This week’s guest is SWFL REIA founder Jeff Tumbarello. Jeff grew up in Stuart, Florida. He is a veteran of the US Marine Core and served in Desert Shield and Desert Storm as an Infantryman with First Battalion Third Marines.
In 2003, He founded the South West Florida Real Estate Investment Association with three other Southwest Florida real estate investors. As an investor himself, he has been a part of every type of real estate transaction and considers himself a local expert and source of data for current real estate trends in foreclosures.
Jeff has also performed market metrics and product modeling for capital markets and private equity firms. Jeff has contributed on Real Estate in general, Real Estate Statistics, Investing & Foreclosures on several media outlets including NPR, Bloomberg, Huffington Post, Wall Street Journal and many local stations like NBC, ABC, Wink and Fox.
Episode Notes:
NarratorÂ
This is The Norris Group’s Real Estate Investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever changing real estate market hosted by author, investor and hard money lender, Bruce Norris.
Bruce Norris Hi, thank you for joining us. My name is Bruce Norris and today our special guest is Jeff Tumbarello. He is the founder of Southwest Florida Real Estate Investment Association with three other Southwest Florida real estate investors. As an investor himself, he has been a part of every type of real estate transaction. He considers himself a local expert and source of data for current real estate trends and foreclosures. Jeff has also performed market metrics and product modeling for capital markets and private equity firms. Jeff has contributed on real estate in general, Real Estate Statistics, Investing & Foreclosures on several media outlets including NPR, Bloomberg, Huffington Post, Wall Street Journal, and many local stations like NBC, ABC, Wink and Fox. Jeff grew up in Stuart, Florida. He’s a veteran of the US Marine Corps and served in Desert Shield and Desert Storm as an infantry, infantry men with First Battalion, Third Marines. Jeff loves talking real estate and has a passion for helping other investors with their careers in any way he can, Jeff, we welcome you to our show.
Jeff Tumbarello How are you doing Bruce?
Bruce Norris I’m good. Good to see you again. Thank you for your service, too, by the way.
Jeff Tumbarello Thank you.
Bruce Norris That was fun last a couple nights, or was it last night? It was a couple nights ago. It was a lot of fun…
Jeff Tumbarello Oh, yeah, it was.
Bruce Norris I love your group and they seemed already warmed up to statistics you were, you’ve already got them warmed up for that stuff.
Jeff Tumbarello We, we made a decision in like, ’06 to never go back to the platform sales model. And it’s been primarily, primarily due and you know, guys thought the investor talking about what they’re doing. We’ve had a great series where we’ve got some, some older investors in the REIA, pretty successful, and then just kind of go to a luncheon and tell their story, how they got started. And those are a lot of fun.
Bruce Norris Yeah.
Jeff Tumbarello Like, we have one guy, Hugh Barber, he was at the thing. I don’t know, if you got to talk to him. He was in the front row on the right. And he sold, I want to say said 20 million comic books after World War Two. And then parlayed that into real estate and then moved here. And at one point, I think he had three, portfolio of over 300 properties free and clear.
Bruce Norris Wow.
Jeff Tumbarello Yeah, and still driving the same car and living in the same condo as 20 years ago.
Bruce Norris That’s a cool story. Well, I love that kind of a club. You know, when you speak, you can tell why the club exists very quickly. You know, it’s about raising money. And, you know, getting every dime out of every pocket in the audience. That’s not my kind of club.
Jeff Tumbarello Yeah.
Bruce Norris So you guys…
Jeff Tumbarello I refer to it as lemming herders. So, they, some of them, which, the irony, we have an assistant in the Philippines and once a month, we have an app that has every REIA that we’re aware of in the country, or every group like ours meetups, all that. And she actually captures all their meeting topics, and then emails me and the other director, a spreadsheet of what the current meeting topics in the country are to give us an idea of what’s going on. And I used to think we were the anomaly. And more and more the norm is groups like ours. I mean, the bigger cities can still support that that info product model. Most of them do some sort of mentoring program as well. But the meetings are more what I call content based, not, not, not sales based.
Bruce Norris Okay. I want to ask you a question. How did being a marine, actually you are still a marine. That’s one thing that’s kind of cool. That’s a lifetime assignment. How does it change? Or how’s it assisted you in business in life?
Jeff Tumbarello It’s actually a blessing and a curse at the same time. I’ve thought about writing a book about as you get older, and you know now to me, the Marine Corps is a bit of a memory unless we all talk and then I’m amazed at how bigger stronger and faster we were back then. That’s it’s amazing how we were all John Rambo back in our day. And at the point, it didn’t feel like that. But the, I mean, it teaches you discipline, motivation, all that but there’s some things I’ve had to unlearn as from the Marine Corps, like you know, if, if they say take this hill, everybody dies taking the hill.
Bruce Norris Right.
Jeff Tumbarello In business, that’s probably not the smartest thing,if everybody’s about to die taking this, this goal, then we probably should pivot and figure out a better way to do it. Yeah. So, it’s, it’s a blessing and a curse. But at, the Marine and you is very much you know, pin your ears back, let’s go. And part of that is I’ve had to unlearn some of that of, ‘Yay, let’s take a step back.’ Can we be doing this better way not just what’s in front of us and that’s you know, and there you’re taught obey the orders go up the hill, if we all die, we all die, we have to accomplish the mission.
Bruce Norris Okay.
Jeff Tumbarello And business is so different than that.
Bruce Norris Okay, well that’s, that’s a good perspective I like, I like that. How did you get interested in trends and trying to figure out how things work?
Jeff Tumbarello Like everybody else, watched a market cycle creep up on me that I really wasn’t aware happening. And I just, more and more I realized and as that the, the more successful investors that I met, were the ones that really knew what was going on in the market because like your presentation, my company Steelbridge Realty, our motto is Timing is everything.
Bruce Norris Okay.
Jeff Tumbarello So, I was loving your presentation, I felt like I was like, I feel like I’m talking to me just maybe six months older. So, but I was, you know, that’s, so timing is everything. And more importantly, just understanding where the market is. There’s really nothing new that happens under the sun anymore. There’s different modalities, there’s different depths, there’s different durations, but we’re really just live in the same cycle over and over again, it’s like the movie Groundhog Day. And is to kind of figure it all out and you’re never gonna maximize and anybody that claims they can time a market perfectly is deluding themselves.
Bruce Norris Yeah.
Jeff Tumbarello But we, what you can do is not get caught up in the market. You know, your, your timing can be good. You’re never, your timing will never be perfect. If that makes any sense.
Bruce Norris Yep. No, you don’t even because I don’t even think I’ve solved everything. You know, I’m always constantly learning like your take on how things work. I read your report last night that you produced in what? 2009 for your club? Okay.
Jeff Tumbarello Yeah.
Bruce Norris So, you know, that has…
Jeff Tumbarello I actually wrote down for me.
Bruce Norris Okay?
Jeff Tumbarello Really did write that. For me, I sat down with one of my mentors, he showed me most of that data. I thought he was right. But then I didn’t believe him. Because you know, the first time you’re really presented with the facts, a lot of times there’s a recoil. So, I actually went home from that coffee session, and recreated every chart and graph that he had, downloaded every bit of, and I was up all night. And I downloaded the data. And then I took a step back, and I went back the next day. And then I double checked a lot of the data. And really, really just looked at it with a with a fresh set of eyes. And that’s where I came up with, you know, even though at the point in this market, it felt like the end of the world. It was really just the new beginning.
Bruce Norris Yeah, you know, what I love about charts at it takes the emotion. For me, it takes the emotion of whatever’s going on. And makes make sense of it. And where I can make very calm decisions that are completely opposite of the crowd, and feel confident. It doesn’t mean you’re always right. But you know why you made the decision. That’s all I ever want out of myself. It’s like when I write a document, I would say exactly the same thing again, even if the outcome was incorrect, I would say based on what I knew, and I would have, I would have said that twice.
Jeff Tumbarello Well, I don’t mind being wrong. I mean, you never want to be wrong, but I don’t mind if I’m wrong with due diligence and analysis. What I don’t want to be wrong with this because I shot from the hip and didn’t do the work.
Bruce Norris Oh, yeah, absolutely. Well, in 2019, and you know, the California market was was actually slowing, which was it’s very unusual, usually in California has momentum. And maybe it’s true in Florida. It gains momentum and gains momentum because it’s emotional, real estate’s emotional thing, and the better real estate does more people want to pack on. Well, in 2019, and 2018, we were actually losing steam to where it was looking like we’re going to go into a flat market. And so, and all those things were at the same time with the best charts we ever had no foreclosures in the marketplace, and on and on, everything was bullish, and no result. So, we thought we were really probably at the end of a cycle and then the Coronavirus hits and kicks it into overdrive. So, yeah, same thing. What we thought was going to happen in 2020 got changed very radically. And now, now it’s California as usual. We’re now we’re racing to our ending point, you know, and we still have a ways to go and it’s, it’s fun. You know, I’m so glad that I know you’re willing to share the statistics with me like, I would love to play with Florida the same way I have California to try and figure out.
Jeff TumbarelloÂ
Sounds like we need to just jump in a conference room with I’ve got all the data I’ve got, I’ve got an insane amount of data, I always keep the data. I even have every foreclosure and you really only accurate in Lee County back to about 87. So, I have every foreclosure in CSV from 87 forward, because I was really trying to, you always want to take the current overlay and figure out where are we really?
Bruce Norris Right.
Jeff Tumbarello So, I mean, the last downturn, everybody was trying to correlate this to like the 87 because of the sharp crash in the stock market, except for the SNL crisis was big commercial led it with residential as a what I you know, just riding along the same train to where this one the last cycle was residential dragging everything else with it.
Bruce Norris Absolutely. Um, you got you started the club in 2003. What was, what was the mood of the attendee about real estate at that time in 2003?
Jeff TumbarelloÂ
Well, it was a good market. It wasn’t an insane market. There was a group of us that would go over to the Dade and Broward meetings, and we really enjoyed the meetings. And we’re like, and there had been a couple attempts to do them over here, but they just they were some of the clubs from Dade and Broward tried to expand over to here. And they didn’t really have the local footprint. They didn’t have the network and the between the four of us we kind of knew everybody. So, our first meeting, we invited Bob Hunter, the Dade REIA, who’s kind of the godfather of all those clubs over there in dade, they call him the king of Liberty City because he owned so many rentals there.
Bruce Norris Okay.
Jeff Tumbarello And we had Bob speak, we were at some barbecue restaurant that had a private room, and we had to commit to 20 Chicken dinners for them to give us the room.
Bruce Norris Okay.
Jeff Tumbarello So, we advertise it out. And the joke was, everybody has to take home five chicken dinners if nobody shows up. It’s not the end of the world to have the barbecue chicken for a couple days. We tried something, it didn’t work. And we ended up with like 45 people at the first meeting. And the irony was people were trying to join and we’re like, we don’t even really know what membership is are going to be, we just had a meeting we thought it would be fun. So, then we call it Bob. Bob said, here’s here’s what we do. This works kind of came up with a membership thing. And before we knew it, I can remember I think it was late ’06 when Kendra Todd won the Apprentice 3. She was actually the pre con girl at the Broward club. And before she made it to the Apprentice, and they were crushing pre construction sales her company was and when we had her speak, I think we had 450 people at that meeting because we had the current Apprentice winner.
Bruce Norris Wow. Okay.
Jeff Tumbarello In two years, we went from you know, 20 Chicken dinners to the you know, the the upright, but that’s the market, the market was insane. So, you know, you always want to go with the tide.
Bruce Norris Okay, but it was pretty it got more euphoric 2003 turned into four or five. What was what, was the top of your market? What year was that?
Jeff Tumbarello Our markets statistically peaked here. And I can actually divergence to the downside was March of ‘0, not March, August of ’05. At that point, the volume started creeping up. You had your sales count start creeping down, and prices started creeping up, which is just technical divergence to the downside. And that carried through all the way to late ’06. And by then prices started correcting on the other side in the market carried forward momentum probably almost a year before. And you had a whole year to get out. You know, and the irony was, if you, if you sold it at 90% of the market in mid ’06, you were the most brilliant human being on the planet in 2008. So, and you had a year I mean, if you were watching the numbers the one thing I really watch for Southwest Florida is the Cape Coral lot market, because land represents hope. So, when there’s a lot of hope land gets really hot. And like you said in your, your, your presentation, you know, it’s probably the most dismal asset in a downturn. We were part, my company Steelbridge Realty, we were part of a private equity firm called Silverleaf advisors. And we were doing a lot of distressed debt. And we did I want to say in 2011 or 12, no, 12, we entered into a purchase agreement on a bulk short sale of I think it was 53 lots in the Cape primarily it was couple in Lehigh if I, remember, and at that point, all of our lead investors wouldn’t be part of it, because they were you know, they and the spreadsheet had clearly showed landed bottom and what’s coming out. Now the BP oil spill, kind of pause that for a second that really kind of took some hope away from the market. And then as soon as we realized that, you know, we weren’t all going to be bathing in oil and the lot market continues. exactly where we are today.
Bruce Norris I want to go back, I want to, I want to hear the numbers that you would, you’ll know and top up top of your head. So, let’s pick a dry lot in Cape Coral. Okay. What is the price today? What was it two years ago, approximately.
Jeff Tumbarello As you well know, because you’re doing a lot of business here, Cape Coral is a huge market and it’s broke out into legal units, which are kind of a square mile. So, you really have to comp square mile by square mile. But to give you an example, we have a builder we ended up with three lots a three lot package from Fifth Third Bank, I believe it was in unit 72 which is way south. I mean that that’s kind of the cream down by tarpan point and all that.
Bruce Norris Okay.
Jeff Tumbarello We bought those lots. I think we, the bottom of that asset was $12,000 we captured 18,000 and thought we were brilliant. A year and a half later they were 30 those lots today are right around 100.
Bruce Norris Wow, now 100 today. Compare that to the peak in 2005 and ’06.
Jeff Tumbarello Oh, is that those lots were a buck 50.
Bruce Norris 150?
Jeff Tumbarello Yeah, that the extreme south cape like in it’s in a golf access neighborhood. It south of Cape Coral Parkway. Those lots, at least 150.
Bruce Norris Okay.
Jeff Tumbarello I mean, give me an example Lehigh lots, I was picking them up at the at the bottom for 1500. The same lots four years earlier, were selling for 55,000. The same lots today. Now, in the actual and, there’s two areas of Lehigh that are that are probably the most coveted. There’s an area called the ABCs. Because all the streets are ABC, you’re getting those in the retails 2022 now, and then 33976 is where all the builders really go, because it’s kind of right where Daniels road spills into there, it’s got really good access to the Interstate, and that those are 15 now, and but those were 15 $100 $1,000 lost all day at the bottom.
Bruce Norris And the peak of the, peak of the 2005 and six…
Jeff Tumbarello 55, 55. I, me and one of the guys who founded the REIA flipped a lot. I think we got it for like seven, we flipped it for 14, we thought we were brilliant in a year when we put it in a land trust. And a year later, the same land trust is floating around the REIA meeting at 55,000. I was like, dude, we’re so stupid, we even pay the taxes. Like at the time we were, we thought we were brilliant. I’m like, we’re the biggest idiots in this room.
Bruce Norris Well, I’ll tell you what, see one of the reasons why I’m really interested in me, you know, the history of this stuff. So, California investors are now are paying a premium on lots. But I also want them to put it in perspective that a lot of times it’s a third of what it was last week. So, that’s a that’s an interesting perspective. So, this is definitely price has increased, and is still nothing close to what the 2005 and six land market was.
Jeff Tumbarello If you want I’ve got some charts, I can PDF and email to you of like long term pricing.
Bruce Norris Yeah.
Jeff Tumbarello You could probably stick it in the show notes.
Bruce Norris Okay. Yeah, I’d love that. The, what, what drove the 2005 and six peak was that speculative investors or was that owner occupants that were…
Jeff Tumbarello The last cycle three and four to mid ’04 was a boom, okay. It was a booming growth market. You had the pre war baby boomers retiring with the wealthy boomer ones, because within the the boomer generation, it’s a big generation, there’s really three cohorts within that generation. There’s a boomer one, two and three. If you ever want to understand that generation Google Dell web Boomer survey, they did the most amazing data work. And it really, like they talked about for music. I mean, if you’re if say you’re in real estate, and you’re opening a model center, all three cohorts love the Beatles. But then everybody loves the Beatles. So, it’s probably the best model center music you can have. Everybody loves it. And then particularly the people with the money at the time, baby boomers, if you played the Beatles, that was their jam. You were good. You know, you didn’t you didn’t offend anybody. And also I always try and avoid having elevator music. Anytime you’re doing something you really want something of substance. But the so hurricane Charley hits this market in August. So we’re already in an overheated we’re beginning to hit overheated that’s when stated income and no doc loans really started kicking in I own a mortgage company then too.
Bruce Norris Okay.
Jeff Tumbarello And so, wages the mortgage is decoupled from wages right about that point. And then on top of that, you have a major weather event which at first everybody if you remember they were on the Today Show talking about all the palm trees that Edison put on, McGregor were torn down which they weren’t one palm tree fell, but it’s the media so they take a picture of the one palm tree. Everybody thought we were dead up north. And and then what it did was go, Hey, check out Southwest Florida, the markets hot, it’s beautiful and you know, sound like a cool place to be and most of them had vacation here at some time or another. But and then on the economic side, you pull out some inventory because there’s some damaged homes, you have about $3 billion in insurance money got dropped in the market. And so, you’ve got new capital. And then you also have all the people coming in to fix it. So, you got a huge rental demand. That’s right, all sudden homes that were renting for 1100 a month or 15 almost overnight, and it was just you you would rent to a roofing company who would pay you six months up front?.
Bruce Norris Yeah. Well, I’ll tell you, you know, that’s, I was, I got introduced to Florida in 1992, after Hurricane Andrew. And that was quite an education because of that experience won’t go into it right now. But yeah, I realized that hurricanes, the aftermath is really a very powerful driver of an economy. No doubt about that.
Jeff Tumbarello Also, if you go back historically, here, generally a hurricane at the beginning of a cycle creates a lot of attention. And then if you get multiple weather events within a two or three year period, it scares people, and then they back away. So, if you go back and look, the Florida land boom, in the 20s was really begun by one storm and ended by another storm. Everybody got scared after that storm. So, it’s really weather events have shaped Florida real estate forever, particularly hurricanes. And we get them every so many years. It’s just kind of a given. You know, it’s part of the game.
Bruce Norris You guys are pretty calm about hurricanes, you know, when you, it’s kind of funny, where it’s finally whatever you’re used to. I remember there was a I was visiting some relatives in West Virginia, and they were, I’m sorry, Missouri. This is my wife’s relatives, and they, their house actually had been lifted up with a by a tornado and said a mile away and they survived. So, they, okay, so we’re watching a baseball game. And on the bottom, all of a sudden scrolls tornado warning, and I’m looking around the room figuring it all, you know, it’s all gonna break loose here. No one move. And so it happened again. I said, Excuse me. And they said, Oh, yeah, that’s not the word though. The word you want is the, is the warning or the watch. Not the warning. I said, Okay. So when I’m leaving, I said, well, you guys come out and see us and they also in their face, their whole demeanor changes. And though you guys have earthquakes, and I thought, okay, earthquakes, you know, that’s pretty mild compared to tornadoes, but they’re, that’s what they’re used to.
Jeff Tumbarello So, people in Florida, or hurricanes, just a three or four day house party, and if you lose power, like I live on the water, I have a pool, I have a guest house so I can power the guesthouse with a generator and just we can go out there, but I got three or four days of jumping in the pool. Basically, day drinking, it’s not terrible. It’s you know what I mean? And you just wait for them to hook the power up. It’s you know, and, and unless you’re, in here’s something like you’ve got California investors coming out here, we helped in the last downturn, a bunch of investors build some amazing portfolios that are still paying their bills today. And the eye wall for hurricanes 60 to 90 miles max, but really the destructive parts really about 30 miles. And you can actually overlay over a market in Florida overlay where the eye walls have hit. Like I had one of my clients he did 28 properties 14 in the Cape and 14 in Lehigh. And we did that on purpose because you’re generally only going to get an eye wall that’s truly going to hit the Cape are truly going to hit Lehigh. So, you’re only going to lose half your portfolio so, if you’re say you’re investing in Florida, particularly in one geographic area, you don’t want to put your entire portfolio where one eyewall I mean, Yeah, you’ve got insurance but you know you lose half you know you got, your, you got, you may not lose your cash flow, but you’ve got disruption, you got a lot of brain damage. The insurance claims are they’ve gotten better. The last hurricane the money flowed quicker. The interesting modality is they had all their approved vendors. So, like all the tree guys ran all over town doing estimates and the insurance companies already had a tree guy in the mix if you want it done right away our guys doing it. So, they actually learned from the last couple ones and minimized them getting ripped off and still got the work done. It was actually impressive.
Bruce Norris Okay, well that’s good to know. That’s one of the fears of any California investor because that’s not something they faced before.
Narrator For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com
Aaron Norris The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab