Staying Competitive in a Hot Real Estate Market with Dom Santaniello

Thank you for joining us today. 

I appreciate the opportunity.

You have a really interesting background and a lot of great experience. I’m excited to dig into what we’re going to talk about today for our listeners out there who don’t know about you, your business, and your background. Can you tell us a bit about what you do and where you come from?

Yeah, for sure. The cliff note version of that is 29 years. My father was born in Western, Massachusetts is an immigrant from Italy, and went the traditional route of getting an engineering degree, getting a master’s degree, and getting an amazing nine-to-five corporate job. I really have no complaints about that, through that journey, but always wanted something more and started getting into real estate passively on the side, just to pay off some student loans.

What that looked like was I got a real estate sales to licensing hanging under my aunt at the time, who was a broker doing some small transactions on the side there, and then ultimately got my first duplex and started two businesses: Naples Home Buyers and Naples Realty Group with my partner, Luke Giusto. One is a fix and flip company where we focus on generating off-market leads, flipping the properties wholesale, or bearing them.

We also do buy and hold on to turnkey stuff with those profits. And then the other half of our business is the brokerage, which we’ve branded the investor-friendly brokerage. And we actively recruit like-minded real estate agents and investors to join us, affiliate with us and work together to achieve financial independence.

Nice. I love it. We are. We’re all about that goal here. You really got yourself out of your W2 job at a pretty early age, and a little walk through that and learning about your journey And how did you decide that this path you’re on now was preferable to engineering?

Yeah,

So, that definitely didn’t happen overnight. It was a long, slow, calculated journey of consistency. So actually, my last day in corporate America was last June. So June 1st, 2021, was, I think, the seven-year mark for me in corporate America. As an engineer So I pretty much didn’t even know when I made my announcement that I was leaving corporate, that I even had a job because I had essentially, for the last year, before that, been pretty heavy on social media and building the brand and working more than full-time on those side businesses.

And COVID was real. A blessing in disguise at the time, being able to work fully remotely. And at that point, we ended up getting office space furnished, and I made the decision. I’m never going back to the office. How I did that though, a few steps back, which is really the important piece, as well.

Leveraging that first-time homebuyer program, getting into a duplex owner-occupied from there, leveraged some creative financing and scaled some other multifamily investments, getting into them with less than 20% down, which was huge at the time. And then really, from there, just build a pipeline of sales to lean on.

So on the residential side, having a pipeline of just transactional work to get those big sums of money coming in is key. And then just cash flow. So, methodically building a cash-flowing portfolio was critical, as it allowed me to essentially replace my salary and then go full-time in the, in this case, real estate space.

Awesome. That’s great. That’s what you achieved. A relatively short timeframe, at least compared to a lot of others who set themselves out on a similar path. Can you walk us through when you first kicked it off with that owner-occupied duplex too, when you were able to leave your job and go full time?

Yeah, sure. So, in my opinion, it actually took me a little longer at first to be an engineer because I was killing myself with it. spreadsheets, and other tools for analysis or analysis paralysis so I would say I was on the sidelines for probably an extra year going to a ton of deals in psych and myself out over a decimal point on a cap rate on a two-family, which really doesn’t mean all that much.

Now, at the time, that was pretty much it. It was the first purchase in 2018. I actually went back to back. I got my first house and then the second house a few months later. So it went from zero to four units pretty quickly. And then from there, as I said, it was June 1st, 2021, which was my last day to collect a paycheck there.

So, soup to nuts, I would say really, it took three years of growth to really get to that point. So, soup to nuts, three years of building a portfolio. I got a partner, and then we started building a portfolio together. And it’s just one of those things where you leverage your strengths, and I run one side of the business while my partner, Luke, runs the other, and we focus on what we’re good at, and we’re able to rapidly, like, really scale quickly, figure out lead generation, figure out financing, figure out construction, and really blast it off pretty quickly.

Nice. That’s awesome. So can you tell us a bit about the types of deals that you’re doing today? And then I really want to dig into how to invest in such a competitive environment, but before we get to that, can you tell us about what you’re doing now as far as investment deals? 

Yeah, so it’s actually pretty simple.

Right now, we’ve really figured out the two to four-family space, just because there’s more inventory there and less competition. We see a lot of people overpaying on the bigger buildings now just because they’re doing 10-31s and roll-on profits on smaller buildings in there.

So we’re going direct to seller on two to four units, and then also on the single-family side of things. And that’s really what we perfected, is that branding and that whole system of lead generation and getting deals under contract and moving them to the closing table, then moving them from the closing table to construction, and so on and so forth. Just building an iron-clad system to do that has been really helpful. And then pretty much what we do It’s simple. For example, we can service any lead. If so, the worst-case scenario leads to just retail. We’ll steer through the brokerage and collect a commission.

Just put it on the market. Let’s say our offer is way far off from there. So they owe too much money. It’s still a fine deal. We can capitalize on this and get a commission, which would be our smallest way of monetizing the lead. The second way that we could do it is just through traditional wholesale.

So we can do a double close assignment of the contract. If we have another investor that’s interested in a project and we collect a fee that way, the real juice is really going to be when we get either a big margin fix and flip project or a multifamily building, where we can go in, add value through construction, either take a profit on the sale or have enough margin where we can go to the bank refi, get our cashback, and keep it moving.

So at the end of the day, that’s a long-winded answer, but we put ourselves in a position to monetize every single lead that we can. And then just keep rolling those profits back into multifamily. That’s pretty much all. Nice. 

I like that. And you have a lot of ways to like you said, monetize these opportunities, and I find it interesting that

Really, the retail exit option is the least profitable on your end. So basically, listing it on the MLS is the least profitable for you. And I find that interesting that, in light of where the market is today, we’re still doing commercial deals on my investment side, but also, my fiance and I are shopping for a new primary residence primarily on the MLS and

It’s absolutely insane. What are people paying for properties on the MLS? It’s almost like the condition is irrelevant. They’ll just pay whatever it takes just to buy a property. And I wonder how, in the residential space, investors can even survive. For example, why would a seller sell their property to an investor or a flipper instead of simply saying, “Hey, I can list it on the MLS?”

Full retail without doing any work through it. How are you staying competitive, staying relevant, and making deals? As an investor

Yeah, that’s a great question. It’s a hot topic every day here, and pretty much, how do we? It’s a numbers game, and the unfortunate answers there is no secret.

There’s no recipe like it. It’s just grit and consistency and a lot of marketing dollars. And at the end of the day, understanding the seller’s motivation and servicing it properly. So, as I told you before, our goal every week is to have 10 motivated seller appointments. From those appointments, we’ll usually get six to seven offers in front of those people, because there’s always a 20 to 40% chance that it’s just not a fit.

Or they don’t; they just wanted to see what we would offer and we’re hundreds of thousands off, or whatever the case may be. Just leveraging that funnel, it takes a lot of time and effort to even get those 10 appointments set. But from there, it’s all conversion rates. So we go from the 10 appointments, or as we call them, six offers, to a 10% close rate, or accepted offer rate, on those.

On those offers, and then of that 10%, there’s probably an 80% close rate. So you’re losing 20% just due to title issues. People were backing out, getting cold feet, losing motivation, whatever. So it really is a very hard business to thrive in because cash flow is the lifeblood of any business.

In a flipping wholesaling business, you need to be consistent in moving inventory and closing deals, and floating projects. And we’ve been in situations where we have eight projects going on at once and nothing’s closing for a couple of months, and you have your payroll going out, you have expenses, and you’ve got to keep your marketing going.

And here’s some. It’s like a feast or famine. It feels like it’s definitely different from the nine to five life, where every Friday you had a nice, big check in your checking account and you were off to the races. Controlling that pipeline is the key, and the way you control it is through funding, your marketing, and always having opportunities in the backlog.

And we found that we’ve been doing this for just about two years now, formerly with a brand. And it really was just until we struggled with having a consistent flow. And like now, our board has a double-digit number of deals in escrow that we’re either closing out, working on, or looking to move.

So it’s, you need to invest heavily for probably 18 to 24 months consistently. Until you start compounding that backlog, then your service is backlogged to monetization. 

Nice. I really like and appreciate your system’s level of numbers-driven thinking and design. Does that come naturally to you as an engineering-minded person, or did you have to figure that out over time and say, “Hey, we want such and such number of leads or opportunities closed on the backend and reverse engineer that to figure out, okay?” Basically, how many marketing pieces do we have to send, and so on?

Yeah, I would say that’s just what I personally bring to the table is that analysis element and forecasting, and, in my prior career, I pretty much was on the project management side of things, which dealt with doing projects and then also running the money side of things and forecasting and doing the accounting and all that.

So that’s definitely a very important part. Yeah, like Kevin O’Leary’s shark tank, I listened a lot to that stuff on the side. And his number one thing is always to know your numbers, which used to haunt me because, the first year, I’m like, I don’t even know our numbers yet because we haven’t gone through two or three tax returns, seasons.

We haven’t done something consistently for one to two years and measured on a percentage basis where all this stuff is coming from. And just now, as we were doing basically all of our account reconciliations and stuff from last year, it was very exciting to actually have data, not just piecemeal data, but full data of one year of like full commitment and all of these areas.