Built During the Housing Crash: Appraisal Nation, Dodd-Frank, and Scaling Through Adversity

Michael Tedesco (00:00)

So, a scaling Appraisal Nation was a tedious time consuming process because it has to happen on multiple fronts. Obviously, getting the business in the door, especially during the housing crisis was an absolute bear for us. I would drive three hours to Charlotte every day, knock on lender’s doors and say, hey, can I take you to lunch and tell you what we’re offering? And they would say,

Oh, well, we have no business to even give you. And then I would say, OK, well, that’s the best time to go to lunch. You have no business. Let me take you. And we would do this for years to grow that business.

Dylan Silver (02:09)

Hey folks, welcome back to the show. Today’s guest is a North Carolina based serial real estate entrepreneur and is involved in the building and ⁓ exiting of businesses. Please welcome Michael Tedesco. Michael, welcome to the show.

Michael Tedesco (02:16)

Dylan, thank you for having me.

Dylan Silver (02:28)

It’s great to have you on here. It’s great to make the connection as well. We were talking before the show. I really like the Carolinas. I’ve had a lot of guests, investors who are both living in the Carolinas and then also investing in the Carolinas really tell me about how great of a place it is. And it’s one of the up and coming markets.

Michael Tedesco (02:48)

It’s been up and coming for about 20 years now. ⁓ 1,700 people a week move into Wake County, which is Raleigh. That’s been happening now for well over 20 years.

Dylan Silver (02:59)

So it’s not a new trend at all, just new to me. ⁓ I do want to ask you, and one of the things that I ask guests at the top of the show is really, how did you get into the real estate space?

Michael Tedesco (03:13)

I like to tease everyone and say ever since I was a little boy, I always wanted to be an appraiser. You know, I think in life, we fall into what we’re good at. when it just so happened that I was a very young loan officer, I was a 19 year old loan officer, I was very good at it. I became a bank manager from there. I was moved into the appraisal management space and

I saw a company that I worked for doing it pretty well and I said, you know, I could do this better if I focused on small to mid-sized lenders and gave them dedicated attention. And that’s what I did. I created Appraisal Nation in 2007. ⁓ Me and two gentlemen walked up into my attic and ⁓ we spent the next 18 years building ⁓ what would go on to be one of the largest appraisal management companies in the country. And in February, we recently exited that company.

Dylan Silver (04:12)

Congratulations. I want to ask you about the inception of Appraisal Nation and also where you saw the opportunity. So from a background working in banks and as a lender, I’m imagining you saw, hey, this appraisal process is antiquated. Walk me through the inception of Appraisal Nation.

Michael Tedesco (04:31)

Sure, so for us, ⁓ the original piece before, and I don’t want to get into too much of the weeds, but before the HVCC and the Dodd-Frank Act and all the regulations of the crash ⁓ that inspired those rules in 2009, ⁓ before that, ⁓ we saw that there was a need ⁓ for small to mid-sized banks to have a ⁓ service level

Dylan Silver (04:49)

Yeah.

Michael Tedesco (05:48)

for appraisal management. So they wouldn’t have to pay in-house staff to take care of their appraisals. There was a service that we could do where we could provide that. And that was the original thought process was this could be a cost savings model for a lot of lenders and banks if we created this service for them.

Dylan Silver (06:08)

So up to that point in time, banks really were dependent on someone that was either in-house or that they worked with very often in order to do all of their appraisals.

Michael Tedesco (06:19)

Before the 2007 housing crash, there were approximately 25 appraisal management companies in the country, all built around a cost savings model for large institutional banks. So instead of ⁓ Chase or Wells having to have a staff of 100 people manage their appraisals, they would outsource to someone to do it for them. I said, there’s a need here for smaller ones ⁓ to get the same level of service. And that’s where we started the appraisal nation process. Two years following the housing crash,

The Dodd-Frank Act came out and required a third party separation between the lenders and the appraisers. And that really exploded the appraisal management space ⁓ to where it boomed to over 450 appraisal management companies.

Dylan Silver (07:01)

I want to ask you about building ⁓ this platform, Appraisal Nation, and then also too, your advice for folks who may be ⁓ doing something similar nowadays, whether it’s digital or scaling a business that requires a lot of labor and workforce, especially coming from a banking background, I’m imagining that

You had a very specific way of going about things, but that also this was an emerging space So you had to be able to pivot walk me through what scaling appraisal nation was like

Michael Tedesco (07:38)

a scaling appraisal nation was a tedious time consuming process because it has to happen on multiple fronts. Obviously, getting the business in the door, especially during the housing crisis was an absolute bear for us. I would drive three hours to Charlotte every day, knock on lender’s doors and say, hey, can I take you to lunch and tell you what we’re offering? And they would say,

Oh, well, we have no business to even give you. And then I would say, OK, well, that’s the best time to go to lunch. You have no business. Let me take you. And we would do this for years to grow that

This is a time consuming process that took us years to develop.

Dylan Silver (08:19)

So in in building and scaling appraisal nation lots of moving pieces ⁓ as well as ⁓ Having to do all of this in an emerging market right where you went from 25 Businesses across the country doing this to several hundred where were some of the pivot points along the way for you?

Michael Tedesco (08:33)

you

Yeah, you know, it was a real challenge. have the competitions exploding. We’re trying to grow the appraiser market on our side, which, you know, we had 26,000 appraisers in our network when we exited in February. So we were growing that building appraisers, determining where they best fit which products, whether it’s private lending products or consumer driven products, commercial products.

And then on the other side, know, one of the hardest parts of all businesses is getting the business. So developing the sales, ⁓ going door to door, knocking, working hard to build relationships. We did a unique process, which I don’t know that could be repeated today. And that is we literally ⁓ built it one relationship at a time, one handshake at a time. We would go to conferences, shake hands, break bread, have dinner.

Dylan Silver (09:10)

Right.

Michael Tedesco (09:33)

build relationships. It’s one of the reasons our retention rate was so high at exit. We had a 92 % retention rate. It’s just when you build long systemic relationships, it’s very hard to have them leave when they become friends of yours.

Dylan Silver (09:49)

I want to ask you about exiting Appraisal Nation and then also I know you’re involved in so many different businesses. We were talking before the show here, AI, CRM, got a large STR portfolio, you’re involved in private lending.

In moving from Appraisal Nation into some of these other businesses, did you take any of the lessons learned and the approach or is each one really?

totally a new ⁓ adventure on each business.

Michael Tedesco (10:55)

You know, Dylan, what I’ve found, and it may not be true with every business, but for the businesses that I’m in, whether it’s our med spas, we’re building gyms across the country right now. We Bucked Up, which is a great supplement brand, we’re building Bucked Up Fitness. We have their brand and ⁓ we have our third party software as well as our virtual assistants in India. All these things which sound completely different are really just widgets.

And for us, if you focus on the process and you focus on the company and you focus on the people, that’s really what dials that in for us. So that’s kind of what we’ve done. Let’s look at each business. Let’s look at each process. Start with the end in mind. That’s always my key takeaway to anyone who asked me is to always start with the end in mind and then work backwards, figure out the model from that working backwards, and then build a scalable, profitable business.

Dylan Silver (11:53)

I want to ask you about building teams, staffing, and finding the right people, right? So this is critical in all of these ⁓ businesses that you mentioned. Certainly, I’m imagining med spas. have a large ⁓ brick and mortar and lots of workforce tied into the physical establishments themselves. But in all of these businesses, they require ⁓ staffing. What’s your approach to finding the right people and then also to making sure that, you

that they themselves feel rewarded and are staying long term as the business grows.

Michael Tedesco (12:29)

yeah, absolutely. ⁓ And again, when I say it’s all about relationships, it’s not just the relationships with your clients or your lenders, ⁓ your customers in the med spa or your members in the gyms. It’s relationships with your employees and your staff. That’s crucial. Class valuation, I’m still ⁓ working with them. They’re the ⁓ acquisition of Appraisal Nation. They are now the largest, with our acquisition, they became the largest appraisal management company in the world.

and there’s 700 employees. All 700 employees have to work together cohesively. So that’s an enormous part. ⁓ Knowing everybody’s responsibility and role, trusting that they’ll do their role, ⁓ even from a small company, one of the biggest pitfalls I find is owners not being able to let go and trust the people they hired to do their position. yeah, you have to not only delegate,

Dylan Silver (13:22)

Yeah, delegate.

Michael Tedesco (13:26)

but stop the micromanaging. So when you delegate, you have to trust that they’re going to do it and trust that they may not do it exactly the way you want it done, but you have to trust that the way they’re getting it done ⁓ is positive for the mission.

Dylan Silver (13:42)

I want to ask you about building that trust but then also having people take that ownership. I forget exactly who said this but if you are the owner you’re gonna be going the extra mile and in a way it’s difficult to trust people because you feel like well this is mine I know exactly what I would demand that of people why can’t they exactly match it via the same level of effort the same level of output and do things exactly this way. Right.

Michael Tedesco (14:07)

Sure, because it’s not theirs. That’s

why. And I thought that, you know, look, I started a business when I was 20, 29. And for the first decade, I thought the same thing. You know, why aren’t they putting 16 hours a day worth of work in? Why aren’t they working on Saturdays? And why won’t they answer the phone at 10 o’clock at night? Because it’s not theirs. And you have to realize the level of responsibility

commensurate to the level of work in a lot of cases. So when it’s yours, when it’s truly yours, and when you truly care about it, and when you truly want to succeed, you’ll do anything to do that. An employee, right, an employee’s not the same.

Dylan Silver (14:47)

Right. Versus the other stuff.

I want to pivot a bit here. know that you’re involved in the short-term rental space. I’m a licensed realtor in Texas. I worked very much hand-in-hand with

several fix and flippers, also a lot of folks who were involved in the STR space in DFW Dallas, Fort Worth, also in San Antonio. ⁓ Funny enough, Dallas, I believe, in large parts of it no longer allows short-term rentals. But I want to ask you about ⁓ being in the STR space. How’d you decide to get into the STR space?

What’s been your experience in short-term rentals?

Michael Tedesco (16:06)

You know, that’s probably the gyms and the STR portfolio are probably two of my absolute ⁓ favorite fun businesses that we have. I really enjoy that space for a multitude of reasons. A few years back, my wife and I came up with the model that we were only going to buy in places that we wanted to visit. ⁓ And because we have so much data at our disposal, when you’re doing a million appraisals a year,

you are a data aggregate and we’re able to look at data across every sub market throughout the country and determine which ones are really ⁓ not only profitable but are forecasting for exactly what you said ⁓ legislation that’s positive to the STR community. So for example, we love Nashville but we didn’t buy in Nashville because we knew that the legislation there was going just like Dallas where the hotels were coming in, they were limiting STRs.

So we held off there. ⁓ We love the outer banks, but the outer banks only produces about five and a half months worth of revenue where the Smoky Mountains produce 11 months of revenue. So we ended up buying cabins in, ⁓ Lion’s Landing is in Sevierville, Tennessee, Triple Mountains in Gatlinburg, Tennessee. So we find ⁓ markets that work, that are successful, and that we enjoy going to.

Dylan Silver (17:17)

Hmm.

I want to ask you about getting a little bit granular on the short-term rental space. The management of all these properties. Short-term rentals, I’m thinking Airbnb. I know there’s a lot of changeovers. You have to manage cleaning. You also have to make sure you have good ratings because they’ll boot you off Airbnb pretty quick if things go sideways. What’s been your approach to management and to making sure that everyone’s happy in the process? The cleaners are happy, the guests are happy, and that you have a good rating on Airbnb?

Michael Tedesco (18:00)

So it’s not just Airbnb. I know they’re the largest platform. They’re actually losing market share this year. ⁓ Two, the other platforms and a lot of those other platforms are the property management companies directly. So what a savvy ⁓ renter will do, they’ll go on to Airbnb. They’ll find a property that they like. Maybe they’ll go to St. Augustine. We have a beautiful property there. ⁓ Serenity at Surfside.

and that’s a great property on the beach and ⁓ people will look it up on Airbnb and then they’ll say, ⁓ well this is ⁓ 4,500 for the week on Airbnb and then they’ll do a little Google digging and find out very quickly that Ovenstay is the property manager. They’ll go to them directly and they’ll save all those fees. That is a very common tactic that a lot of renters will utilize to save fees. Because of that, Airbnb has been losing a lot of market share.

Dylan Silver (18:49)

Hmm.

Michael Tedesco (18:58)

⁓ To that point of your question, we use property management companies like ⁓ the one I just mentioned and a few others through our portfolio. ⁓ We found self-managing the project ⁓ is a very time-consuming and unrewarding process for us. It’s worth paying someone the 15 to 20 percent to have them take care of it for you.

Dylan Silver (18:58)

Thanks.

We are coming up on time here, Michael. I do want to ask you about the businesses that you’re involved in, how you decide which ones to get involved in. I am a big exercise guy. I’ve done jiu-jitsu, boxing. I love just being in the gym in general. I’ve ⁓ been a fan of Bucked Up ⁓ from afar and just love everything in the exercise space. I’m imagining you probably feel similarly, which is why you’re involved in gyms, med spas, and supplements. But the-

Michael Tedesco (19:46)

You know,

always been a real estate guy. I met Jeff and Ryan who owned Bucked Up ⁓ on a houseboat and we had an amazing conversation. the long and short was you have all this real estate data and at that time they were doing 700 million in sales. I think this year they did 1.1 billion in sales. And I said, ⁓ what if we could take what you’re doing and build brick and mortar to it? And thus Bucked Up Fitness was created.

Dylan Silver (20:15)

Wow, well, it’s an interesting synergy there. I think from afar at least, when I think of gyms, I think of it’s a difficult business to get into. There’s a lot of competition. It’s also difficult to compete against people when it seems like it’s a race to the bottom in a lot of ways for membership pricing and this type of thing. So to be able to do something that creates a niche that draws eyeballs.

and that has a brand I think is impressive. ⁓

Michael Tedesco (20:46)

We built a differentiator. ⁓ I

think that’s important in any business is to have a differentiator. Our differentiator in the gym space is we offer free pre-workout. Because Bucked Up is a supplement brand that does pre-workout, when you come to our gym, we drop a scoop for free in your shaker bottle. So you never pay for your pre-workout. We don’t race to the bottom. We’re ⁓ we’re tiered right in the middle typically. But by offering a large differentiator like that, it gives a huge value.

Dylan Silver (21:02)

Yeah.

Yeah, yeah, mean, being a Texas licensed realtor, that was one of the things that I loved about Texas was there was this huge gym culture, but you had so many options. was a really what is one place doing? I’ll plug this gym that I went to, Metro Flex Gym, which is where Ronnie Coleman was training in Arlington. And just to be able to know that I was training in the same gym as former Mr. Olympia was mind blowing to me. So they had that.

Draw so to your point, you know if you can carve out a niche in your case will give you a free Pre-workout when you come to the gym that’ll drive me there We are coming up on time here though Michael where can folks go if they may be interested in learning more about the various businesses that You’re involved in or if they would like to reach out to you directly

Michael Tedesco (22:01)

Well, Appraisal Nation, if it’s on a real estate setting, Appraisal Nation, can always find me there. LinkedIn, you can find Michael Tedesco on LinkedIn, of course. ⁓ We are diversified. think one of the best things about being a business owner is being in the background. So I don’t advertise or put myself out there too much. My goal is to let my businesses be represented strongly by their brands.

Dylan Silver (22:23)

Michael, thank you so much for coming on the show here today.