From Textbooks to Real Estate: 5 Game-Changing Strategies

Mike Hambright (00:01.368)
Hey everybody, welcome back to the show today. I’m excited to talk to my buddy, Scott Pennebaker. He’s been a member of investor fuel. He and his partner has been a member of investor fuel for a long time. He referred to himself here as the biggest wholesaler that nobody’s heard of. So that sounds like a fitting kind of opening line here. These guys do six to 800 deals a year in markets across the country. In fact, they’ve been operating in 10 or 12 markets. And I just found out that they’re now marketing in 50 states and growing rapidly here. So we’re going to talk about

Scott Pennebaker (00:14.331)
You

Mike Hambright (00:30.282)
a little bit about their kind of journey, because I knew that I knew you guys before you were anywhere close to that big. I knew you guys when you were focused on another business outside of real estate, really. But anyway, learn a little bit more about your kind of journey and what you guys are doing now and some lessons learned and even some collaboration opportunities to work with you guys, because you work with a lot of wholesalers as well and have access to some hedge funds and things like that. So anyway, Scott, great to see you, buddy.

Scott Pennebaker (00:40.101)
Absolutely.

Scott Pennebaker (00:55.227)
Mike, thanks for having me, man. I haven’t seen you in a while, so it was good catching up before we hopped on the video here. But yeah, I’m excited to be here and look forward to kind of sharing what Rebuild has built in our journey and really how it can help other wholesalers and investors as well with some of the things that we’re rolling out here in the near future.

Mike Hambright (01:17.4)
Yeah, so let’s tell you your tell your backstory a little bit because when when I met you guys were selling college textbooks and and dabbling in real estate and now now now it’s very different.

Scott Pennebaker (01:23.908)
Mm-hmm.

Scott Pennebaker (01:29.915)
Absolutely. There’s three partners, Al, Brandon and myself, and Brandon and I worked for a direct sales company in college. We sold educational material door to door, knocking on doors. So sitting in the home doing sales presentation with Mrs. Jones. And so when I graduated college, I got into the mortgage business. And then this was like 2003, 2004. So we were writing just like.

crazy subprime loans, 125 % loan to value, one day out of a bankruptcy on a stated income. And so that kind of led, I’m sure, those things to the crash of 08 and Dodd-Frank and all that. But what that taught me and that I learned is that you could use banks’ money or other people’s money to really build a balance sheet. And so I always knew I wanted to get back into real estate. But then in 2005, I fell into the college textbook business.

removed a few years from college, but I remember that those things were really expensive and probably had really great margins. And so we built a company, really wholesaling textbooks. So we were wholesaling textbooks, years before we were wholesaling houses. And then I got, I grew that business really just regionally for the next five years. then Brandon and I reconnected after he left, the direct selling company.

I only did that door to door company for about two summers. That’s all I could stomach. Brandon did it for six summers and actually ended up recruiting college kids all throughout the two thousands to come out and sell during their summers. And so when he left that about 2011, we reconnected and I’m like, man, I could use some help really building out the textbook business. So he brought over like 40 people in the first year and the company kind of blew up and Brandon and I are both sales guys. So we’re not very process oriented.

Um, he said, you need to talk to my cousin, Al. Al was a director of BlackRock had been there for about 10 years. Um, really overseeing project managers and software engineers building software for BlackRock. And at that time, BlackRock was not nearly the company that it is today either. I will tell you. So, um, so I came in and really consulted for a couple of years and then in 2015, they became equity partners in the book company.

Scott Pennebaker (03:47.291)
Leading up to that though, we all loved real estate. So Brandon had his stuff in Nashville. Al had Holdings in Philadelphia where he lived. And then I had stuff in Lexington that I’d have been buying and keeping in a rental portfolio. So we started to buy stuff together. And between 2015 and 2018, we bought about 150 doors, really from wholesalers. We were the buyer in the area and we were burning in and out and just building a rental portfolio alongside our book company. Well, in 2018,

textbooks really started to move online and go digital. So we’re like, well, how are we going to support our families with a dying business? We love real estate. We have all these rental properties, but they don’t make a ton of money because they’re all leveraged at 80%. There’s taxes, insurance, maintenance, management. We’re not pulling any money out of that business. Definitely not enough to replace our income on the other business. So we thought, well, we’ve paid the wholesalers a ton of money. Why don’t we?

try to do some direct to market selling or direct to seller marketing ourselves. We’ll keep the good ones for ourselves. We’ll still rebuild communities, rebuild. That’s kind of where the name came from. But then we’ll wholesale the fall off or the ones we don’t really want to take down. And it became apparent as we’re getting so many leads and so many new contracts that there were way more than we could take on under construction. so…

2018 was really when we launched our kind of wholesaling business. The first deal we did in Lexington was like for five grand or something. And we’re like, all of a it works, you know? So let’s try to scale it a little bit. I got some interns from University of Kentucky, helped with run some appointments and take some phone calls and really just kind of built it as a side business between 2018 and 2020 and then COVID hit in 2020. And so at that time, the textbook company

We’re locked out of college campuses, right? We don’t know when we’re going to go back. It had been tracking down since 2018 on the top line revenue numbers. So we thought we love what we’re doing with Rebuild. It’s growing year over year. Textbooks is a dying business, but it’s taken up 80 % of our time. Let’s take the opportunity to close the textbook business. We were able to get PPP money.

Mike Hambright (05:59.022)
Hmm.

Scott Pennebaker (06:04.827)
to help our warehouse workers kind of land on their feet for their next move and shut down the business. And then we went all in on Rebuild. And so that year we launched Nashville where Brandon lives, Philadelphia where Al was at the time, and really just started to scale the textbook company and it’s, I’m sorry, the scale Rebuild. But what’s funny is that we went to a lot of our top reps that were in the book company.

And we said, Hey, unfortunately we’re having to close the book company down because of the pandemic, but would you like to learn what we’ve been doing the past couple of years of rebuilt? so we launched Alston that way. We launched Huntsville that way, Chattanooga. It wasn’t, we had a bunch of data saying, Hey, go into these markets or a bunch of demographics. was more like, Hey, where do you have your best people? We can teach them how to wholesale there. And so that’s really the evolution of how we turn.

of what was a side business and a long-term vision for retirement and building a rental portfolio into what we spend 125 % of our time doing today.

Mike Hambright (07:08.664)
Yeah, yeah, that’s awesome. And what was the vision? mean, I guess maybe talk about how the vision has changed, because I know along the lines, you guys ended up raising a lot of institutional money and not a lot of people have done that. But you you clearly had a vision that was bigger than, you know, certainly the average wholesaler for sure.

Scott Pennebaker (07:28.091)
For sure. We knew that we could scale. When we closed our book company, we had about 110 nationwide reps. We had scaled to, you know, over five figures or I’m sorry, eight figures in revenue a year. And so it was a big business and that’s what we wanted to do. And we were set out to do with, with wholesale and we knew that we could scale it. Now we bootstrapped it.

You know, just like we did the boot comp or the book company for years and just kind of took out equity lines on properties that we had built in this rental portfolio to really fund the marketing and the startup costs. And then Al through his connections with BlackRock and Wall Street was approached by a company that was actually about to take Offerpad public and they liked our model because it was balance sheet light.

You know, an eye buyer needs a large line of credit to, you know, buy hundreds of homes a month, warehouse them, fix them up, and then sell them on the retail back end. So they liked that our model, we didn’t need a whole lot. There was a lot less risk if we’re holding a bunch of property on our books. And that they knew that this was an opaque and kind of fragmented market with the off market space. And that was something they thought we could really penetrate and get some market share.

And so in about August of 2021, we did a series A raise of 65 million. was 15 million in a debt facility and then 15 million in equity that they injected into the business to really help grow our core business, which is the wholesale business. But then it off shot other businesses that I’ve really stood up over the past few years. The first one we had to stand up was Tidal.

because we couldn’t scale to doing 60, 70 wholesale deals a month using outside title vendors in different states. There was no control, it was chaos. And a lot of title companies, to be honest, don’t want to do wholesale deals. just, title companies make money off of title premiums. Title premiums are based on the sale price of the property. Most of wholesale properties are a lower price point.

Scott Pennebaker (09:49.477)
Plus they come with hair. So you have to work harder to make less money. And most title companies don’t want to do that. Right. And so we built our own title company to be able to handle these types of transactions and, and, and, and to just have that service level to ensure that our buyers and our sellers were really getting the best support that they needed to make these transactions happen. but our title company does.

Now, you know, it’s built for these type of deals, all the wholesale deals with separate settlement statements, assignments, double closes. We do novations, sub two, 1031 exchange. We use mobile notary, so your buyers and sellers never meet. We have bilingual escrow agents and bilingual docs so we can do Spanish closing statements and deeds and promissory notes and all that stuff that may be needed on the on that side of the.

business as well.

Mike Hambright (10:47.49)
Yeah, and I guess I know I don’t know how many mark. mean, I know you’re marketing 50 states now, but not that long ago you guys were operating. I think 10 markets right so and I guess the more you branch out, the more important it is to kind of control title. Cause if you have to go find a different title company in every market in the country, that’s that’s like nightmare. Yeah.

Scott Pennebaker (10:57.829)
Yeah.

Scott Pennebaker (11:05.797)
Painful. Right now we’re licensed in 28 states for title. but the reason we are there, I guess the one thing that’s really changed and evolved since we started was that Brandon and I came from a boots on the ground in the home, doing a sales talk background. So our initial way and thought to do this business was all in person, right? Set the appointment, go out, meet with Mrs. Jones.

do a sales talk, show, you know, go through comps, go through a repair estimate, break down your offer and then write a contract. And while we still do that in about 30 markets with local, localized reps in those markets, we realized in order to scale to really where we needed to be, to get into profitability, we had to be able to run virtual appointments. And once we cracked the code on virtual, we realized that that’s much more scalable.

You maybe don’t buy them as deep, but you can buy a lot more of them in a lot less time. And so that’s really been the way our business has evolved mostly over the last 12 months.

Mike Hambright (12:07.938)
Yeah. Yeah.

Mike Hambright (12:15.202)
Yeah, and I think on the other side, you guys are focused on bringing in institutional buyers and stuff like that that historically are willing to pay a little bit more for houses. I guess kind of high level if you have to pay a little bit more, but you can find somebody that’s willing to buy from you for a little bit more. It’s way more efficient, right?

Scott Pennebaker (12:33.465)
Absolutely. And that’s been a big change because we were selling to IBs in 2000s, 2001s, whenever one was, they weren’t our core customer. Our core customer was still the mom and pop investor. And still today is the mom and pop investor. But now all this money’s been sitting on the sidelines and they’re starting to come back. And so through some of our contacts, we’ve been able to strike up some great partnerships as of late with

some of the larger hedge funds and institutional buyers that want us to source and aggregate off market for them. You they still source 75 % of their inventory, 80 % of their inventory on the MLS, but they want more off market. It’s just such an opaque and fragmented market that they haven’t been able to crack the code. And so they’ve really asked Rebuild to serve as that kind of gatekeeper between them and the off market space.

Once deals are submitted into our ecosystem, we do a preliminary underwrite against their buy box, submit it to them. They give us their preliminary number. If it’s within a certain range, then we’ll schedule an inspection form through a third party. Typically the inspections within 24 hours, we get the report back in 24 hours and then we get a final offer for them in 24 hours. I’ve even had some of the some recent wholesalers I’ve been working with will give us

a three day option on the property. So we contract it with a three or a five day option period in order to get that inspection done. And that’s been great. It’s working well. We’re starting to see, you know, they’re still paying more than your mom and pop investor will for a lot of these properties. And so I’m looking for more wholesalers that have property that they’re trying to move and at least let us scrub it against some of these buy boxes and

You retain your entire fee. It’s not a day V where I’m trying to take out of your fee and share in the spread. You keep your entire fee and they pay us a percentage to bring in the deal. Very much like a broker relationship.

Mike Hambright (14:37.966)
Yeah, that’s great. And I know we just because we talked a little bit ahead of time, like it’s a way for investors to there might be investors that are passing on deals to that just seem like they’re kind of but because they’re selling to their same five or 10 kind of friends or buddies that they’ve been selling to for years. And but the institutional buyers, you know, God love them. They’re willing to pay a little bit more.

for those deals. so said another way, there might be a way for wholesalers to bring the deals that they were going to pass on because it was a little bit too thin and you guys might be able to make it work and they might be able to turn those lemons into.

Scott Pennebaker (15:16.251)
100 % and we have a lookup URL on our marketplace, marketplace.rebuild.com. You register on there, there’s a submit a deal button at the top and you just type in the address and it’ll walk you through the steps on how to submit that and it will return whether it qualifies or not. And so we really want to see as much inventory that you guys have and eventually we’ll be able to post different buy boxes and whatnot. It’s just not on there yet.

You know 1965 or newer three bed one bath some of the different criteria. They’re all different though You know, there’s even like things like note not a busy street and different qualifications But it depends on their exit strategy because some of these larger hedge funds are just buying to hold Right. And so they’re looking at cash flow and home price appreciation while others some of the I buyers specifically are looking to buy them

do a small rehab under 30,000 and then retail them on the backend. They’re not looking to hold them. They’re looking to force the equity through renovations. And so just kind of depends, but having both of those extra strategies at our disposal, you know, gives us more opportunity to move those things for you guys.

Mike Hambright (16:29.966)
Yeah, yeah. So one question I have for you to step back a little bit here is I want to talk about just this idea of thinking bigger. Like you guys clearly had a vision for something much bigger than the average real estate investor and you’d run an eight figure business before, but maybe talk a little bit about that and kind of you obviously, you you’ve been a part of our investor fuel group. There’s, there’s some, you know, amazing people in there and there’s some people that are, you know, whether it’s an investor fuel or the whole industry kind of stuck in what I’ll call.

Kiyosaki’s kind of cash, basically the self-employed box, right? So they’ve got a job, but they’ve got a business, but it’s a job and they’re kind of stuck there. Maybe just thought about, share your thoughts on what you see for a lot of wholesalers out there or all, guess, investors that kind of get stuck in that box, even though they want something bigger, but maybe just talk about how to not just think bigger, but.

Sometimes you gotta act. mean, the actions gotta follow, right? But talk about that concept. Just like what you see out there, because you know a lot of people, how people can step up.

Scott Pennebaker (17:30.853)
Sure.

Scott Pennebaker (17:35.13)
Absolutely.

I think the biggest mistake I made kind of early on was I tried to do too much. Like I didn’t know what my core focus should be in like, did we want to do fix and flip? Did we want to do buy and hold? Did we want to do wholesale? Do we want to buy land? Do we want to target storage facilities? you know, there’s just, do we want to lend money? There’s just so many different ways to make money in real estate. think that

we kind of lose the force between the trees and we lose focus, right? And then we end up spending marketing over here for this business and marketing over here for that business. And we really failed to like dive into one business and just become an expert at that. And really that’s what we’ve tried to do with, we said, let’s eliminate all the noise. We quit buying rental property. We actually sold off a lot of our rental portfolio that Al Brand and I had made, the 150 plus doors.

We sold a lot of that off to fund some of the growth for rebuild and then just to keep it moving over this downtime and this past couple of years since interest rates have risen, still just trying to unlock that equity and put it back into the business because that’s not our core business. It’s great to have those for long term and we still do have some, but we’re not going after rental projects. We’re not going after fix and flip. We are just focused later on.

really growing the wholesale side of our business. Now, that has led to other avenues with the title company, with our lending business, with our brokerage that kind of naturally fell into that. But I can tell you our brokerage is not a core focus of ours. It’s stood up in eight states, but it’s not anything we’re putting a lot of energy and effort into. does because it’s a…

Scott Pennebaker (19:30.041)
necessity for your core business. So it’s a good compliment. Our lending business, we’re not really going out pushing, fixing flip loans and trying to grow that side of the business. We’re just core focused on doing transactions and doing deals. Now we have to think bigger because when we think about an exit strategy, everyone always is like, okay, how do you exit? How do you get the big payoff at the end and whatnot? And so we’re thinking, well, how can we exit?

a transactional business because transactional businesses historically only get like a one or two multiple because they’re thankless. know, basically every Monday you’re back at zero. It’s like, Hey, it was great. had a good week last week, but like, what do we have this week? And so really with the technology, we’ve been fortunate enough to be able with our investments to hire someone in a core team, head of product and engineering, a great team of engineers.

Mike Hambright (20:11.286)
All

Scott Pennebaker (20:28.389)
to build out a SaaS element to what we’re doing. Now, the reason we initially built the tools is not to license them, they’re to use them internally again on our core business. So everything we’ve built technology-wise from our marketplace to our investor finder, to our mail modeling and direct mail concepts and stuff, all of that stuff was built for our business.

However, that stuff is our tool that allows us to do 600 deals a year. They’re tools that we’re close to the point of being able to let other wholesalers tap into and use that to grow their business as well. And then it just kind of pulls us all together to be able to work on a lot of different things in the future as kind of a community.

Mike Hambright (21:17.762)
Yeah, that’s awesome. maybe share like, obviously you’ve got a lot more pressure on you guys because you raised a lot of private equity and you have three partners too, right? So in my experience, I’ve said this recently, like there’s not a whole lot that I want to do going forward without some sort of collaboration and partnerships. And, you know, there’s some negative sides of partnerships too. But for me, one of the biggest things is it forces me to be held accountable.

because it’s real easy for me to let myself down because I’m comfortable with a lot of things. But when you have a partner or a partnership or certainly, know, folks that you raise money from, maybe just share your kind of thoughts on how that’s forced you to think bigger because you got to perform, right?

Scott Pennebaker (22:02.605)
Absolutely. I love my partners. They’re my best friends. And the good thing about, about us, and I think this is important in partnerships is that we have each have different skill sets, right? And so we all contribute to the business in different ways. Brandon and I are both sales guys and we do work on the sales side of the business, but I’m in acquisitions and Brandon handles Dispo, right? And those are two very separate businesses. And so,

Mike Hambright (22:30.382)
Mm-hmm.

Scott Pennebaker (22:30.875)
And then Al is really, you know, he’s our CEO. He’s the one talking, interfacing with the board, creating the pitch decks, raising more money, helping with product and tech, which I know nothing about. Um, he really helped to drive that. That was his background at BlackRock as well. And so everyone wears different hats, which, makes it great. And we are all accountable to each other. mean, our text messages go until all, you know, 24 seven, basically, um, Al.

Uprooted his family from Philadelphia as four kids moved to Nashville where Brandon lives their first cousins by the way moved there when we raised money just because we thought Nashville was a better hub even though the business was started in Lexington, where I am Nashville was a better hub to recruit talent right and so we wanted to bring people into Nashville and have kind of that that more corporate feel there and it’s a been a cool city

But back to your question, 100 % having partners for me has been a great experience because it doesn’t let you kind of let yourself down. all the first person we’re always willing to like let down is ourselves for whatever reason. But when you have other people holding you accountable, it makes all the difference. But I know partnerships aren’t for everyone, but for me, it’s been a blessing.

Mike Hambright (23:39.651)
Right.

Mike Hambright (23:46.904)
Yeah, that’s great. So can you just share like for folks that are listening? So first off, you guys have created an impressive model. I know it’s been a lot of hard work and you’ve been a part of investor fuel for gosh, probably close to six years. So we’re glad to have you in that. By the way, love having you in the group. I know you, think you guys get a lot of value from being in the group as well, right?

Scott Pennebaker (23:59.205)
Six years maybe? Yeah.

Scott Pennebaker (24:08.313)
Yeah, a hundred percent. InvestorFuel has been great. And honestly, like it was like a, a launch pad for our business and not only in just like the tools and the willingness of everyone to share, like what was working for them and whatnot, but just the relationships and the ability, of the group to be so open and just honest with each other and the friendships I’ve made there. And they help you think bigger, you know, beyond just what you think you could grow like a regional business into something.

much more of a conglomerate and to meet investors all over the country that are kicking butt and to kind of hear what’s working in their markets has been well worth it.

Mike Hambright (24:48.984)
Yeah, that’s great. And maybe you could just share here like you guys have obviously done some tremendous things, but there’s ways that people can work with you too. And I think that some of this is newer, right? Like you guys were just out trying to do a bunch of deals and sell them upstream to whoever would buy them, including institutional guys. now you, now that you’ve got some of those tools, folks can use your, your title company. They can use your transactional funding. They can use your platform to get access to institutional.

So maybe just share some of the more common ways that folks can actually work with you guys.

Scott Pennebaker (25:23.437)
Absolutely. Tidal and escrow is just kind of low hanging fruit and easy license in 28 states. Like I said, specialize in everything that a wholesaler needs. If you have a new state and you’re doing virtual, don’t go out and try to find a new title company. Check in with me or you can just go to the website. Our title company is called National Tidal Services and it’s national-tidal.com. And there’s a map on that. It shows all our coverage areas.

Again, we can help with double closings. We can help with, you know, just your, your normal assignments. use mobile notaries. So any of that stuff, novations, do a lot of novations. If you have a sub two deal or seller finance deal, we can help with that too. So that’s, that’s the easy one is title and escrow. If you’re doing transactional funding, if you’re doing an ABBC, if it’s closing with national title, then we can do that. The fees are minimal.

You know, we used to be able to wear. Sometimes, you know, some title companies won’t make you fund the AB and they’ll let you fund the AB with the BC. Unfortunately, it’s becoming less and less commonplace as these auditors and underwriters really are just getting much more particular. Every transaction they want to stand on its own. And so if you’re doing a double close, maybe because you have a really large fee, then a lot of times you need to use that transactional funding to fund the AB.

And then the BC would come in and close and then you would get the spread on that. think our fees, like 1 % of the loan amount or a minimum of a thousand bucks or something to get a deal done on transactional funding. do fix and flip loans. So it’s a portal on our website, on the marketplace. All of this stuff can be found on our marketplace, marketplace.rebuild.com. But the fix, we do fix and flip funding, construction loans. There’s four different loan products on there. Just clip, apply for a loan.

when you get on there and there’s an old portal that’ll walk you through. And then have career opportunities. If anybody’s tired of doing it on their own or wants to come work with Rebuild and help us build something, everyone in our company gets stock options because it was really important to Brandon and Al and I that as we build this and, you know, hopefully look for an exit at some point that everyone in the company would get to benefit in that. so

Scott Pennebaker (27:47.455)
that was an important aspect. If you want to come and be part of something big that we’re building, life at rebuild.com is our website for that. And we would love to talk to you.

Mike Hambright (27:58.23)
Awesome, that’s great stuff. Well, appreciate you for sharing your story today, Scott. Good to see you, buddy.

Scott Pennebaker (28:02.767)
Yeah, Mike. Awesome. I look forward to seeing you guys in Dallas here in like two months.

Mike Hambright (28:07.077)
Yeah, yeah, absolutely. So everybody hope you got some good value. I think one of the key lessons here, your goals are your goals. Like you should know, not everybody wants to do six or 800 deals a year and all that comes with with 80 or 100 employees and all that. But I think if you’re like me, it can’t you can’t help but every once in a while think like, am I thinking too small on something? Right. And so there’s a lot of ways to make money out there in real estate and hope you got some good value from today. And hopefully this helps you think a little bit bigger.

for where you’re at today. So appreciate you guys a bunch. We’ll see you on the next show.