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Show Summary
In this conversation, Tom Dunkel shares his extensive experience in real estate, finance, and investing, particularly focusing on distressed mortgage debt and the nuances of the second position mortgage market. He discusses the importance of emotional equity in real estate transactions and his transition into other asset classes like self-storage and mobile home parks. Tom emphasizes the value of partnering with experienced individuals in new investment areas and highlights his approach to passive investing through Eagle Capital Investments.
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Investor Fuel Show Transcript:
TomDunkel.ai (00:00)
I do have a soft spot in my heart for people who are out there. Maybe they’ve built up a nice rental portfolio. They’re getting into their 50s like me. Their kids have no interest in taking over the business. And so now what are you going to do? Are you going to 1031 exchange until you croak?I don’t know that that’s such a great strategy. I know a lot of people do that and it certainly has benefits in certain situations, but what I like to see is people… ⁓
unload those properties and place their capital into a deal alongside me.
Dylan Silver (02:06)
Hey folks, welcome back to the show. Today’s guest, Tom Dunkel, brings nearly 30 years of experience across real estate, finance, and investing. He leads Eagle Capital Investments, which delivers exceptional opportunities for investor partners. You can find them at eaglecapitalinvestments.com. Tom, thanks for taking the time today.TomDunkel.ai (02:26)
Hey Dylan, it’s great to be with all the you and all the listeners today. I’m looking forward to our chat.Dylan Silver (02:32)
Now, when we talk specifically about kind of the intersection of real estate and of finance and investing at large, I think a lot of people tend to separate these into buckets based on how much risk you’re willing to tolerate and also how hands on you want to be. You’ve been involved in all three of these spaces. How did you get started in real estate?TomDunkel.ai (02:58)
Sure, Dylan. Yeah, I think there’s kind of an evolution ⁓ through the entrepreneurial process. I know when I started out, ⁓ when I got fired from my corporate finance job in 2006 and I had had it with Corporate America and decided to go into real estate, ⁓You know, I was, I was ready to rock and roll. had a great education. had a great background. had great skills for putting deals together. I was, was doing mergers and acquisitions in the aerospace industry. So I knew how to, I knew how to put the capital stack together, you know, the debt financing, the equity. I knew how to build the models and the projections to attract the capital. And so I figured out this is going to be, it’s going to be easy. So I went, you know, hands on, um,
doing wholesaling of residential properties, residential investment properties, of course, picking up some rentals, doing some fix and flips and that sort of thing. But for me, as I got into it, I’m an educated finance guy. I didn’t wanna be swinging hammers and…
doing all that, which I never really did. But then, you you start running into problems of finding the right contractors and whatnot. So for me, I was like, OK, how can I do this better, smarter, faster and frankly, more profitably? Because, you know, when you go into a real estate ⁓ deal and you’re looking at doing a fix and flip, for example, you know, you go in with a certain budget in mind and there’s always delays or overruns or some a contractor doesn’t show up or whatever. So.
Dylan Silver (04:36)
That’s right.TomDunkel.ai (04:37)
That was when I found ⁓ the Distress Mortgage Debt space. ⁓ And so my partner, Joe Downs and I, we’ve been able to build a really nice business in the Distress Mortgage Debt world. And what we did there is our initial goal was, hey, we want to make a million dollars a year ⁓ working 20 hours a week. And that thought process really forced us to build a team and build systems. ⁓and find a niche where there was some good profitability so that we could grow from there. So that was kind of the next phase of the entrepreneurial journey. And now at this stage, a good 15 years later, I’m very happy to say I’m financially free. I’ve got a company that runs itself. I have people that run it.
I live up in Pennsylvania, but right now it’s too cold up there for me. So my wife and I are down here in Hilton Head, South Carolina, getting ready to go out and play some golf later. And just wanted to spend a little time with you this morning, Dylan, and try to share some knowledge with the audience out there.
Dylan Silver (06:34)
Yeah.I do want to touch on something you mentioned, is ⁓ distressed mortgage debt. Now, I would like to dive in here, get a little bit granular. When we talk about distressed mortgage debt, does this coincide with people who are creating notes and buying notes, or is this a different space entirely?
TomDunkel.ai (07:01)
It’s a little different than what I think you’re referring to. So we buy ⁓ loans ⁓ directly from ⁓ Big Bank USA, let’s call them. So these are loans that were bank originated. We actually specialize in second mortgages, home equity lines of credit, that sort of thing. ⁓ And so these were loans that were originated by a bank.Dylan Silver (07:12)
Okay.TomDunkel.ai (07:26)
And the borrower, whatever reason, they had a health issue or a family issue or a job issue. Something happened and they stopped paying their mortgage. Banks, their ability to think outside of a box or be entrepreneurial at all to solve a problem with their borrower is about this big. So they do a horrible job of dealing with their borrowers. just not.they’re just not designed for that. So they end up selling that loan out into the world because the regulators come along and say, hey, you’ve got too many bad loans on your books. You got to get rid of them. So they’ll sell them to a company like ours, US Mortgage Resolution. And then we have, because we’re buying these loans at a deep discount, that gives us a lot of flexibility to work with the borrower. And so we basically ask them three questions. What happened?
Where are you now and what do you want to do? So we put it all on the bar where like, we’re not trying to be some big bully. We’re not in the foreclosure business and it’s a lose lose situation. So a lot of times, like I said, they lost a job, they had a health issue, they got divorced, somebody died, somebody went to jail, something bad happened. But now they’re back on their feet. Where are you now? Well, I’m over that issue. I’m back on my feet.
what do want to do? I want to stay in my home. Okay, great. Let’s talk about doing a loan modification. And then it’s a win for the borrower, right? They get to stay in their home. It’s a big win for us because now we have a very, very high yielding cashflow stream coming in. And it’s a win for the bank because they get these bad loans off the books.
Dylan Silver (09:07)
Now, in that space specifically, are the operators typically investors or are they folks like yourself who have a mortgage background, finance background?TomDunkel.ai (09:20)
You know, Dillon, it really spans ⁓ the spectrum. have what we call a downline of buyers that will buy loans from us now. ⁓ And some of them are just onesie twosie. ⁓ They like to buy loans like in their state or in their area. And then we have other buyers who are ⁓ more experienced and they’ll buy a big pool of loans ⁓ scattered around multiple states.And so it kind of like regular, you know, buying properties, right? Everyone has their own little specialty, their own little niche that they like, their own little neighborhood or state or type of deal they’re looking for. And ⁓ so it just really varies.
Dylan Silver (10:40)
Now, when we talk specifically about the first position, second position notes, Or mortgages. I’m imagining that you have people who feel comfortable buying that second position mortgage, but then you have others who won’t, right? When, if I can, without giving away the whole gold bar here, Tom, but maybe one gold nugget. If folks are looking at that second position, is there specific strategies whichTomDunkel.ai (11:02)
Sure.Dylan Silver (11:10)
know, second position mortgage buyers have knowing that, you know, I may not be able to as easily recoup all of this.TomDunkel.ai (11:20)
Yeah. So I guess a lot of people don’t know and which frankly we love. We love that the second mortgage space is very nuanced and kind of scary and risky sounding because ⁓ it keeps people out of our space, keeps the competition away and keeps our profits high. But basically if you’re, if you’re a second position lean holder, a lot of people have this misconception like you don’t have any power.You can’t foreclose or even threaten foreclosure. And that’s just not the case. You are in second position. So if you do take back the property, you do have to pay off the first. So you can’t leapfrog the first. But you do have a lot of control. And ⁓ again, we’re not in the foreclosure business. We’re trying to get a loan modification in place or sell the loan or come to maybe some kind of discounted payoff with the borrower. ⁓
And the borrower in our experience, having done this now over 15 years, even like, know, investors like us, right, Dylan and the listeners out there, it’s like, if you look at a property, it’s worth 200,000 and there’s $150,000 first mortgage and a $75,000 second mortgage, we’re going to say, that property is underwater. But what people don’t realize is the owner of that house.
That’s where they live, right? That’s where, you know, their kids go to school down this block. They go to church around the corner. They have block parties with the neighbors. You know, they’ve got the badminton set up in the backyard. You know, this is where they live. And so we find that they have what we call emotional equity. So even if it doesn’t pencil out like an investor would look at it, they will still work with us.
Dylan Silver (12:46)
Yeah.TomDunkel.ai (13:08)
to get a loan modification done or some kind of discounted payoff ⁓ because that’s what works for them. That’s what they want to do. And they have that emotional attachment to their family, to the neighborhood, to the house. That’s where they’re raising their family. So we do everything we can to help them out there.Dylan Silver (13:24)
Yeah.You know, that’s a great point that not enough people mention, which is that, you know, if someone is dealing with a situation where they may be falling behind, if this is their forever home, if they’re attached to it, they’re going to fight, you know, real hard to stay there. And I think oftentimes the solution that investors have, you know, wholesalers, know, flippers and so forth is here’s a cash offer, you know.
you’ll have to move, here’s some money to assist with that. Versus a more nuanced approach, which might have maybe more long term, it might require some further nurturing, right? And it may be somewhat more intensive, but you’re able to keep that person in the home and still benefit from the interest as an investor.
TomDunkel.ai (14:08)
Mm-hmm.That’s right. And so we’ve been able to build up a nice ⁓ cash flowing portfolio in our company. And then we have discounted payoffs that come in each month and we have full payoffs that come in sometimes, which is, which is awesome. But over the years Dylan, the, the, the success of our distress mortgage debt business has allowed us to do other things, get involved in other asset classes. So we have a, we have a self storage portfolio. Now we have a short-term rental portfolio.
And now that I’ve ⁓ stepped away from kind of the day to day of the business, ⁓ I’m looking at investing as a limited partner myself, being a passive investor. And so that’s what I try to help people do through Eagle Capital Investments is ⁓ get people from the active world into the passive world.
Dylan Silver (15:51)
I think there’s a lot of people all across the country, definitely in the Sunbelt states, right, who are looking at ⁓ some of those other asset classes that you mentioned as well. Self storage seems to be huge, almost to the point where it’s like, you know, everyone wants to be in self storage. I’ve also seen RV parks, know, mobile home manufactured as well. When folks are looking at getting into some of these other ⁓ asset classes, do you think it’s best to partner with someone who’s got thatTomDunkel.ai (16:04)
Mm-hmm.Mm-hmm.
Dylan Silver (16:21)
level of experience or if you’re coming from the single family space, you jump right into owning a self-storage facility?TomDunkel.ai (16:31)
Yeah, that’s a great question, Dylan. It’s funny, know, the entrepreneurs out there, know, myself included, a lot of times we just want to go and do it ourselves and, you know, smash through walls and, you know, skin our knees and get the black eye and, know, ⁓doing
what plenty of other people have already done and learned how to do better than you could ever do. So I know some people just need to go through that experience themselves before they realize, hmm, you know what? I should be asking myself who should I be partnering with on something like this, not how do I go and ⁓ do this myself? There’s a great book out there, by the way, called Who Not How. ⁓
which I’ve really embraced that kind of attitude. you know, when I’m looking to solve a business problem or learn something about like mobile home parks, for example, I think that’s an interesting area of investment right now, especially as, you know, our country continues to have an affordability crisis in housing. think mobile home parks fit that bill tremendously. So I have a lot of friends that are in that space. And so I just like to learn from them. And then, you know, when they have a deal, you know, I already have that relationship with them that know like,
Dylan Silver (17:31)
That’s right.TomDunkel.ai (17:46)
that know like a trust kind of thing. I’ve learned how that space works from them. And so if they present a deal to me that I think pencils out and make sense for me as an investor, you know, I’ll go for it.Dylan Silver (17:58)
We are coming up on time here though, Tom. Any new projects that you’re working on and then as well, what’s the best way for folks to reach out to your team?TomDunkel.ai (18:06)
Sure, Yeah, so this has been great, Dylan. Thanks. ⁓ So yeah, I am ⁓ looking for deals for myself as a limited partner, and ⁓ I’m looking in the mobile home park space.I already have a lot of self storage,
so I still really enjoy that space. And as you touched on earlier, it’s become very popular. So you’ve got to be a little extra careful there that the operator ⁓ is in a particular area where it’s not overbuilt and there’s not enough demand to keep the units full. ⁓
That’s a problem that you can easily run into if you’re not careful. ⁓ So I tell you, these days I’m big on capital preservation. I’m big on cash flow. So I really love private lending right now. So I have some ⁓ fix and flip guys that I’ve done business with for many years. Again, I know, like and trust them. And so ⁓ I place capital with them. Those are typically short term, you 12 month notes at a high interest rate.
And I just like getting that check every month and I’m in first position. even if something goes wrong with the project, you know, I’m well, well covered and I can definitely get my capital back. But with all that in mind, Dylan, you know, when I do go and find these deals and I’m putting my years and years of experience to work for myself and I’m, and I’m.
going to my network that’s developed over years and years. ⁓ I’m now through my company, Eagle Capital Investments, I’m inviting investors to join me and partner with me to participate in these deals. Take advantage of my background, my due diligence system, my network.
and my ability to go and find good investment opportunities. So they can keep doing whatever they’re doing.
And I do have a soft spot in my heart for people who are out there. Maybe they’ve built up a nice rental portfolio. They’re getting into their 50s like me. Their kids have no interest in taking over the business. And so now what are you going to do? Are you going to 1031 exchange until you croak?
I don’t know that that’s such a great strategy. I know a lot of people do that and it certainly has benefits in certain situations, but what I like to see is people… ⁓
Dylan Silver (20:16)
youTomDunkel.ai (20:27)
unload those properties and place their capital into a deal alongside me.I put money into every one of my deals. My investor network never sees a deal unless I’m putting my money into it myself. And then, you know, are they going to pay taxes? Yeah, they’re going to pay a little bit of taxes. But you know what? I look at that as a freedom tax because now you’re becoming free of your active headache and you’re transitioning into this passive world where
you know, maybe you want to escape the winter and come down to South Carolina and play a little golf. I don’t know. If you do, you look me up. But that’s the essence of, ⁓ of Eagle Capital Investments. And I encourage people to go to investwitheagle.com to pick up a free copy of my book and learn more about me and what I do.
Dylan Silver (21:13)
Tom, thank you so much for coming on the show. Thanks for your time today.
