsey
Recorded: September 5, 2019

Excerpt

Knox Financial makes turning your home into an investment property frictionless, delivering passive income and a fantastic value growth investment. Knox handles every aspect of investment property ownership— finding a renter, running background checks, negotiating a lease, securing your financing, finding the right insurance policy, and handling all the maintenance. Once a home is enrolled in the Knox program, the homeowner sits back and receives a quarterly distribution.

When Dave Friedman did what the vast majority of homeowners do when it’s time to move, the company started putting the home up for sale. A year later, the home that Dave sold appreciated by $100,000. Four years later, the new owners sold the home for $200,000 more than he had gotten for it just a few years earlier. Dave missed out on a huge wealth-building opportunity, all because there was no easy way to turn his home into an investment property.

Knox Financial is just the latest success from Dave Friedman – he’s already well-established with his IT service provider, Boston Logic. Back in grad school, David got asked to look into a computer problem someone had in his Realtor’s office. After becoming the “IT guy” in that office, he realized that many Realtors there faced the same technical issues, and then he thought if all of them in that office were experiencing those issues, how many more Realtors were going through the same thing? Then it hit him—more than these break-fix IT jobs, what they truly needed were long-term solutions.

Nobody should settle for outdated technology solutions that don’t play well with integrations or work on a mobile device. Boston Logic set out to build software, online marketing, and design services for real estate companies looking to be the technology leaders in their marketplace. And that’s what they did. It’s why when they build something, they are committed to constantly improving it to meet and exceed today’s standards and expectations. It’s why they strive to be partners, not obstacles in building modern real estate businesses. They are developers, online marketers, and designers. They work hard to stay on top of today’s trends, coding, and design standards, so their technology and services always reflect current expectations. The company was formed in 2004 in Boston.

Catch our conversation with Dave and hear the stories behind these great companies.

Transcript

00:00:08:08 – 00:00:32:22
Daniel Ramsey
Hey, everybody. Dave Ramsey here with MyOutDesk. As you know, we introduce and interview top performing real estate people across the country. And today I’m a special guest, David Friedman of NOx Financial. And this is going to completely change your world. If you’re a realtor and you have a database, this guy is going to help us unlock a ton of value and get some, you know, some investor clients.

00:00:33:00 – 00:00:34:23
Daniel Ramsey
So, David, thanks for being here today.

00:00:35:09 – 00:00:36:13
David Friedman
It’s great to be here. Thank you.

00:00:36:24 – 00:00:48:01
Daniel Ramsey
You know, you’ve got an interesting story. You founded and exited a couple of businesses. So let’s just start off. How did you get started in real estate for our audience so they can kind of get a backstory of who you are?

00:00:48:10 – 00:01:09:23
David Friedman
Yeah, sure. So I bought my first home when I was 23, and as I was out of bed home, I realtors said to me, you know, I’m having this problem with my computer. And I said, well, you know, I’m a grad student right now and I know something about computers. Maybe I can help you. And sure enough, I came in and they paid me for a couple hours of my work and I fixed this computer problem.

00:01:10:06 – 00:01:29:18
David Friedman
And then I found out that pretty much every other realtor and his office, it was Remax office needed help with their computer. So I ended up being like the IT guy for this office in my spare time, making my beer money in grad school and lo and behold, I figured out they needed more than just like, you know, break, fix it work.

00:01:30:00 – 00:01:42:10
David Friedman
They needed a whole bunch of other solutions that they didn’t have and that, to make a very long story short, is what became my first real estate company, which which is Possum Magic, which is now known as property based.

00:01:42:24 – 00:01:52:10
Daniel Ramsey
Nice and property based just for the audience. They’re one of the largest CRM platforms in in our space. Tell us a little bit about that company.

00:01:52:18 – 00:02:16:07
David Friedman
Sure. So property based actually owns a number of these is a software for real estate brokers and agents. So I both grew the company under the name Boston Logic, which built a marketing and sales platform. We acquired property based, which is a CRM built on Salesforce. Absolutely the most powerful CRM available. And so that became our second product.

00:02:16:07 – 00:02:38:21
David Friedman
We then just took the name Property Base because it was good in every time zone. And then we continued to acquire company. So we carried a transaction management company and a leads company, an implementer in Australia. So we’re now offices on four continents and clients in about 75 countries and a few hundred employees. So it’s it is one of the largest software companies for the real estate brokerage vertical.

00:02:39:15 – 00:02:42:18
Daniel Ramsey
So you might know a little bit about our industry. It’s what you’re saying.

00:02:42:22 – 00:02:44:10
David Friedman
Yeah, I’ve been around it a bit.

00:02:44:22 – 00:02:52:24
Daniel Ramsey
That’s awesome. What? I mean, if you were to sum up like the real estate space and why you exist in it and what you love about it, what would you say?

00:02:53:20 – 00:03:21:21
David Friedman
I. I think real estate is I mean, you know, there’s just endless corners and opportunities and ways to create things within real estate, whether you’re creating like a lawn, you enjoy spending time on a garage or you like renting on your car, a technology business, a career as a broker, who or I should say an agent who just decided to go from being, you know, soccer mom to millionaire.

00:03:21:22 – 00:03:32:09
David Friedman
I mean, think about all the things that happen in real estate. You build tall buildings, you create. I mean, come on. If that doesn’t get you excited, then you need to check on your pulse.

00:03:32:20 – 00:03:49:08
Daniel Ramsey
They go. They go. Okay, well, cool, man. So let’s talk. Your current new start up, some of them, it’s about six months old. Let’s talk about NOx financial. You started this business to solve a unique issue inside of the industry. And let’s let’s hear about.

00:03:49:08 – 00:04:12:24
David Friedman
That you’re so I’m going to start by disagreeing with you. I don’t think it’s unique at all. I think this is a situation that millions of people run into. So I lived an experience as a lot of startups go, this is this out in story, you know, somebody has a problem and they’re going to solve it. And I was living in a two bedroom, one bath condo.

00:04:12:24 – 00:04:30:16
David Friedman
I loved it. It was there for a decade and came time to move because I got engaged and I said to myself, you know, why am I selling this home while I live there? For ten years, went up in value, a quarter million dollars, and I thought that was really great. But I’d, you know, made a bunch of money and that was pretty cool, right?

00:04:30:21 – 00:04:50:19
David Friedman
Well, you know, I thought about holding on to I thought about I said, you know, why would I sell this? I’ll turn into an investment property. Got all the things I had to do was daunting. And you maybe I needed I can find a renter and in different terms policy. I need to refinance the property. Now I do maintenance or find a property manager.

00:04:51:01 – 00:05:10:24
David Friedman
I need to figure out how to taxes work. And I said, you know what? I’m running a startup up a time. I’m going to sell this place. Well, four years later, the new owners sold for $200,000 more than what I had sold for. And I thought, well, I only for a decade and a 250. They owned it for like four years.

00:05:10:24 – 00:05:25:22
David Friedman
I made 200 grand. I made a huge investing mistake. I’m the kind of guy who likes to make fun of myself. So I started telling this story to my friends and said, Hey, what an idiot I am. Remember that place, that that place I lived in in my twenties? And you came to all the parties on the roof.

00:05:26:10 – 00:05:48:06
David Friedman
That place just sold for 200 grand. More than what I sold it for. I’m an idiot. And so many of them had the same story. This is why it’s not a unique problem, and it’s totally common. The older that person was I was telling the story, the more their story made mine look like nothing. You know? They’d say, Listen, kid, I owned this house.

00:05:48:06 – 00:06:22:24
David Friedman
I sold it 1988 for $250,000. I thought I was stealing money from the buyer. It’s now worth two and a half million dollars. So your story is nothing. And if I sold that property, I’d be a multimillionaire. And I’m not. So anyway, Knocks exists to solve that problem. He said, Hey, lots of people want to own investment property, but they don’t want to take on the job of being a landlord, a rental agent, a bookkeeper, insurance broker or a lawyer all combined into one.

00:06:22:24 – 00:06:40:08
David Friedman
Then say, I don’t want I want investments, I don’t want new jobs. I have a job. And. KNOX Is this you give us the keys, you become the owner of the property, the owner of the investment, but not the landlord, the rental agent, the maintenance guy, the insurance guy, etc.. You I love it.

00:06:40:08 – 00:06:57:02
Daniel Ramsey
I love it. And you solve the problem of I don’t have time, but I’d love to keep this property and make it an investment. That’s right. So one thing that we you know, we had talked about prior to the show is that you guys actually have a program for realtors, our audience, our clients, like the people that we serve.

00:06:57:09 – 00:07:06:12
Daniel Ramsey
That actually helps them unlock a lot of commission from their database in the investor space. Let’s talk through that and what that looks like.

00:07:07:05 – 00:07:42:00
David Friedman
Sure. So having spent most of my career working with realtors, I know that realtors are always trying to find ways to turn their existing database and their past client base into their next set of clients. The best any business will have are their past clients who already trust them and won’t do business with them again. Yes. So we’ve created a program that allows you to mine your database for the folks in it who are interested in becoming investment property owners.

00:07:42:22 – 00:08:08:12
David Friedman
Now, if you’re sitting there and you’re thinking, hey, gosh, I must have like one or two clients who do that. Well, we would tell you that there’s probably a lot more of them that would like to own investment property, and they’ve written off the idea because they don’t want to take on the work. They don’t want to be a landlord, they don’t want to be a bookkeeper and figure out their taxes, figure out what to charge for rent, all those things.

00:08:08:12 – 00:08:13:23
David Friedman
So that’s why Knox is there, so they can be an investment property owner or without the work.

00:08:14:18 – 00:08:32:18
Daniel Ramsey
Got it. That makes total sense. So when you think like, let’s say I’m a real estate guy and I’ve got ten years and I’ve got 10,000 people in my database. What do you believe the return would be? I mean, would I have five new clients? 20 new clients? I mean, what do you think the average would be?

00:08:33:03 – 00:08:59:15
David Friedman
I mean, I think on an annual basis, you’ve got to assume let’s say you’ve got 2000 people. Let’s just zoom every year. 1% of them takes an interest. 1%. Right. I mean, totally doable. Totally achievable. So ten people from your database every year say, yes, I’m interested in looking at an investment property. If you are a realtor worth your salt, you can look in the your MLS can find units that would make a good investment property.

00:08:59:23 – 00:09:19:23
David Friedman
It’s not hard math to do the little spreadsheet or actually I think we can. We’ve got one you can download somewhere. You say, Hey, I’m ten investors. Here’s a property I recommend. This is the net monthly cash flow year one based on the way rents are going, this is how much it’s going to go up based on the market.

00:09:19:23 – 00:09:41:09
David Friedman
This is how much wealth you’re building with this much financing. The result is you can easily sell them on, Hey, here’s a good investment and actually position it for those owners. But first you have to identify them and then pick a property and say, Hey, here’s ten people. One of you’ve got to want to buy this property. I think you’re going to email them once a month with a property that you think is a good investment.

00:09:41:23 – 00:09:43:04
David Friedman
You’ll get some sides out of that.

00:09:43:20 – 00:10:01:06
Daniel Ramsey
I love that. I love that. And you know why I like it so much is we help our clients develop like another pillar of their business and that investment properties can be a pillar of your business in addition to your normal resell stuff, you know, helping investors buy and sell homes. And those guys are all about the math.

00:10:01:06 – 00:10:24:00
Daniel Ramsey
There’s no emotional purchasing going on usually. So I think it’s a great opportunity. One thing we were talking about is you had a unique, you know, study that you did about 20 years of history. Let’s talk through that and why this is such a big opportunity for realtors and the people who own the property.

00:10:25:03 – 00:10:50:13
David Friedman
They’re happy to do it. So like I said, I live this experience and I started talking to a bunch of other folks about my investment mistake. Yeah, it was. It was Spencer Taylor who I sounded knocks with. And Spencer, I said to each other, Is this just us? So we just the guys who happen to own a couple of homes, by the way, we we both made this mistake in very different places on the map, not neighboring cities or towns like different states.

00:10:51:12 – 00:11:12:12
David Friedman
So we both just luck into this. It was the question. So we went we ran a 20 year regression study. We took a look at the average home in America, which we pegged to the Case-Shiller index, and we compared the performance of that home in the Knox program for 20 years, if we existed 20 years ago, versus the S&P with reinvested dividends.

00:11:13:05 – 00:11:34:23
David Friedman
And the result was the average home, not the best job in America, not the perfect property, the average home in America that would be stoop by 370% if Knox existed 20 years ago. So we said, all right, if that means a majority of homes in America would fit our program, that we feel like we can really bring a lot of value to a lot of people.

00:11:34:23 – 00:11:42:17
David Friedman
And that that was sort of the deciding factor. We said there’s broad appeal, there’s mass appeal in this product. We have to build.

00:11:42:17 – 00:11:50:24
Daniel Ramsey
Wow. Wow. Well, okay, if somebody wanted to go deeper with Knox Financial and learn more in the real estate space, how would they do that in church?

00:11:50:24 – 00:12:16:15
David Friedman
So we can check on Knox Financial dot com for realtors who want to get our program. So we’ve basically created a program that helps you mind your customers, your past clients, your database. For those investors, they go to Knox and account slash realtors, sign up and we will send you a whole bunch of information. And it comes out over time so you’ll get inundated.

00:12:16:20 – 00:12:25:11
David Friedman
And that’s a toolkit for marketing to your database to find the best service in that population.

00:12:25:21 – 00:12:37:11
Daniel Ramsey
And there we go, David. Dropping knowledge and giving away free stuff, man. I appreciate that. All right. Well, this has been awesome. What’s the one message you’d like to leave our audience with today as we kind of wrap up?

00:12:39:00 – 00:13:07:08
David Friedman
I think the audience should know that there’s there’s a time to sell and there’s a time not to sell. And there’s a lot of folks who realize their home is a fantastic investment. And whether you’re a realtor or a homeowner, that’s a question everybody should be asking. And, you know, the best realtors are advisors to their clients and how they can build wealth, real estate, and we want to be a partner in that.

00:13:07:08 – 00:13:10:01
David Friedman
So that’s the message we want to we want you all to take away.

00:13:10:01 – 00:13:23:21
Daniel Ramsey
All right, David, thanks for your time today. Really appreciate having you. And if you’re listening right now, go to Knox Financial dot com to find out more and appreciate you today for coming coming on our show thank you.