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Show Summary
In this episode of the Real Estate Pros podcast, host Erika speaks with Tom Diamond, a seasoned real estate professional who shares his journey from a high school wrestling coach’s influence to starting his own brokerage, Red Diamond Realty. Tom discusses the importance of diversifying in real estate, the opportunities in flipping houses, and the evolving role of realtors in a technology-driven market. He also highlights the challenges of navigating uncertainty in real estate transactions and introduces his innovative service, House Fixers, which helps homeowners manage necessary repairs to close deals. Tom outlines his future plans for expanding House Fixers nationally, emphasizing the need for adaptability in the ever-changing real estate landscape.
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Tom Diamond (00:00)
There’s a huge opportunity right now with flipping because I talked to these college kids the other day from John Carroll. They’re flipping houses. You can imagine this. These guys are probably juniors or seniors or business majors. There’s companies out there that’ll loan you, let’s say 90 % of the money needed to flip a house. So general rule of thumb, you kind of want to get something about one third to one half of what it’s going to sell for.Erika (01:55)
Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Erika And today I’m joined by someone that I’ve been looking forward to chat with, Tom Diamond. He’s been making serious moves in the real estate world and beyond. Tom, I’m so glad to have you here. Excellent, excellent. And I really think our listeners are gonna learn a lot from your journey. So let’s jump on in.Tom Diamond (02:11)
I’m so glad to be here.Erika (02:23)
Since they aren’t familiar with your world, tell us what it was like getting started in real estate and where that journey took you.Tom Diamond (02:30)
Well, I’ll tell you quickly, when I was in high school, ⁓ we had a really good wrestling team and our coach, he was a multi-millionaire and he was doing this thing where he would buy an apartment building and he would break it up and sell it in pieces. And they were called condominiums. He was the first guy to do it in Ohio. And he would pull into our high school in this Porsche, then he would pull in a Jaguar.I used to see this guy and he was our wrestling coach Howard Ferguson. He’s a legend in wrestling in Ohio and I was like man. This is cool. Whatever this guy does well. He taught a class and in his class he said Listen, it takes as much energy to meet a person and describe your product and Do the paperwork then sell the product and deliver the product as it does for a box of paper clips or a building or a house
So why not sell real estate? Because you’re going to do the same process. You’re going to meet somebody and do the paperwork. And so then you get a big commission. That always made sense to me, always. So I went away and I went to college and graduated and was going to be a teacher. But I came back to Ohio from California. And the opportunities in real estate were much better than they were in teaching at the time. And ⁓ I got my real estate license in…
1992, and it wasn’t easy. There was like eight of us in a company called 2100 Realty. So we were selling at home 2100 back then. And so at this point, it’s 1991. We’re just taking our test and we all cleaned carpets at night. So we were just like eight of us at night cleaning carpets at like three o’clock in the morning. And then in the morning we had to be at the office answering phones and taking leads and.
And you know, was kind of fun, but it kind of tragic and stressful at the same time. that’s how me and a bunch of my friends got started, way back in 1992.
Erika (04:21)
to fast forward a bit to today. What do you have going on in the real estate world? What kind of markets are you focusing on? Tell us more about that.Tom Diamond (05:19)
Well, you try to diversify. So ⁓ I had been with large international companies and small local companies and eventually ⁓ decided, you know, I wanted to start my own brokerage. So 2010 started Red Diamond Realty and ⁓ grew out of there. And we originally worked with investors, but it’s best to diversify because you want to do a little bit of commercial.a little bit of investors and ⁓ maybe lion’s share might be your buyers and your sellers that are more traditional. But when you get into something that’s like right now, if you’re locked into commercial, it’s very, it’s very troublesome because of technology. So if you have a strip mall for sale, where there used to be a real estate brokerage and an accountant, maybe a law firm, right? But now there’s legalzoom.com or maybe a travel agency, right? So there’s Travelocity.
Legal zoom, accountant.com and know, Zillow, right? So all of a sudden your strip mall is empty. So it’s best to stay a little bit of everything because one of the, if you’re two into one thing, it could become very risky. know, the payoff in a strip mall is nice, of course, but it’s pretty stressful when you’ve got six empty stores of 10 in a strip mall and you’re trying to convince somebody that, ⁓
You know, they go ahead and buy this building, the rent’s not even going to cover the mortgage. So you want to, so that’s kind of what we do. We do kind of diversify. We flip homes. My realtors, if they flip a home, they don’t pay a commission to the brokerage. So they get to keep what they make. Otherwise they give me 10 % on transaction. So ⁓ you have the realtors that are flipping homes, realtors who are working with buyers, realtors working with sellers.
and then I flip and then we do commercial occasionally. So that way you try to stay diversified and try to have a nice foundation in case there’s a disruption to any section of that. Right now flipping is the way to go.
Erika (07:15)
What kind of trends are you noticing around you, whether it’s an opportunity or a challenge?Tom Diamond (07:22)
There’s a huge opportunity right now with flipping because I talked to these college kids the other day from John Carroll. They’re flipping houses. You can imagine this. These guys are probably juniors or seniors or business majors. There’s companies out there that’ll loan you, let’s say 90 % of the money needed to flip a house. So general rule of thumb, you kind of want to get something about one third to one half of what it’s going to sell for.You’re to put one third to one half, you know,
not one half half, but so you wanna get a home, let’s say it’s a 200,000 or home, so you wanna get it for kind of 60, maybe you’re put another 60 into it, then you can have closing costs and commission’s gonna take it up to 250 and you might make 50. What these kids are doing is they’ve got a little bit of money, let’s say 25,000, they can buy that, they can put 25,000 in and like one company that comes to mind is named Backflip and there’s a lot out there. You put the 20 in,
and they’re gonna give you 80 or 90 to buy the house and do the work. And then you sell the house and you get to keep the 50. That’s pretty amazing. So you come out of this thing with 30,000 in your pocket. So there’s a lot of opportunity there that’s never been there because there’s this sort of flipper financing for lack of a better description. As far ⁓ as my realtors, they can now plug into platforms.
that are just as powerful as anything. It used to be you had to go with the national company because they had all this in-house stuff, if you were international brokerage. Now a realtor can come with me at a 90 % commission split and they can buy these same products for themselves. You know, the CRMs and the lead generators and they can put all this stuff in, plug it in. So the real estate agent is much more…
powerful now. They have much more control than they did in the past, which is kind of exciting. mean, I think the commission splits are getting much better for the realtors now from the bigger brokerages because of this, because they know they can leave.
So it’s exciting for everybody, but it’s kind of terrifying too, because we could be eliminated by online real estate brokerages. And when I say eliminated, I don’t think it’ll seem that way, but I don’t think that’s real. Because what people don’t realize is that the actual selling of the house is easy in the sense of paperwork, okay? But the actual job that a realtor does, it’s kind of a joke, it has nothing to do with the sale of the property.
dealing with problems with a low FICO score, the deal falls apart for the buyer and we got to help them find another loan officer, or there’s too much work that needs to be done on the home and the seller can’t afford to have that done and that’s why I house fixers. And you have these different things that are a problem and the realtor’s got to get out there and solve those problems. And that’s really what a realtor does and that can’t really be replaced by technology.
Erika (10:09)
Yeah, absolutely.With all that in mind, what would you say sets Red Diamond Realty apart? How are you kind of preparing for that shift and what are you already implementing now?
Tom Diamond (10:57)
Well, we’re not an international brand. just a local, ⁓ call it a family brokerage, right? So what we have to do to justify going with us is give an intense level of customer service. So we have an in-house photographer. We have an in-house appraiser. We have this company behind me on this board, which for realtors, if you need, let’s say, ⁓$15,000 in repairs in order to sell your home. Maybe it’s a city inspection or FHA or VA. We will do those repairs and then get paid out of escrow instead of, so the homeowner doesn’t have to come up with that $15,000 right before they’re going to close, which is a huge problem. It’s been a problem forever. So what we offer is this level of service. We have to because otherwise,
People know about Keller Williams and EXP and Remax, right? They know those names. They don’t know my brokerage called Red Diamond. They never heard of it. So we have to really be at a intense level to have them stay satisfied with us. That’s kind of what you’re gonna get with that kind of brokerage.
Erika (12:04)
Absolutely. Tom, with your flipping experience, I want to ask, and this even ties in with the brokerage, every real estate pro has a moment where a deal goes sideways or you had to completely change what you were doing. Can you share one of those moments along your journey and what you learned from it?Tom Diamond (12:25)
You know, in 35 years of doing real estate, nothing’s ever gone wrong.You know, I tell my kids, I go, you know kids, the only thing that’s certain in life is uncertainty. And I tell to my realtors as well. And when they complain, they say, oh my God, it’s in appraise. They spent their down payment money. They bought a car right before closing. That’s a famous one that we all love. It’s like, okay, this is why you’re getting paid. You’re getting paid because there’s problems and you’re being asked to solve those problems. Oh boy, this could be a…
38-hour show if we talk about things that have gone wrong. The important thing is your mentality. Like, you know, in life everything goes wrong. I’m sure a heart surgeon does what he does and then an artery opens up and I’m sure a car repairman puts a fender on and it’s crooked, right? You know, and it’s no exception. In real estate there’s going to be problems and the fortunate thing is if you have an old man broker like me, I’ve probably seen it before.
So I’ve probably seen the pipe break in the ceiling during the winter. And I may have seen the break-ins where the copper gets cut out of the house. Thank God for Pex. I don’t know who that guy is that invented it, but I say a little thank you every day to that guy because when you’re flipping houses, was very, as soon as you put it into multiple listing service in certain neighborhoods, they would break in and cut the copper out of the walls and annihilate the property.
Now with packs it’s made of plastic so there’s no point in doing that. ⁓ So such a great thing when you’re dealing with what we call C properties. There’s A properties, B property, C. A is going to have a much lower return on investment but you’re probably not going to have any break-ins. The house is probably going to sell quickly because you’re really just updating a let’s say a $400,000 house in a nice neighborhood. A B property might be a middle-class bungalow. That may be in Cleveland. Some of these numbers are kind of low around the country but
Maybe it’s a $210,000 house and you’re going to have some problems, but you’re going to be, and it’s going to be on the market a little bit longer. But if you really want to make a killing, you can do a C or D property in a rougher neighborhood, but you’re going to deal with crime. It’s going to be on the market for a while and then an investor will buy it, but you’re going to buy the house for much lower cost to get into it. So it’s, it’s really just what you, what you want to deal with and you know, how much can you deal with?
And I’ve done all the above. I’ve done high, middle, and low. And I’m a little bit older now, so I don’t want the problems. I think when I was younger, I would buy in tougher neighborhoods. And now I just don’t want to deal with that. But there’s a lot more profit to be made in the C &D market. But nothing is for certain ever. mean, you just never know. We went behind a house yesterday.
We had everything worked out everything figured out the value and everything and the back of the house is caving in The entire back porch is caving in into the basement And we didn’t see it when we were there walking through the property, but you know who saw it was the guy who wants to buy the house So You know he says is there anything wrong with house? Yeah, it needs a paint job and it needs this and a couple windows need to be replaced and he says
You know, there’s some work behind the house. It could be as much as $50,000 or $60,000. What are you talking about? You know, we had no idea.
So we went back there and it’s like, I didn’t know, you he just didn’t notice that the whole patio is gonna have to be taken out. The whole back of the house is gonna have to be jacked up. The whole wall’s gotta be built. So the only thing certain is uncertainty. And you can lose your mind or you can tell yourself this is why I get paid.
Erika (16:33)
Yeah. What you were talking about there sounds like, you know, that would be a very costly repair might be a good time to transition and talk about what you have going on with house fixers.Tom Diamond (16:46)
And that, yeah, and house fixers, which used to be called FHA okay, was specifically for that situation. So in this situation, it’s a little different. They have a lot of equity, but a typical person would be like, hey, I can’t sell the house until I get that done. The buyer’s not gonna assume that, you know, or he’s gonna be a huge hit on the price. So the buyer says, okay, I would like that fixed and I’ll buy your house. House fixers will go in.and do that job and it’s going to be a lot. Like it’s going to cost us probably 45 or 50, 52, 53,000. We’re probably going to charge 60. It’s going to mean a lot of contractors. It’s porch and so there’s brick. All this stone’s got to be taken out then dug down and you know, this is a big deal. So FHA OK was a great idea and it started like gangbusters. Company blew up when I started it and then we walked right into the housing crisis and
Those transactions weren’t FHA or VA. They were conventional, the ones that were falling apart in 2008. And I came back in 2012 and I was like, okay, we’re ready to go get back into this. In 2012, people didn’t have equity. So when they were selling their homes, they were still kind of upside down. So what they were getting for their home was kind of what they owed. So they couldn’t pay me to do the…
A typical job we do is about $4,500. So they couldn’t, they couldn’t do the, they couldn’t pay me out of escrow. So that was kind of a problem, right? So I put it on hold and brought it back now. And now with the technology, it’s very exciting because I post the job on house fixers and it goes down to the contractors and they take it and then they come and they, and they do the work. It’s a little different for the realtors because in that particular scenario, we are
funding we’re paying the realtor I mean we’re paying the contractor and we’re not getting paid until closed so the company is a little bit different in that but it’s a really nice thing to have plugged into my brokerage it used to be just for red diamond really now it’s for everybody so if you’re a realtor out there we’ll be national by 2030 it’s it’s really nice because if you have these everybody needs repairs to close the transaction almost almost I would say 95 % of the time
And about 50 % of that, the homeowner doesn’t really have the money for that because they’re kind of moving and buying couches and moving vans and a lot’s going on and they don’t want to deal with these repairs, but they have to get them done in order to close. So that’s kind of nice for them because they can call us and get the repairs done. And at that point in time, you can’t really take out a home, a HELOC or anything because you’re supposed to close in two weeks.
Everybody’s in a panic because when that list comes out you’re three weeks into the transaction you’ve accepted an offer You’ve done financing the appraiser comes out. There were now we’re about two and half weeks The appraisal gets done or the city inspection or your buyers inspection or VA FHA These guys are coming in about three weeks in with their list of things that need to be done or you can’t close It’s like ⁓ we got to do all this. Okay. Hey homeowner. You got to do all this
I’m not doing that. Yeah, the homeowners don’t really often, they don’t really want to deal with it. But if they can just pay for it out of their equity and the way houses are now, we’re in a nice situation where people have a pretty good amount of equity. So for a number of reasons, you know, they paid 280 and now it’s worth 420, right? So they can afford to get the work done out of equity, but they don’t have, a lot of people just don’t have that kind of money just sitting around.
put into the repairs in order to close. So that’s where house fixers is different for realtors. But in the general sense, it’s for people also to use that need repairs done.
Erika (20:26)
That’s exciting that you’re planning to go national with that. Where do you see things, you know, going over the next few years as stepping stones to get there?Tom Diamond (20:35)
Well, we’ll do Northern Ohio first in next year. So we’ll have just my crews, probably about, about 13 crews that can handle North, North, ⁓ Northeast Ohio. Once we get the kinks out, we’ll go across Ohio. Cause that’ll be a little different because then they won’t be people I know. So that’ll be a, that’ll be a little different problems to solve. And once we get Ohio settled in, we should be able to go a multi-state and then coastal.East and West Coast. So we have the whole thing kind of figured out to 2030 and we think we know ⁓ what we’re doing. The only thing we don’t know is what we don’t know. You know, there’s a thing called Dunning-Kruger, which is people start businesses and they don’t know what they don’t know. Then they know what they don’t know. Then they know what they know. goes through these phases where…
So when you start something, and I’ve been doing this for long time, so right now we’re in a situation where I kind of know what problems to expect and what situations that arise. ⁓ For example, painting a lady’s house and then she says, that’s not the color. And it’s like, okay. So from now on when we paint a house, they’re gonna initial the back of the paint color that they choose and it’s gonna match the house. Things like that, right? So you learn over time.
So now it’s only, we don’t know what we don’t know. We just have to do it. It’s scary. I mean, you have to fly the plane and see if it flies.
Erika (21:54)
Yeah.Tom Diamond (21:58)
million dollar plane.Erika (21:59)
Yep. Well, Tom, this has been awesome today. Before we wrap up, if someone listening wants to reach out, whether it’s with your brokerage or flipping or what you have going on with house fixers, what’s the best way for them to reach you?Tom Diamond (22:17)
Well, there’s a lot of ways. There’s rdrhome.com and housefixrs.com does not have an E, and I’ll tell you why. It’s F-I-X-R-S because to add that E is $85,000. So it’s housefixrs.com, which was a dollar on GoDaddy, and housefixers with an E is $85,000. So I chose the latter.There are our phone number is on there and you can give us a ring and we would be glad to hear from anybody.
Erika (22:51)
I appreciate your time, story, and perspective on the show today.Tom Diamond (22:55)
Alright, thanks for having me.Erika (22:56)
And for our listeners, if you got value from this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations lined up with pros like Tom, who are out there building fantastic real estate businesses. We’ll see you on the next episode.
