Have you been hearing that real estate is going to come to a screeching halt? Have you also heard that new construction companies are booming right now? How can you invest in that?
Our guests and owners of ROI Property Group, Rob & Nicole Fuller, join us to share how they have huge opportunities for investing in this underserved space in the real estate market. Tune in to find out how they’re doing it!
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Can Investing In Build-To-Rent Neighborhoods Be Good In This Market With Rob And Nicole Fuller
Welcome to our show. It’s for you, those that work so hard for your money, and you’re ready for your money to start working harder for you. You want that freedom and cashflow now, not 30 or 40 billion years from now, so you can live the life that you love with those that you love, but most importantly, it’s not just about getting rich. It’s about living a rich life because as you are blessed financially, you have the greater capacity to bless the lives of those around you, whether it be in your family, your communities, or across the world. That is exactly the ripple effect we’re here to create.
Thank you so much for allowing me to create a ripple effect through you. I appreciate you. You’ve been binging on these episodes. You’ve been sharing them. You have been binging on the shorts, which I love too. I love the fact that you have short attention spans. You’re still going through those too. Thank you so much for tuning in because we couldn’t create this ripple effect without you. As a reminder, speaking of our channel, if you’re already subscribed to our Money Ripples channel, go and check out the Money Ripples Podcast channel. Check out the Money Ripples channel as well if you want more education to go beyond what we talked about here on this episode.
I brought two friends on here, two friends that I spoke with live. Many of you had reached out saying, “I don’t live in Utah. I want to be able to see what this is all about. I love learning about passive income.” Some of you have already been reading this for years, and you still want more. I’m bringing on Rob and Nicole Fuller. Both of them are with ROI Property Group. The operation they have is pretty impressive because we get a lot of people coming on here that might talk about some syndicated types of deals with apartment buildings, self-storage, or anything in between, but these guys do actual ground development all the way to rent.
They even do pre-built-to-rent types of homes. They’re massive projects. The crazy thing is I didn’t even realize their office is twenty minutes from my house. These guys are in my backyard. Sadly, it takes other people to introduce us to get together but I’m excited to have them on here to talk about what they’re dealing with and ask them maybe some of the harder questions, especially with the way the real estate game is going. There’s a lot of uncertainty. I would love to hear about what they’re doing with their fund, where they’re paying double-digit returns. Rob and Nicole, welcome to our show.
Thanks so much, Chris.
Thanks for having us. It’s good to be here.
Tell us a little bit about your backstory. You have a very interesting backstory I didn’t know about. Tell us more about the two of you.
Rob and I met in college and got married. Rob was pre-med originally, planning on going to med school. He had interviews lined up at five different schools. He went out to his first interview. When he came home, he said, “Would you be mad if I don’t go to medical school?” I said all along I didn’t think that was his passion. He has always loved real estate. Ever since I knew him, he talked about real estate. He studied real estate. He wanted to learn more about it. When he said, “I’m not going to head to medical school,” I said, “You finally figured it out. We can move on with the rest of our lives.”
We started investing in real estate pretty quickly early on in our marriage. Back in 2009, I had a little bit of money in the stock market, and we got creative to get the rest of the cash that we needed to buy a tape of properties from a bank. We started with thirteen properties that were scattered all over the US. We found contractors in those areas, got the houses fixed up, and then got renters in them. We held onto some so that we had monthly cashflow and then sold others so that we could then start the process again.
We built a big fix and flip business. At one point, we were doing between 30 and 40 homes a month. We loved it. We enjoyed it. We kept our day jobs for the most part. I was raising babies. He was working and doing real estate on the side. He commuted a lot for a number of years. He would leave at 5:00 AM, making phone calls. We had a lot of properties on the East Coast. We were in California at the time.
In 2015, it started getting harder to find good deals on single-family homes. We didn’t necessarily want to be in fix and flip forever. Development was always interesting to us. We started looking at what it took to buy raw land and take raw land all the way through development. We switched gears. 2016 or 2017 is when we closed on our first big land acquisition. It was 830 acres in Colorado Springs. We completely transitioned to development. We’ve got seventeen development projects in our pipeline. What we focus on now is real estate development. That’s the background.
Nicole, I’m going to go back to what you were talking about here too. I want to rewind a little bit farther back. Probably at least 99% of wives would say, “Go to medical school, idiot. Are you crazy? What are you thinking? You’re trying to quit this path that we already know should be the sure thing to do something like real estate investing.” How can you even do that? I would imagine most women would not be that supportive.
I’ve been very supportive. I am naturally entrepreneurial-minded, which works well to be married to a serial entrepreneur.
The other thing, too, is Nicole has never been passive. That’s not her personality. She’s always been involved from the beginning. It was her money when we started. We were able to start buying some of these initial homes she had from an uncle who had passed. She’s been involved in the business from day one. It wasn’t my business. It was our business. When we were doing fix and flip stuff, she did more design stuff. As we have done more development, she still is involved in that, but there’s less of that because you’re building 4 to 6 floor plans in a community 20 times each. She works with most of our investors. She’s more likable than I am, anyway. I will get geeked out. You’ve been with me when I talk about things that put most people to sleep.
That was one thing that surprised me because when we first met, we were at lunch. You struck me as much more of that visionary guy or the stereotypical CEO, but then getting to know you more from day one, I could tell she’s the relationship person. You could tell that’s her thing, but I noticed you’re pretty nerdy about this. You’re not just a visionary, “I’m here to lead the company, and I’m not into the details.” You get into the details. I was surprised how much you got into those details or the weeds.
The stuff that is in that man’s head is amazing. I always tease him because he has forgotten to pick up children before, but he could tell you every number, every address, and every statistic. His mind is a beautiful thing, but it can be frustrating.
I think, “How could I forget this thing that’s so important?” Fortunately, our kids are schooled two minutes from our old office.
You create some easy decisions. It makes it a lot easier to get past some of this stuff.
It was not part of your normal schedule.
It didn’t happen regularly.
Drop your kids off, but you want to make sure they get home too. That’s always important. You made this transition. It’s relatively recent, but it’s not either. You are starting to see some changes happen in the marketplace. In my personal experience, when I’ve seen people say, “I do development,” I’m thinking, “Good luck. Have fun with that.” That’s a long-term thing. That’s not a quick and easy thing. The longer the term, the higher the risks. What are the things you have done and learned over the years that have lessened your risk in doing this strategy?
We kept our day jobs for quite a while and rolled our profits and equity forward for a long time. I don’t think we even took investors until 2015 or 2016. Even then, we took a break for a little bit. We have revamped that and started bringing investors on again. It allowed us to build our net worth by rolling our equity in. Part of the reason for the transition back to investors frankly is because of the bank turmoil. Things were going pretty well. Lenders were lending, and then the pandemic happened.
They all stopped.
It wasn’t about writing loans. If you already had a loan, they stopped funding it. In anything, whether you’re building a house, renovating a home, or developing land, if you have a commitment and people are out there working and then they don’t get paid, they get upset. Fortunately, that didn’t ever happen to us, but I did see it happen to a lot of people. It came back in the summer of 2020. Even then, banks and debt funds were still trepidatious. They weren’t sure where things were going to go, and then it went hog wild. Everything was great for a year, and then there was inflation and all that. I’m sure you talk about that with people all the time.
What we didn’t want to do was get caught up in a situation where we were going to be stuck with banks. Even recently, we were going to close on a loan. The bank decided, “Our deposits are where we want them to be. We don’t want to extend any more loans in case something happens like SVB or one of these other banks where deposits go down, and we are over-extended. The FDIC shuts us down or all those kinds of things.” We decided we would raise our debt funds. That’s what we have done. We started raising our money so that we could continue because it is a long-term thing.
Some of these debt providers look at what’s happening this month or next month, whereas we’re looking at projects. The one Nicole mentioned, Saddlehorn Ranch, is out in Colorado Springs. We have homes being built there, but those homes being built and sold to retail buyers are something that might take five years. We’re profitable much earlier than a two-years-in thing of selling homes, but those take time to sell.
Traditionally, we sell built-to-rent. That’s a unique product for that because that’s a sold-to-a-consumer type of product, but even the buyers that we have are very even-keeled and aren’t as disturbed by the changes in the market. Pretium and Asia Pacific Land are big ones that we have relationships with. There’s a number of them that buy these entire communities and look at it in the long game. Do rates affect them? Sure, but it’s not the same way that it affects the average homebuyer.
Those timelines do shorten because we can sell an entire neighborhood to one buyer, and they’re renting it all out. There’s risk mitigation because of that, which brings it back to your question. Even if people aren’t buying homes, they still have to have a place to live. We’re seeing Baby Boomers move out of their bigger homes to not have to maintain yards and things like that. They’re moving into rentals in these communities.
Even if people aren't buying homes, they still need to have some place to live. Click To TweetIt’s the flexibility of being able to leave if they want to leave and go somewhere different.
Millennials are getting out of the apartments and into homes. They’re having kids or dogs. They want to be in a home. You have people who get divorced, and the spouses go separate ways. They both have to have a place. There’s still a group of people who don’t want to necessarily live in an apartment. They may not want a big house or can’t afford a big house. They’re going into these typically what might be considered a starter home, but many of the starter homes now are being used as rentals.
That’s important to understand because I brought it up in an episode. It’s serendipitous because I brought up the eight questions that I teach all of our clients, “Here’s how you score an opportunity when you’re looking at it.” One of them is looking at the market. Is there a demand for this investment? If we learned anything from the last recession, the worst thing is when everybody is trying to buy McMansions to try to turn and flip them and make big profits on them, but once credit tightened up, nobody could hardly afford them.
The markets got a lot smaller versus those that had lower-priced rentals. I’m not saying bullet-hole $10,000 types of homes. I read about median price or under that. Those ones were still selling very strongly. They held their values. Their rents were strong too. It sounds like that’s a similar model to what you’re trying to do here too. You’re trying to fit the demand that everything is moving toward.
Oftentimes when you have a higher-priced home, there is already only a small tier of people that could afford them. That crunches that group of people. They’re not buying $1.2 million homes. They’re buying $1 million. The people who were buying $1 million are now buying $850,000. The people that were buying $850,000 are now buying $600,000 or whatever it is. It changes the dynamic of everything.
Being in a place where most of our homes are going to be around that median home price or below as far as renting them out, we do have one neighborhood with big million-dollar homes, but we bought that land relatively inexpensive and that wasn’t the intention from the start. Most of our built-to-rent projects are exactly what you’re saying. They’re designed for the everyday person who needs a place to live and can afford what we have on the market.
Do you do any lending with banks? Are you primarily just using investors’ money to be the lenders or the bank for you?
We have some banks that we work with. Bank of Colorado is one of them. We’ve got a couple of other debt funds that we have worked with for years that still lend to us and are still lending money. Those are deep relationships. They’re not your traditional debt fund that’s then turning around and selling those loans, which is what happens to a lot of them. They will generate a loan and then sell it. One of the big ones that we have is Anchor Loans. They have been in business for a long time. We have been borrowing from them for years.
Short-term or long-term borrowing?
That’s short-term.
Even if interest rates go up, is that still priced in so that you can still maneuver and change?
Those are designed mostly for construction and renovation loans. Those are one-year to two-year loans, typically.
After that, you get refinanced out of them.
We will put them on a bridge. In some communities, we will put it to long-term debt financing with HUD, which is still lending. Government lending still lends. Those are pretty safe places to be.
Unlike some of our other friends, have you had an okay time still transitioning even with all the changes in the banks? A lot of them are especially not wanting to do commercials anymore.
We closed a loan in January with the Bank of Colorado at 6.75% loan-to-cost. We’re doing development using their financing, and it’s great. On the flip side, we have had the one that backed out. That happens unfortunately more and more as the credit market is changing constantly. That’s why we’re trying to move away from that and do our debt fund, raising money.
There always has to be another way around that system.
In my opinion, there are problems with the banking system anyway because if you can borrow it, they can get a $1 deposit and lend $10. How long does that last? We borrow $1. We spend $1. That seems like a more reasonable path to execution long-term. I don’t know how they maintain that but it’s with the government guarantee and promise behind them.
A lot of people are concerned. You borrow people’s money and use it all. You use everybody’s OPM. Are you putting your money into this too?
We’ve got a lot of our money in.
We have a lot of skin in the game.
We share our financials with people when they come to talk to us. I don’t typically broadcast on a show. We’ve got a substantial amount of our money and equity in these deals.
Here’s a big question I get from our clients that are asking about this. After they have talked with you or seen you present, a lot of them will say, “How can they afford to pay such great returns to investors as the lenders in that sense but at the same time still do these huge development projects?” How do you still keep the cashflow coming in? What’s your response to them about that? You got a mixture of portfolios, but how do you make sure you can always service the debt and keep paying investors?
Traditionally, whether it’s a debt fund or a bank that we have used in the past, they always have an interest reserve built in. People are right. When you’re putting pipes in the ground and the streets, there’s no rent coming in. We build in an interest reserve so that we can pay mortgages to individuals. We can pay the investors while that’s ongoing. We build that into our proforma.
We show, “If we have this much interest that we’re going to pay, we need to raise this much money.” We can pay the interest to the investors. We will see how everything goes, but we’ve got a number of projects that we’re working on that we will be selling over the next six months. As those sell, that revenue comes in. It’s used to pay distributions and things like that.
That becomes part of our interest reserves so that we have that money available.
Even when you turn around and sell them too.
We sell the units because we will have the principal that gets returned and then the profit that comes in as well. We pretty much stick all of the revenue that we make back into the fund. That’s why when you ask how much we have, it’s North of $10 million. I can share that happily and easily. It’s the exact amount. We will share financials with people when they talk to us. We’ve got a fair amount of skin in the game. One of the things about us being in it is our money gets lost first if there are ever any losses. We are selective about what we take on. We haven’t taken on new projects lately.
We stopped. We’ve got a lot on our plate and pipeline.
We can always put some on pause. We’ve got some that we own where we don’t have any interest payments or anything like that. We own 640 acres and 1,800 acres without any interest because we own the land with cash. There’s no mortgage or anything like that. Those are both big projects in Colorado Springs. There are over 10,000 units between the two of them. That’s a fifteen-year plan. That’s not something happening next year. Those are big projects that will span a number of years.
I like hearing that because I was speaking with another operator too. He said, “I’ll be honest. I haven’t had a new deal in eight months.” I said, “That’s one of the best things you could have told me.” The thing that always worries me is when people say, “You pay great returns, and they keep wanting to give you money.” It’s much like money managers. When money managers keep getting money thrown at them, they have to figure out a way to deploy it.
When you hear people like you say, “We haven’t had any new projects. We can take some new money, but we’re going to be picky and choosy about the projects we go into. We may not be investing in this. We may have to hold off because it’s not fitting our buy box and meeting our criteria,” that to me is a huge trust builder because I don’t want you to buy anything because you have the money for it or because there’s demand for it as a lot of mutual funds, REITs, and things like that do. You buy things because it makes sense.
With what we have on our plate, the credit market has been brought up by many people. Until we understand what’s happening with that as well, our intention is to continue to hold off. Unless there’s something so golden, we don’t anticipate doing anything as far as picking up any new projects.
It sounds like it’s a project you already have. There’s already a lot of development. A lot more costs are going into those anyways. What are some other common questions you hear? You had spoken with an attorney. It was not a pleasant conversation because you were already guilty until proven innocent. What were some of the results of that conversation?
Honestly, speaking with attorneys is fine. We talk to them all the time. Some of our biggest investors are attorneys.
Most of them aren’t aggressively coming at us. They’re looking at security, “How are my clients secured?” He did dig into your sales background, different jobs that you’ve had, and different LLCs that we have owned, which all is public record. That’s where he found everything.
He’s a litigation attorney down in California. I like the guy a lot.
He’s great.
He’s pleasant. Even when you’re coming and asking questions, there’s a way that you can be cordial. He did a very good job of doing due diligence for his client. A number of our bigger clients are attorneys. My single largest client went to Yale Law and got $18 million with us. He’s a super smart guy. He practiced securities law and retired when he was 42 from that. He has been investing in real estate for the last few years. He’s seasoned. He knows his way around real estate investments. He’s been investing with us for a few years at this point.
A lot of real estate is understanding the operator. Documents are important. This last guy brought up some of the people he knew that went from zero to hero and back down to zero. There’s a recession because of everything that happened. The reality is that can happen. Know what you’re going into. There are no guarantees. They’re well-positioned because they’re going to be rental communities.
We already have takeouts planned with HUD where HUD comes in and finances. We already have term sheets from them where they take out 98% of all the costs. Some of those things can change, but if HUD comes in and finances 98% of all the costs, then the investors take it out of that point. It seems like that’s an easy transition. We’ve got a few of those projects.
Most of ours feel good that way. We also have the ability to sell a number of them. They’re individual single-family lots. We could sell individual homes, individual lots, or bulks of lots to DR Horton and so forth. We do have some that we consider doing that with periodically. We will sell some when we have an offer that comes in. Everything is for sale. Our job is to make money for ourselves and our investors. Not everybody says this, but I would usually say the deal of a lifetime comes every week because people always come at us with, “This deal is unbelievable. You will never see anything like it ever again.”
The deal of a lifetime comes every week. Click To TweetIf you’ve been in this and you’ve been serious long enough, I can say no to a deal and see something exactly like it or way better next week. If we have to pass on some because we don’t have the ability to do something, that happens, but we will see a deal that’s good or better next week, next month, or in six months. It’s a matter of time. We’re pretty comfortable and confident in what we’re doing.
I’m going to ask this question before I ask some of the most important questions here. I appreciate you being open and honest. As a reminder, we’re not giving recommendations. You go and put money with these people, and just because they’re on our show doesn’t mean we’re sponsoring them this way or anything like that. The question I want to ask before I ask these other questions is this. First, if people want to get ahold of you and see more about this, especially because you pay a very healthy return on your fund, how would they do that?
The best is to email me at Nicole@ROIPropertyGroup.com. I’ll reach out, and we will get something scheduled and do a one-on-one call. It’s the easiest. If you go to ROIPropertyGroup.com, there is a form submission link there as well. That comes to myself, Mackenzie, and one other person on our team. That’s also an option.
They can even see some of the projects you have been working on too.
Every month, we update each of the projects, typically with drone footage and photos if dirt is moving. Sometimes dirt is not moving. Those pictures aren’t going to change, but there’s always written text as well about the changes and updates on each of the projects.
They can check that out for sure. Here’s a big question for you. I’ll start with you, Nicole. Why do you like doing this business and this kind of real estate investing, particularly where it’s a niche deal? What is it that drives you to want to keep doing this?
It’s challenging. Rob often says, “If you’re a real estate developer, you’re a problem solver.” The engineer gets back to us and says, “The way we have it is not going to work. We’re not doing it.” Rob is like, “We figure out how we do it.” My side of the business is the relationship side. I get to work with our investors, private lenders, and individuals. I like people. I love that we get to pay a high return to individuals as opposed to banks. You talked in the beginning about the ripple effect. Immediately, I thought, “We’re the same in that because we love to give back.”
We were on a trip to Fiji. We got to tour a local village, meet the spokesperson of the village, tour their school and their church, and do a kava ceremony with them. Typically, when we travel, we find a service opportunity or a way to give in some way to the local area that we’re in. We decided on a dollar amount that we wanted to give to this village to help them with whatever they needed help with. Since being back, our WhatsApp is always going because these people are so appreciative of what we were able to do for them. I’m immediately like, “We have family in Fiji now. We have to go back and take care of these people.”
This job and this lifestyle allow me to do what I want to do, which is to take care of as many people as humanly possible. We are in the process of setting up a charitable organization. It has expanded our world in a way that I don’t think is always possible with your 9:00 to 5:00 job. I like the constant change and the need to learn something new. I like the new connections that we make with other individuals.
It’s fun. In particular, when I had young kids and I was doing the design, I got to see something. You raise kids, and that’s the most important job. I love being a mom. It is my number one, but you can’t always see the result of all of the hours of hard work that you do, but when I got to design houses, I got to see the result of my work as it transitioned into development.
I do a lot of fundraising and working with our investors. I get to develop those relationships. We’ve got phenomenal investors. I got a text message the other day from one of our investors. She was checking on our son because she knew he had been sick. It’s the relationships and the life that this business has created for us. I love it. People ask us, “When you retire.” We automatically go, “Do you retire from something that you love or do you just keep going?”
It’s cool you mentioned that because that’s what we try to do every snowbird trip. We try to do the same thing, “How can we give back to that community, that area, or that one individual?”
Your next snowbird trip should be to Fiji. We will introduce you to some guys.
Go to Fiji. It’s phenomenal. The people there are amazing.
I’ve never been there. That sounds awesome.
We hadn’t either. It’s fantastic. They’re very good people.
How about you, Rob? In your case, why do you do this work? Why do you love it?
I’m not a creative person in the sense that I design art and things like that, but I’m pretty good at problem-solving. I hadn’t considered it. They were like, “How are you creative?” I’m like, “I’m not a creative person.” She was like, “Everybody is creative.” I got to thinking that my creativity is being given a problem and saying, “How can we solve that?” I like working with municipalities, engineers, and attorneys to get all of the documents in order and make a community possible. That, for me, is very interesting. I love it.
You are very good at it.
I would like to think so. That’s what I love about it. We will keep on doing it until we die.
That’s my thing. God put us on this planet for a reason, not to do weak things but to do our strengths. That’s the best way we can serve people, not say, “I don’t do this well, but I’m going to do it anyway because that’s a good job. It’s secure.” You’re doing what you love and what you’re good at. We appreciate you being on. It’s so great getting to know you even more. Every time I get to talk to you, I always learn something new, and I love that. There are a lot of people that would love to get to know you as well. We appreciate you being on.
Thanks for having us.
Everybody else, feel free to reach out to them. That’s the thing. If anything, this ripple effect is not just about making money, although that’s a great way to do it. Trust me. They’ve got some great options themselves that could help you make a lot of money but ultimately, what this comes down to is helping you create more freedom for yourself and liberate yourself so that you can also be a liberator of others. Go and make it a wonderful and prosperous week. We will see you later.
Important Links
- Money Ripples – YouTube
- Money Ripples Podcast – YouTube
- ROI Property Group
- Nicole@ROIPropertyGroup.com
About Rob & Nicole Fuller
Rob & Nicole are the owners of ROI Property Group, specializing in build to rent rentals and subdivisions. After investing in single family homes for several years, Rob & Nicole pivoted their business to invest in raw land to then develop into rentals. They have development projects spanning across the United States and own thousands of homes.