How to Build a $25m Section 8 Portfolio in Less Than 8 Years with Tom Cruz: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we'll be breaking down how to build a 25 million Section 8 portfolio in less than eight years. And to drop these value bombs, I brought Tom Cruise into EO Fire Studios. Tom is a 33-year-old real estate investor who grew his Section 8 portfolio from zero units to 390 in less than eight years. He is now generating over$400 ,000 a month in passive income. And today, we'll talk about the key to success is providing value, how to leverage your team and use the right software.

0:38And if the outcome is not income, delegate it and so much more. And a big thank you for sponsoring today's episode goes to Tom and our sponsors. Is this your year to grow a successful business? Attend the world's highest rated business growth workshop taught personally by Clay Clark and now featuring football star Tim Tebow and President Trump's son, Eric Trump at thrivetimeshow.com slash EO fire. Again, And request life-changing tickets today at thrivetimeshow.com slash EO fire. Tom, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:20What's up, Fire Nation? Yeah, the most obvious thing that I could think of when I was asked this and putting that together is I think it comes back to passion. I think there's that platitude and cliche where everyone says you have to follow your passion in order to be successful. And I don't think that's true. I think passions are great for hobbies and passions can also overlap with success. But I think the key to success is providing value. And I found that providing value through real estate and a basic need is the way that I found that success. For example, I'm also very passionate about paintball.

1:55I've been playing paintball since high school. but there's no future, you know, professional paintball or any type of, um, uh, income or success from, from that. So I keep it as a hobby, but I would say that's a pretty big common misconception about success that I've found. Well, let's be honest. Maybe there's no way to earn revenue yet, but Hey, in this new metaverse, I mean, who knows what's going to be happening as far as Atlas star Atlas and Axie infinity and everything that's going on in this world. I mean, you know, all of these parents that are yelling at their kids were playing video games.

2:30Now all these kids are making 10 times more than their parents were ever making. I mean, it's a crazy world we live in. So you never know. But I mean, let's be honest, as I mentioned Fire Nation in the intro, Tom is generating$400 ,000 a month in passive income. And we're talking less than five hours per week of work, which we'll get to at the end here. But I want to talk about your beginnings right now, your beginnings in real estate, because a lot of people in Fire Nation like, well, this would be cool. You know, I talked about what you've done in the introduction, but you know, you're already at 390 units and probably much more right now.

3:04And that's, that's a high, huge number. So let's talk about your path from one to 10. What did that look like? I mean, it started very normal. I bought my first house. Um, I got the Obama tax credit. I got, I did an FHA loan, which is the first time home buyer loan. I, um, put, you know, 3 % down on that property. It was a condo. Uh, that kind of got me started. on the path of real estate and home ownership. It was very humble beginnings. There's like $120 ,000 condo here in Wilmington, North Carolina. I lived there for a little under a year. I decided to buy a dog, so I needed a bigger house and yard, and they didn't allow Dobermans in that condo.

3:40So I tried to sell that condo and come to find out that I was upside down. 2008 was not kind to the real estate market. I only had very little equity in it, so I put very little down payment. So I was forced to rent it, and that's kind of where I had that aha moment. I posted an ad on Craigslist and I mean, an hour later it was pretty much rented. I had a hundred people responding to the ad. I just threw it up there. $500 was the rent over my mortgage. So I think my mortgage is 600 and I put it up at 1100 and it rented very quickly. And at that point I was doing marketing, I was doing web design and SEO and I was killing myself for$500 a month with a client.

4:20And here I am passively making$500 a month off this condo rental for doing nothing except signing a lease with his tenant. So from that point on, I started getting into real estate wholesaling. I knew that I couldn't continue to put, you know, 20 % down on every property, which is kind of the, you know, investment requirement for a lot of loans. So I started doing what's called real estate wholesaling. I would find properties that were undervalued. I would put them under contract and then I would find like a flipper or a landlord that wanted that property. And I would essentially assign the contract to them.

4:52And I would, I mean, I would make$5 ,000 to$8 ,000 per deal doing that way. And that's really how I got started. I essentially took that cash, combined that with my side hustle, which I was doing with marketing. And now I also have that rental income from that first condo. I would put that together and got my second unit. From that point, it just kind of turned into a snowball. I was continuing to reinvest all that compounding rental income. And when I got about five or six units, I learned about cash out refinances. So I was able to start pulling equity out of those properties in order to continue buying more.

5:27I had a revelation at around seven or eight condos. That's when I realized that condos just weren't scalable. There's a ton of issues with homeowner association fees and condo association fees and assessments that these apartment complexes were charging. The monthly fees were eating into my cashflow like crazy. So I knew that I had to go into the single family realm. So I started doing that around seven to 10 units. And then that's, you know, that's essentially how I grew from there. And we can get into, you know, maybe 10 to 100 units in a little bit. But yeah, that was kind of the progression was starter home loans, reinvestment aggressively.

6:03I mean, I was living very lean during that time, focusing solely on down payments, you know. But yeah, that's how I went from one to 10. Action, Fire Nation. You just have to take action. Tom didn't know what the second, third, fourth, fifth step was going to be when he started, you know, just that process, which was putting the ad on Craigslist and getting somebody to rent. That just was an action he took that led him to the next step, to the next step, to the next step. And he got up every day and he just took action. And I love what you did. You just reinvested in yourself. You said, you know what?

6:33I'm my best investment. I'm reinvesting in myself and my vision and what I'm creating here. I'm not going to go out and buy a Lambo the minute I can afford it. I'm going to invest the money in myself because that's where I'm going to get my best return. And you did discover at one point section eight, and you have this section eight program that you really dove into that you were really able to say, okay, this is a cool opportunity. So why is section eight and the program overall with section eight, such a great opportunity for people. That quick backstory is essentially I found section eight by accident.

7:06When I was probably my 10th or 11th unit, I started buying, like I said, single family properties. I was buying 150,$160 ,000 houses and 20 % down there is still 30, 40 grand. So that was very expensive for me to scale. So I was like, well, let me try going on the lower end of the spectrum. So I started buying, you know, 60 and$70 ,000 houses downtown. They might've had some, you know, more cosmetic issues or needed more work. And I bought this house for$55 ,000 in downtown Wilmington. I'll never forget it, three bedroom, one bath built in 1920s. And I had a tenant in there paying$1 ,350 per month.

7:40The landlord was retiring. He didn't want to deal with it anymore. So he sold it. And on the day of the sale, he drops this bomb on me that, oh yeah, by the way, we need to switch over the direct deposit for section eight into your name. And I said, what do you mean? Like, this is not a section eight property. He's like, yes, it is. You know, that's how you're getting $1 ,350 in rent on a property that should never gotten more than maybe 850 a month in rent. Right. So I was thrown into the deep end. If your listeners don't know what Section 8 is, Section 8 is essentially a federal program that will pay the rent for low-income or economically disadvantaged people.

8:14So you have a lot of retirees, you have people with disabilities, you have a lot of people from the VA, retired disabled veterans on the program. So I had to scramble. I had to figure out exactly how the program worked. Essentially, this tenant was disabled. So Section 8 was paying 100 % of their rent every month. So I simply switched over my direct deposit account with Section 8 into my name, and they began paying me$1 ,350 per month. And that was the second life-changing moment was that first direct deposit of$1 ,350 a month. Because at the time, I bought the house for$55 ,000, 20 % down on that loan.

8:53I think my mortgage was$40 ,000,$42 ,000 a month, or$42 ,000 total was my loan on that. My payment was$280 a month. And here I am collecting a$1 ,350 rent on a property that I put very little down to own. So then I became obsessed. That's when I really started figuring out what I need to do in order to continue getting these$800,$900 a month cash flow home runs in order to keep growing, keep growing, keep growing. So at that point, I had 10 units, 11 units. I continued to reinvest that. At around 15 or 20 of these properties, I started looking for partners. And that would be kind of the next step in how I got started with Section 8.

9:31And that is exactly, Fire Nation, again, what the process is. I mean, I kind of love how you found out about that by accident. Then you're like, oh, wait a second. This is actually a thing. Let me double down here. Let me triple down. Let me really look into this and see what kind of opportunity this could be for all of the reasons that you just went into. Now, I want to get into the partnership thing. I also want to talk about how coming up with upfront cash, it's just tough. it's tough for a lot of people. I mean, you know, what is it? 40 or 60 % of Americans are living paycheck to paycheck.

10:03They couldn't come up with$400 for an unexpected expense, even if they had to. So how did you find how to put down as little as five to 10 % on your rentals? And in some case, even less. Yeah. So that was a big key to my scaling. So there's two parts to that, the seller financing and being able to put limited money down, and then also other people's money. And I'll get into both of those real quick. So with seller financing, that's essentially when you find a property that may have been on the market for a long time or that might just be kind of ugly, you know, there's no rhyme or reason, bad colors, overgrown lawn, whatever it is, I'll reach out to the seller and I'll say, hey, look, man, I see that your property's been on the market for six months.

10:41I'll give you the full list price of what you're asking for, but I'm going to need you to seller finance it to me. And essentially what that means is he acts as the bank. I pay him the monthly payments every month on the property. That allows you to, There's no appraisals. There's no inspections. There's none of the headaches that come when you're dealing with a bank. There's no credit checks. I mean, everything. There's no income verification. These sellers want to get rid of their house. And if I can come to them and say, hey, look, you have this$100 ,000 property. I'll pay you 100 grand. I'll give you$5 ,000 as a down payment.

11:12So that's 5%. I'll do a five-year balloon on a 25-year amortization. So what does that mean? My monthly payment is based off of a 25 year payment schedule. So I have a low monthly payment. So I'm able to cashflow with my section eight tenants. And then in five years, I'll pay the property off. But in five years, I'm not going to pay the property off. I might do a cash out refinance. I might sell the property. I might ask him if I can give him another five grand and extend for another five years if he wants to. So and then I'll also give him a high interest rate, On a$95 ,000 loan, if I offer him a 7 % interest rate, it's a no-brainer.

11:50Between him getting$5 ,000 down, a super high interest rate, and he also believes that he's going to get the property paid off in five years, which is very possible if I sell it and pay him off, or he might be able to extend it for another five years. Very few people will say no to that if they're in the position to not need the cash instantly. So that allowed me to be able to go out and buy a ton of properties without putting 20, 30, 40 grand down and without having all this debt on my balance sheet or not on my balance sheet, on my credit report because of that. So that was step one on how I was able to do less down payments and less bank involvement.

12:23And Fire Nation, I mean, when it comes to this kind of stuff, freeing up cash is the name of the game because when you have more cash, you can then go ahead and leverage more and go and scale more and get more properties and have more opportunities and do more things with all of this. So that is why it's so critical to really say, hey, what are all the opportunities that I can expose here and double down on to really make this happen? And we're actually going to be talking about a pretty simple hack so you can see how much Section 8 is paying in your area right now, Fire Nation. And again, I teased it.

12:58We're going to talk about it. How Tom works less than five hours a week. And we're talking$400K a month in passive income, Fire Nation, when we get back from thanking our sponsors. One of the reasons I chose podcasting as a focus for my business is because it gives us complete location independence. At the start of every year, we get to take out the calendar and plan epic adventures across the U.S. and abroad. We've done a 90-day European adventure with just our backpacks. And last year, we did a 23-day river cruise through Europe that was incredible. So if you're like me and love to travel, don't let your home just sit there while you're away.

13:36Host on Airbnb. Even though you might be thinking that hosting will be overwhelming, especially while you're traveling, think again with the co-host network it's easier than ever now you can hire a high quality local co-host to take care of your home and your guests they can do everything from creating your listing to managing reservations to messaging guests and providing on-site support so if you've got an extended trip coming up and need a little help hosting while you're away you could hire a co-host to do the work for you. Find a co-host at airbnb.com slash host. Is this your year to grow a successful business?

14:15Are you looking to learn the proven processes and success systems that have been used to create thousands of millionaire success stories? See thousands of success stories and testimonials from real people just like you who Clay Clark has mentored and coached into prosperity at thrivetimeshow.com slash EOfire. Clay's proven business coaching program is month to month and it costs less money than hiring a minimum wage employee. Yes, it's month to month and it costs less money than hiring a minimum wage employee. Schedule your free personal 13-point assessment with Clay Clark himself today at thrivetimeshow.com slash eofire because Clay only takes on 160 clients and only allows 300 attendees to each business conference.

14:55You will interact with Clay directly. See thousands of real success stories and learn about attending the Thrive Time Show two-day in-person workshop featuring football star Tim Tebow and President Trump's son, Eric Trump, today at thrivetimeshow.com slash EOFire. Become the next success story. Schedule a free consultation and request tickets to join football star Tim Tebow and President Trump's son, Eric Trump, at Clay Clark's next business conference today at thrivetimeshow.com slash EOFire. Tom, we're back. What is that simple hack for Fire Nation TV to look up and see and check out how much Section 8 is paying in their area right now.

15:36Yeah, guys, simply go to Google and search FMR. That's Frank Mary Roger and then HUD, H-U-D, Housing Urban Development. It's two simple acronyms. And once you come up, you'll see the first result is going to be the HUD website. In there, they'll have a directory by county and zip code. Plug in the county or zip code that you want to look at, and it will tell you the one, two, three, four, and five bedroom rate that Section 8 will pay you every month in your county. It varies completely by bedroom count, and it varies by location. And you're going to be shocked because, first of all, majority of those three bedrooms that you're going to find, it's going to be between as low as$1 ,300 and as high as, if you're in California,$28 ,000 to$3 ,000 per month.

16:23And that's where a lot of misconceptions come in. And people think like, oh, you can't buy a$60 ,000 property and rent it for$1 ,400. Yes, you can. You can do it. And we do it every day because Section 8 doesn't care about what you paid for the property. They have a set formula that's location agnostic as far as the pricing inside of the city. So it doesn't matter if you're on the beach or if you're in the inner city. They pay the exact same on those properties. So being able to leverage low purchase price properties in high rental values, That's how you get this crazy cash flow. And that's how I've been able to scale so fast is because now I'm able to reinvest$800, $900,$1 ,000 per month times 10, 15, 20 units that I put very little money down to begin with.

17:08If that makes sense, John. Makes total sense. And this is exactly the type of steps you need to be taking, Fire Nation, if you're interested in this type of thing, because this is a great opportunity and a great process from somebody who's been there and done that. And what I really want to end strong on, Tom, is you work less than five hours per week. You've built a team that allows you to do this. How the heck do you accomplish that? Yeah, so it's a combination of processes and teams. So I have four full-time property managers that manage the properties. I have a property management software called Cruise Control that we built out designed for Section 8.

17:48Because with Section 8, you have two different payments. You have direct deposit, which is the payment that comes from the federal government. And then you have the payment that a tenant pays you, which is sometimes, you know,$100,$200. So we're able to split those payments up and collect it. And then we also streamline management. You know, we have a portal where tenants can request maintenance. We have tenants where they can, a place where they can sign a lease online. That's all part of our process, which will allow essentially my involvement to be acquisitions and big expense approval. Right now, that five to seven hours that I mentioned on my weekly workload for my properties, it really comes to, okay, for example, last week we had a house fire.

18:25I needed to deal with an insurance adjuster. So I worked with that. We have to replace a new roof because there's missing shingles. Okay, I'm going to approve that$4 ,000 cost. So that's really where it comes down to is being able to leverage a team of people that can handle it and have these systems and processes in place with the right software. That really frees up your time to be able to continue to grow the business instead of working in the business. And that's where I think a lot of investors get caught up. I have investors all the time that are wanting to go out at one in the morning to fix somebody's toilet.

18:57That's being a landlord. That's not being an investor. So what would you just say of everything that we could talk about, which would be a whole other podcast episode in and of itself? Just one tactic, just one tip that you've really found that might be helpful for Fire Nation as they kind of start to build up their team, take things off of their plate, free up more of their time. So what I do is very simple. What I would do is I would go through a normal week and I would document every single thing that I do. And I just have like a little expression or saying is if the outcome is not income, then delegate it.

19:29And that's exactly what I do. So I'll have a spreadsheet and I put down, I'll find myself, for example, doing a cash flow analysis on a property. It's like, I shouldn't be doing this. I should give a criteria to a property manager or acquisitions person to then do this for me so I can no longer focus on this and focus on other more income-driven activities. And then from that point on, I'll find people that are already skilled in that and make sure that it fits within the confines of what we're able to pay them and then make that offer and kind of build the team. And that's how I did it. I also found a lot of entry-level property managers.

20:01I didn't want anybody coming in with preconceived notions about Section 8 or anything else. and I was able to train them and set them up with my policies and processes for my portfolio. So that's how I was able to grow it that fast. Love that stuff. And Tom, I want you to end with a bang. Give us one really key takeaway from everything that we've talked about here today that you really want to make sure Fire Nation gets from this conversation. Give us a call to actions, how we can connect with you, learn more about you, any direction you want to point us in, and then we'll say goodbye. Yeah, guys.

20:36So two things. One, follow me on Instagram. It's tcruznc. That's T as in Tom, Cruz, C-R-U-Z, N-C, like North Carolina. I'm always answering my DMs. I love engaging with my followers and talking about real estate. And then two, book a call with me. If you go to section eight, the number eight, formula.com, and then you select that you saw me on Entrepreneur on fire. I'll give you two hours of free one-on-one time. If you sign up for the course, I do have a$5 ,000 course and coaching program that explains every single step of the way, how to get started with section eight, how to find the best properties, how to find financing.

21:15We have partner lenders that will allow you to get financing without tax returns and without income verification. All you need is a six 20 credit score. So section eight formula.com. Wow. Two hours of Tom's time. I only got like 25 minutes, Fire Nation, so think about that. And I want to say you're the average Fire Nation. Of the five people you spend the most time with, and you've been hanging out with TC and JLD today, so keep up that heat. And if you head over to eofire.com, type Tom in the search bar, the show notes page will pop up with everything that we've been talking about here today.

21:48Follow him, tcruzenc on Instagram, section8formula.com. Get those two hours of free time with Tom when you sign up for his course. And Tom, thank you, brother, for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we'll catch you on the flip side. I appreciate it, John. Thank you for having me. Hey, Fire Nation. Today's value bomb content was brought to you by Tom and Fire Nation. Over the last decade, I've interviewed more than 3 ,000 of the world's most successful entrepreneurs. and I've created a revolutionary 17-step roadmap to your financial freedom and fulfillment.

22:29I put it all into my first traditionally published book, The Common Path to Uncommon Success, personally endorsed by Seth Godin and Gary Vaynerchuk. The Common Path to Uncommon Success is the step-by-step guidance that you need, Fire Nation, to achieve the lifestyle of your dreams. Visit uncommonsuccessbook.com to order your copy and I'll catch you there or I'll catch you on the flip side. Is this your year to grow a successful business? Attend the world's highest rated business growth workshop taught personally by Clay Clark and now featuring football star Tim Tebow and President Trump's son, Eric Trump at thrivetimeshow.com slash EO fire.

23:09Again, request life changing tickets today at thrivetimeshow.com slash EO fire.