May 29, 2025 • 50 mins
Summary
In this conversation, the speakers discuss the critical importance of hiring the right contractors in real estate investments, particularly in house flipping. They emphasize that this financial venture is often riskier than purchasing a primary residence and stress the need for thorough evaluation of contractors to avoid significant financial losses.
Takeaways
Hiring the right contractors is crucial for success.
House flipping is a high-risk financial venture.
Investors should evaluate contractors carefully.
Poor contractor choices can lead to financial ruin.
It's essential to understand the risks involved in real estate.
Investing in real estate requires due diligence.
Contractor reliability can make or break a deal.
Financial ventures in real estate are not to be taken lightly.
Investors should be prepared for potential losses.
The right team can mitigate investment risks.
Chapters
00:00 Introduction to Real Estate Investing
02:02 Jake Knight's Journey and Background
08:20 The Path to Real Estate Investing
12:18 Exploring Short-Term and Medium-Term Rentals
14:53 First Deals and Networking Strategies
17:12 Understanding the Role of a Bird Dog in Real Estate
18:49 Jake's Journey: From Flipping to Short-Term Rentals
21:08 The Importance of Lead Generation in Real Estate
22:14 Flipping Houses: Volume and Market Conditions
25:11 Out-of-State Investing: Strategies and Insights
27:34 Transitioning to Hard Money Lending
30:22 Exploring Hard Money Loans and Their Uses
33:17 Understanding Hard Money Loans and Draw Requests
33:58 Exploring DSCR Loans for Real Estate Investors
37:57 The BRRRR Strategy: Combining Loans for Success
39:27 Key Advice for First-Time Flippers
45:17 Building a Network: The Importance of Meetups
50:31 New Chapter
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
The other part that I think is really the most important part
is who you're hiring to do the work.
I mean, if you think about it, this is probably somebody's most
riskiest financial venture they're going to have in their
life. It's not buying your first home.
I think if it you're going to flip a house, that's more risky
than buying your primary residence, right?
So if if it's the riskiest thingyou're going to do, spend more
(00:24):
time evaluating your contractors, make sure that the
person you're hiring is not going to be the reason that
you're losing your shirt on thisdeal, and maybe never
investigate or maybe go bankrupt.
Welcome to the Real Prop Pro podcast, where strategy,
innovation, and wealth converge to redefine real estate
(00:45):
investing. Hello and welcome to the Real
Prop Pro podcast. I'm your host Ian Deitler,
Sacramento based investor who does fix and flip investing and
multi family. On the show we talked to real
people doing real real estate deals.
(01:08):
At Real Prop Pro. We train investors on everything
from fix and flip, short term rentals, tax deed, tax lien
investing, creative financing and much more.
If you want to learn more on howto do deals, build cash flow or
scale up, please visit realproppro.com.
Today's guest is Jake Knight, a real estate investor who has
(01:32):
flipped properties, wants short term rentals and now lends
capitals to other investors as part of the Conventis team.
Jake brings a valuable dual perspective, not only just an
operator who's been in the trenches, but now as a hard
money lender who works with fix and flippers across the country.
(01:54):
Jake will talk about his journey, how his mindset has
shifted and how his roles have evolved.
Jake, welcome to the show. Hi Ian, thanks for having me
here. I've been listening to some of
your previous episodes. So excited to be here in studio
with you and chat today. Great.
Thank you so much for coming on the show.
Taking the time from here on theshow, we like to dig in on
(02:16):
people's backgrounds and kind ofupbringing.
So can you tell us a little bit about where you're from and
where you grew up? Sure.
I grew up in the East Bay, Contra Costa County, not too far
from here in Sacramento. I grew up very middle class, you
know, had a good family growing up, you know, good childhood, a
lot of happy memories. But one thing we were missing
(02:37):
was in our, in our community were a lot of inspirational
people that, you know, that we're going to college that were
having careers and you know, their path in the future.
My, my parents didn't go to college, My older sister didn't,
my extended family. There was almost nobody that had
a real career, so to speak. So when I was in high school, I
(02:59):
had already been working, I worked for a family construction
business. My only goal was to get out into
the world and start making some money at a job.
It wasn't to go to college. And I was always envious of the
people who at that age knew whatthey wanted to do in life
because they could just, here's what I want to do, here's the
path to do it, and they're set, right?
It's just that one little thing that seems so obvious, but if
(03:20):
you're missing it, life can be alittle bit more challenging
trying to find your path. So a little bit out of high
school, my mom had started to get into real estate and I kind
of learned about it too. And we went to some seminars
together. We went to a rich dad, poor Dad
seminar and this was probably inlike 2002 thousand and one.
(03:42):
I had read the books. I also had read a Robert Allen
book, one that you have here. I had bought the Carlton Sheets
DVDs for no money down and I wasreading all of this stuff, but
it might have well have been chemistry because I didn't know
what to do with it. It sounded great.
The concepts of, you know, cash flow were really appealing, but
(04:04):
there was not enough actionable advice for me being young and
kind of not knowing what to do with it, you know, So I had
basically decided I don't know what to do with this.
So I'll just go get a job in themortgage business in kind of a
back office role and just learn what a real estate transaction
(04:26):
is and, and what goes on and who's involved.
And eventually that will hopefully lead me to investing.
And I actually had one opportunity, a colleague of my
mom's who was a real estate investor, and he let me come to
one of his properties. He showed me around, but I had
actually gotten a promotion at my job and moved away and didn't
(04:51):
really, you know, realize that opportunity and what it was.
I didn't know about networking. I didn't know about meetups.
There probably weren't many backthen.
And if there were probably a bunch of, you know, 6 year old
guys and I would have walked in there feeling like really
insecure and unconfident and notknowing what to do with it.
You know, I didn't know, was I supposed to go door knocking on
(05:12):
people who had a foreclosure notice in the paper and say
here's some creative financing offer when I didn't understand
it? Like to me, you know, without
the resources that we have todaywith the Internet, I felt so
lost and I wasn't that type of go getter to just, I'm going to
figure this out. You know, no matter what it
takes, I'm going to figure it out.
What the few books that I read there was, it was not enough for
(05:34):
me to figure it out. So I got a job working in
mortgage and that lasted until the crash where I got laid off 3
times in 2007. And that sucked pretty bad.
I didn't lose like a ton of properties.
I lost my one property that I had and then it was hard to get
(05:54):
a job. So I went into tech sales for a
little while for a couple years.But the same time I decided to
go back to school and get my degree because you know, I'll be
darned if I'm going to be, you know, 55 years old in the future
and not have a degree and then get laid off again.
Like I didn't want that for me. So I started studying business.
(06:16):
I was working full time, going to school part time.
I did this for like 8 years and it was a pain every single day.
You know, go take lunch breaks at work and go study some, you
know, algebra book in my car. And I was miserable every minute
of doing it. But like, you know, that's what
I thought I had to do, you know,and I actually left the job in
tech sales that was paying good money, but I cut my pay in half
(06:39):
to go work back in lending around 2011, 2012 maybe because
I missed real estate and I knew real estate was going to be
somehow involved in my career. And so over the next few years,
it was a little bit of progression in my career.
I started working in commercial lending, just doing
underwriting. So I was working on kind of
(07:00):
bigger commercial transactions, all types of business loans,
still working out, getting my degree.
And then I found Bigger Pockets and I found, I don't know what
that light bulb moment was. I always try to think of, you
know, what was that one spark inmy life that turned me back on
to real estate investing? Because again, that was my only
ever, the only career path that I ever wanted to do.
(07:23):
And so it felt like a missed opportunity.
And once that spark came again, I went all in.
It was like not just a rabbit hole, but it was like a hole in
the earth that I jumped in and nobody was going to tell me
otherwise. I was doing this.
So I was at work, not working just, you know, going on Bigger
Pockets and reading and listening to podcasts and
(07:44):
YouTube on my walk, buying everybook I could find.
Like I was consuming like 9 hours a day of content to learn
this thing. I was not going to fail.
Like I've never been so convicted about something in my
life other than, you know, this time.
And so it took me about 8 monthsof all of that networking or,
(08:05):
you know, education, started networking, taking action.
And those are the three things Ialways tell people now, like
what do you need to get started?It's those three things,
education, networking and takingaction.
And finally, after eight months,I finally found my first deal.
So that's kind of the the originstory of me, you know, where I
grew up and how I got into investing.
(08:25):
Great. Thank you for explaining all
that stuff. I think it's really good for the
listeners to hear that path thatyou went on to get to where you
are today. Kind of rewinding back to some
of the stuff you're talking about just now, You said you'd
you'd already had one house before the crash.
Was that the first property thatyou'd purchased?
Yes, it was, but it was my own primary residence.
(08:46):
It was a condo and I had done a silly thing of getting a A2 year
fixed loan even though I worked in the business.
And it was like, what are you doing?
But you know, I just went for the cheapest rate and then it
adjusted and I was laid off and I was like, I'm sorry to the
bank, I can't pay this anymore. So me and millions of others at
the time, you know, let our properties go.
(09:06):
Yeah, I was going to say that was kind of the story during
that time, there's a lot of people were getting adjustable
rates. They shoot way up and then now
all the people just can't affordit anymore and causes runoff.
So that's really interesting story.
So you did complete college, is that correct?
I in 2017, I was probably three classes away from completing it
and that's when I started my business and my wife was
(09:28):
pregnant with our son and it waswork.
So if something had to give and it was my degree, unfortunately
I put so much time into it, but now I don't, I don't necessarily
need it. I would love to have it.
I had great grades. I was in the honors program at
San Jose State and you know, it would have been a great
accomplishment. But having this opportunity to
invest and start my business waslike something I could not pass
(09:50):
up. Yeah.
I always think it is better for people to either start a
business, get into real estate, like be serious about it kind of
like you were. I kind of feel like that's a
little bit better way to go thento go to college.
I know a lot of people might argue with me on this and stuff,
but college is really just priming you to get a good job,
(10:13):
right? Like that's kind of the goal of
college is how how do you pass tests?
How do you work well with others?
How do you stay focused in your job and do the just the work
that's going to get your boss oryour agency a lot of money or
whatever. So kind of to think of it in a
different way. If if you have your own
(10:34):
business, the, the potential to make money's unlimited real
estate, same concept, right? If you just start buying massive
amounts of real estate, then your potential's unlimited,
right? However, in contrast, if you're
working a job, it is very limited.
You can only get as much as you know your job allows and the
(10:56):
raises are only incremental, right?
So stuff like that. So for all the listeners, you
know, if it if it, if you're in the same spot as my friend Jake
here and it comes down to like, Hey, do I, do I go to college or
I finish college or do I, you know, get into this real estate.
Sounds like we're both on the same page.
Get into real estate. Do what you have to do to be
(11:16):
successful. And like you said, take action
in real estate. Absolutely, I agree with you and
you know, even I would throw in the trades, you know, these days
with everything, you know, all the degrees like software
development and you know, those things may be less valuable or
less in demand in the future with AI coming out.
So the the more real world physical, either trades or
(11:38):
services that you can provide people that are more tangible, I
guess I think those are definitely, you know, coming
back in style and definitely a path that people should really
consider instead of just your typical four year degree.
Yeah, I mean, that's a good point.
But they're also 3D printing houses at this point.
So I mean, how, how many construction jobs are being out
(12:00):
with that? That's true.
So yeah, it's it's always very difficult to kind of predict the
future and figure out which pathto go down.
But I feel like real estate is pretty safe as far as AI and
robotics kind of taking over ourindustry, especially in real
estate investing, right? Like there's always going to
need to be places to live. There's always going to need to
(12:21):
be managers, there's always going to have to be property
owners, stuff like that. So kind of going, so you, you
were kind of learning a lot on Bigger Pockets.
You were listening to podcasts, you'd really immersed yourself
for those eight months. What happened after that point?
I had simultaneously been looking at 2 paths within real
(12:44):
estate investing. One was short term rentals, but
more so medium term rentals, corporate rentals and flipping
houses. Flipping houses was going to be
the, you know, capital engine that would fuel the portfolio
growth. And I had gone to a seminar and
the owner of corporate housing by owner I think was there, and
(13:05):
I learned about corporate housing and that was really
appealing to me. So I had been, you know,
simultaneously researching both aspects of it.
And so I was trying to find a flip locally, but I was also
researching markets out of statewhere I could buy rentals.
So a right around the same time actually, I had identified a
property that I could buy and furnish as a rental in
(13:27):
Knoxville, TN. And I think a month later,
actually my first flip came, butbefore the out of state part, I
was looking at maybe 5 differentmarkets.
I was on the phone every day at lunch.
I was doing calling property managers and researching
neighborhoods and all kinds of due diligence.
(13:48):
I was even secret shopping otherowners out there in those areas
and just asking questions, posing as a customer to learn,
you know, what the supply and demand situation was.
Air DNA had existed. This was 2016.
Air DNA was around. But you know, I was more
interested in the medium term stuff and there was not like a
(14:09):
data source for that. I don't know if there is now.
I'm not in tune with it, but so I was just calling and learning
and talking to people. And I had found a house on the
MLS actually that had just gone online, had my agent, you know,
make an offer. It was a two-bedroom, 2 bath,
had a little sunroom, you know, kind of a woodsy neighborhood,
(14:30):
cute house already remodeled. And then I, we bought it and I
went out, I flew out to Knoxville the week of Christmas.
And I had, I had connected with a lady out there who's kind of
like a contractor, but also a project manager.
So I had networked with her. We met up, we went shopping, her
and her daughter and myself. We bought like tons of stuff.
(14:52):
And I spent, you know, like 18 hour days, three days in a row
furnishing this thing and then getting it online in time.
And then I came back home and like right after that, I had my
got my first flip under contract.
So it was kind of like these twothings hit right at the same
time. So it was pretty exciting.
You know, I like here I am now. I'm an investor, you know.
Yeah, things are moving and stuff.
So yeah, that was that was how it began.
(15:13):
Nice. Where was that first flip at?
Was that in California? Yeah, that was in Vallejo.
Vallejo. And I got that from a bird dog.
I think I'd met him on Craigslist, you know, just
putting, putting myself out there everywhere I could to, to
be in front of deals. And so found it through him.
Actually, he had an agent, it was an agent's pocket listing.
(15:35):
She knew him. He contacted me about it.
And the way I took that down wasin that previous period where I
was networking a lot, I had madea plan to joint venture with
more experienced investors so that I could learn from them on
my first few deals. And so I had connected with one
(15:55):
of I'll call him my mentor. He doesn't like when I say that
to him, but I considered him my mentor.
He he was generous enough to give me time on the phone and
help me when I was still just a nobody.
And so I thought, you know, I appreciate you doing that.
I want to pay it forward and let's go look at this deal in
Vallejo. And you know, we'll, we'll split
it, split the cost, but the profits.
(16:18):
But I need you to rehab it and I'll learn from you.
I'll, I'll help whatever way I can, but I, I need you to take
the lead. And my thinking was get 50% of
something instead of a, you know, maybe 100% of nothing.
If I screwed it up, I don't evenknow if I had enough capital to
take it down by myself anyway. But really that point was give
me some help. Let me learn and make money at
(16:40):
the same time. And I did that for my first 3
deals. Actually, it was a different
investor on the 2nd 2:00. But I, you know, my plan was let
me learn from different people and I'll take, I'll be a sponge
and I'll take different things from different people and apply
them to my business. That's a great way to get
started. We have a lot of new listeners,
so I really like to highlight different ways to get started.
(17:02):
I had a similar experience getting started, worked with a
mentor, flipped a house with some profits and started doing
deals on my own after that. Fixing flipping here in
Sacramento. You'd mentioned that there's
someone that you'd term to bird dog.
Can you explain to the listenerswhat a bird dog is and how that
(17:24):
might be a good way to get started in real estate
investing? Absolutely.
Bird Dog is somebody who basically goes and finds deals.
They're hunting for deals and then they can do different
things with them. They might wholesale it or just
get paid a fee, you know, for connecting the investor with it,
which is kind of what happened in this case.
So the skills of a bird dog is really just knowing how to
(17:45):
connect with sellers or finding deals through agents, the same
thing an investor may do or wholesaler may do.
Just putting yourself in front of leads and being able to
connect to people and have thoseconversations about, you know,
qualifying A seller to see if they're a good fit for an
investor. So.
So they're finding these deals and handing them off to other
(18:06):
real estate investors, cash buyers such as yourself, and
they're just making a a little chunk of change off of that, not
really taking possession, not really owning the property, not
even really wholesaling it either.
I mean, IA wholesaler is kind ofmore of someone who gets the
property under a purchase and sales agreement, getting under
contract and then assigns that contract to an investor buyer.
(18:28):
So bird dogs, even doing less than that, they're just finding
the deals, tossing them off and collecting a small fee.
Correct. Yeah, They're not putting under
contract. And later on in my career I
realized there's better ways to structure it legally.
So it's, you know, they have equitable interest and it's not
like you're paying fees and stuff.
I you know, my first deal, I didn't know all the legalities
(18:49):
of things. So you, you, you had these two
deals at the same time. You got to flip with the your,
with your mentor or not mentor, but investor, business partner
and you also got the short term rental.
Where did your path kind of leadfrom there?
Were they kind of both going? Was the flipping and the short
term rentals kind of going at the same path, the same rate?
(19:11):
Good question. Actually, no, because within
maybe not long after getting my first flip under contract, I
think even before I sold that, Igot a second one under contract.
And then maybe within eight months of that first Vallejo
deal, I had my third one. And once I sold that, I had made
(19:35):
enough money to leave my job. And it was the short term rental
in Knoxville was going great. But I'm making way more money
flipping houses and it was kind of hard to ignore that, not to
mention now that that's my source of income, right?
So I had to make sure that I wasstill focusing on that and
making sure that that third dealwasn't my last.
(19:57):
You know, I have to keep going or else I'm going back to work.
And I didn't want to do that. So I really put a lot more
energy into flipping houses and building a business.
You know, I was doing everythingI could to get myself in front
of as many deals as possible because the second person that I
mentored with, who's still a great friend of mine today and
(20:18):
we've done a ton of deals together.
And he was doing a lot of speaking at the meetups.
And one thing he said that really stuck with me was, you
know, this is a lead generation business, and you should be
spending 80 or 90% of your time generating leads.
And the more leads you have, thebetter deals you're going to get
because you're picking only the best deals.
You're not just doing a deal because it's the only lead you
(20:41):
have. That's where you get into
trouble. So that really stuck with me.
It's like, OK, I'm in sales. This is a sales job.
It's sales and marketing. I've just got to like go out and
do every marketing channel I canafford and do sensibly.
And so that's what I did. I just put myself in as I'm a
sales and marketer and I got to make sure that this lead
generation business is sustainable.
(21:02):
So that short term rental was actually the only one I ever
bought. I had it for years but my path
really went down flipping more so than the short term rental.
Yeah. That's really interesting how
you're talking about a lot of real estate investors,
especially like, you know, especially smaller companies
(21:23):
that have one to two employees. Maybe it's an owner in Ava or
you know, husband, wife type of situation.
You're right, like you, you are a real estate investor, right?
You're buying and selling or you're buying and holding, but
it's really you're really a marketer, you're really a
salesperson. You're really trying to keep the
deal flow going, right? The the lead generation and the
(21:47):
lead and you know, lead capture and, and closing on deals.
That's really what the business is all about.
Absolutely. If you're somebody who's only
buying houses that are on MLS, then you don't have to do all
that. I mean, maybe you have to do a
little selling to the real estate agents you're working
with, but if you're buying mostly off market, which is what
I've mostly done, then it reallyis a lead generation and
(22:09):
marketing business for sure. What, what type of volume did
you like kind of get into? Like what were some of the best
years for flipping for you look like?
I think around 2021 was probablymy peak.
I think I did maybe 28 deals that year.
It's gone down a lot in the lastcouple of years, partly due to
effort. You know, I haven't been, you
know, my foot isn't on the gas now as it was then.
(22:31):
But also just market conditions.I mean, there's far fewer
sellers selling their houses these days.
There's more competition. So I've done enough to, to be
comfortable and you know, I'm not as hungry as I was back
then, but I'm still doing deals.I'm still looking for
properties. But it's at a pace that I really
like because I'm a big work lifebalance person.
(22:53):
But in maybe 2020-2021, I was doing, I always had probably 5
to 7 deals at a time, but it wasa mix of things.
I was, I was selling the hedge funds for a few years.
I was still flipping and I was buying out of state.
I've done a lot of business out of state as well, both flips,
wholesalers and rentals. And there's pros and cons to
(23:13):
doing that. But I've, I've kind of found
some comfort, you know, in buying in different States and
being able to easily go into a new market.
I'm a little bit different without a state where many
people focus, they try to find the best market.
But I'll do a deal almost anywhere, not almost anywhere,
but a lot of places. And I don't think it's that
(23:34):
complicated to to do that. People overthink it.
I think they're looking for, should I go into Kansas City or
Memphis or Jacksonville? Which one's the best market?
And I'm just like, guys, like, you know, I've bought houses in
Saint Mary's, Georgia and Roswell, NM and Palm Bay, FL and
a ton of ton of other cities that people are probably not
(23:56):
looking at other than the residents there.
And I've made good money on those.
And part of that was because thelead channels I had set up,
we're bringing me leads in different places.
But after I did a few, with all the technology we have today,
you know, for photos, for inspections, for the boots on
the ground, property managers orRealtors or home inspectors, you
(24:19):
can be fairly confident and knowwhat you're buying without
taking on too much risk. And really the key to that is
just buying, right? You know, if you know, if I'm
buying a house in Dunn, NC, which is a place I bought a
house last year and it this was like the most rural property
I've ever bought. But I bought it for 35 K and I
(24:41):
sold it for 215 a few months later.
So there's a ton of spread on the deal.
But I wasn't looking for Dunn, NC.
In fact, when I talked to peoplein North Carolina, they've never
even heard of done. And so I'm like, man, your
state's not that big. Like, you know, have you not
know of this place? But I guess it is really small.
(25:01):
So. So yeah, I mean, I've done a lot
out of state as well. So, so some of your, it sounds
like some of your out of state strategies more like find the
deal and then the market can kind of follow after that it's
kind of secondary. Yeah.
I'd rather have a good deal somewhere that I wasn't looking
than looking at a market and I can't find a great deal.
And then I'm just trying to invest in Saint Louis just for
(25:24):
the simple fact that that's why I was looking.
I mean, I just don't believe in that philosophy, so, and it's
worked out well. What are some of your ways to
generate some of these leads currently?
Are you doing like paper clerk, paper lead?
Are you doing any marketing? What kind of strategies are you
implementing now? I've always believed that you
have to have, I mean, maybe somepeople don't agree with this.
(25:46):
Maybe they just go really hard into PPC, for example, and I get
that or maybe they're direct mail people.
In my earlier days, I realized that I was getting deals from
different channels. So I really wanted to be
involved in different ones. So I had my SEO was my SEO was
cooking for years and then I kind of got off of it a little
bit and I had a virus and it just, I never recovered.
(26:09):
So that kind of went out the way.
But I've done some paper lead agents have been probably the
number one source of deals for me.
But I used to drive for dollars and send direct mail.
I've gotten deals from cold calling myself.
I've used cold calling services and outsourcing for cold
calling, but it hasn't really performed well.
So I noticed that when I cold call, it usually works.
(26:32):
It's just you know how much timeyou're going to spend doing.
And that's where we all strugglebecause we want to delegate.
But you know, you're really moreeffective if you're calling as
the principal to the owner, you know, they just, it's just a
much better, you know, success rate by doing that.
So these days agents a little bit of direct mail, but I'm, I'm
(26:54):
less consistent with it because in the last couple years it just
hasn't really produced. And I haven't, you know, been
comfortable committing when, youknow, I'll go months, 8 months
even sometimes without getting adeal from it.
And it's like, how long do you keep going with this?
Right. But I've never gotten too, too
big into PPC very expensive and people are doing well.
(27:15):
But that's a a game that I didn't want to play in, you
know, with the capital requirements for it.
So I would say, yeah, agents hasprobably been my my go to
source. If I need a deal then I'll go to
agents. So it sounds like you're kind of
like doing some flips, you're doing all this stuff.
You then kind of got into hard money lending.
(27:36):
Can you talk about that transition and like what that
looked like for you going from kind of an investor to doing
some hard money lending? As a, as an investor myself, I
have done 90 or 100 hard money loans and rental property loans
for my own portfolio. And I had kind of had an urge an
(27:57):
itching to get back into lendingas more of a compliment to my
investing. But also, you know, sometimes as
investors, we're we have that entrepreneurial bug and we want
to do other things. And so there I wanted to do
something else in addition to flipping houses.
And so it kind of just made sense that I should combine
these two experiences, my lending background and my
(28:18):
investor, my investment experience and be be able to
offer other investors, you know,and give back to them and, and
give them a product that I know very well because I'm using
myself for years. I understand the lending process
very well. So when I realized that I wanted
to do that, I thought if you're in sales, you really should be
(28:41):
selling a product that you champion or a service that you
can really get behind. So I had been working with
Conventus as a borrower. And so to me it was an obvious
choice that I want to work for the company that I want to
submit my loans to. And so they, because they've
always been like really good on pricing for me.
The my loan Rep and the processing team were always very
(29:02):
commutative. They answered my questions.
They were very friendly and I wasn't getting that kind of
service level from other lenders, in fact.
And some of them were just like really bad.
And we're talking like big companies here.
But so I reached out to them and, you know, they had a spot
for me. So so here I am.
And I'm really excited about it because it's like it's, it's
(29:23):
different than flipping houses. You know, there's less risk by
having, you know, this type of income.
And I just enjoy the new challenge.
You know, I'm out there kind of starting fresh again.
I feel that hunger again, you know, as an investor doing it
for 9 years, I think I mentionedearlier that part of the reason
I'm doing less deals because there's less effort because I'm
(29:45):
not as hungry as I was when I first started.
So it's kind of that reignited passion that, you know, made me
feel really excited about doing it.
That's really cool. It sounds like a kind of a new
chapter in your life is kind of doing some lending while still
doing some investments on the side whenever you feel like it
really. Not that you, like you said, not
that you need to, but just to kind of stay current on it and,
(30:06):
you know, still have stuff to doon the side, you know, flipping
houses or whatever you choose, buying out of state.
Can you explain to the listenerswhat a hard money loan is?
And like, when would a person, you know, use a hard money loan?
A. Hard money loan is great for
buying. I'll just use the fix and flip
(30:28):
as a one example. If you're buying a house that
needs a ton of work, it's not financeable from a conventional
lender. If you go to Chase Bank with the
fixer upper that you need to close in seven days, you really
can't do anything. They can't do anything with
that. So a fix and flip lender has the
ability to close very quickly. They're not as worried about
condition because they're, they know what you're doing with the
(30:49):
house. They know you're going to fix it
up. So it's a shorter term loan
because they're only giving you the amount of time you need to
fix it and say 12 months, you should be in and out of that
property by that time. The rates are a little higher
than a conventional loan becauseit's technically more risky.
There's nobody renting it out, paying rental income.
So the rates are higher comparedto a conventional mortgage, but
(31:15):
it's really the right tool for the job.
And so there's that. It's a similar, we offer new
construction financing. So if you're doing an infill
development, right, we'll pay and for the fix and flip and
construction loans, you put yourmoney down on the purchase
price, say 10% or 20%, but we'refunding 100% of the rehab costs.
(31:36):
So this also allows you to not have to save up a down payment
and all the construction, but only really the down payment and
closing costs. So it's another very flexible
tool for somebody to use in thisbusiness.
So it sounds like these hard money loans are really good
geared towards fixed and flippers.
But you'd also mentioned that itcan be for ground up
(31:58):
construction. Can you talk to talk a little
bit about how that would work for ground up construction?
Yeah. So let's say you're buying,
let's talk about infill development, which is like, you
know, we're here in the neighborhood and I'm going to
buy the lot next door, demolish the house and build a new home
there. That's what we would consider
infill development. So you could, we could help you
(32:18):
finance the purchase of the landfor the lot and then the
construction cost. So if you're buying the property
for 200 K, maybe you need to putin 20% down towards the purchase
price. And then maybe 20% of the
construction cost will have to come out of your pocket.
But we'll fund 80% of the construction cost.
(32:39):
And you know, you've closed on the land, you've got all your
permits and your drawings. Now you're ready to build.
So you start building and then you do what's called a draw
request, right? You come back and say I've spent
$50,000 on the foundation and various tasks.
We have an inspector come out, verify that work and then we
(32:59):
give you the reimbursement of the 50,000 that you spent.
So that's how the draw the construction funds work is
through draws throughout the process.
OK. And there's various draws
throughout and say like maybe 3 to 4, like I don't want to put a
number on it, but there's various different stages where a
person would do the draw request, get inspected and they
(33:21):
get reimbursed going along through the project.
That's exactly how it works for fix and flips as well.
So if I'm doing a flip and I'm spending $100,000 on it, I might
wait until I've spent 15 or 20,000 and a few items are
completed, then do my first drawrequest.
There's a small fee like $260.00for the draw.
So you don't want to do like 20 of them right?
(33:42):
But you know you don't also wantto spend $80,000 and then do
your draw. I mean you could if you want but
most people will do say 4 draws for a fix and flip total.
Yeah, help get some of those people paid, some of the
subcontractor stuff like that. So talking more about hard money
loans, I want to kind of maybe talk about some of the creative
(34:06):
ways to use hard money loans. And there's also another loan
product called DSCRS. Do you guys you guys offer DSCR
loans? DSCR is a really cool product
that's becoming really popular right now for real estate
investors because it stands for debt service coverage ratio.
What that means is that's the ratio of your total gross rents
(34:28):
compared to your property expenses.
So the lenders using this ratio to determine if your property is
lendable, if you're making positive cash flow, essentially,
if you have an above 1.0 DSCR, that means you're above break
even, right? You're making money.
(34:49):
And that shows the lender that it's a it's a good, you know,
project, it's a good house. So we're also looking at loan to
value just like any other loan, but we're not looking at income
and this is where it's. Really.
Income of the borrower. Income of the borrower, correct.
We're only looking at how the property performs and you know,
your credit as well, but we're, we're trading off, looking at
(35:09):
the rental income and getting rid of the borrower income.
So we don't need W twos, We don't need pay stubs.
And that's where it's really difficult for investors to get
loans with conventional lenders is you have to, you know, if
you've got a portfolio, it is anabsolute nightmare to get a
conventional loan. I've done it.
(35:29):
I don't ever want to do it again.
I don't wish it on my worst enemy.
I'm serious. I've worked in mortgage for a
long time, so I can speak from both sides of it.
Getting a mortgage when you haverental properties is a pain and
all this documentation now you don't need it, but that's one of
the best parts. The other best part is it like
the rates are still really good.It doesn't mean you're going to
pay, you know, way over what youwould pay at a conventional
(35:51):
lender. Like I'm, you know, right now
rates, I mean, it's all based onthe timing of the market, right?
Like so when we're recording this, usually an investor can
come in and get like, you know, low 7%, some of them can get
high 6% all the way up to 8 depending on credit and loan to
value and all these other things.
(36:11):
But you don't really pay a lot more than you would for a
conventional loan for this product.
So it's a really, really great tool for investors.
That's great. And so to kind of hard just to
kind of go back to this DSCR ratio, what would a, what would
A1 ratio look like? It would look like your expenses
(36:34):
are $1500 a month and your rent is $1500 a month.
Is that correct? Yeah, and the expenses includes
your principal, interest, property taxes, insurance and
HOA if applicable. We're not talking about property
management, we're not talking about utilities, but insurance,
including flood insurance, that would be part of it too.
But yeah, as long as you're at least break even.
(36:57):
But sometimes we want a little more than that, depending on a
few things. But if you're underwriting your
own run properties, you should be doing this calculation as
part of your deal analysis. Like if you're underwriting a
1.2 DSCR, well that means you'reyour rents are 1200 but your
expenses are 1000. So it's a better deal.
(37:18):
The higher that number is, the better the deal is.
So you should look at that as well.
It's a it's a napkin mat thing you can do in 30 seconds.
And I mean you want cash flow, right?
So I mean at a 1 to 1. It's not great.
It's not great. Plus you have to pay
electricity, so it might be negative.
So I mean, you almost never wantto be at a one to one if you
want cash flow. You know, I know some people pay
for appreciation, but if you're holding a rental for cash flow,
(37:42):
I mean, you need to have cash flow in there.
Exactly. Yeah.
So thank you for explaining thatone strategy that I like to talk
about. And it sounds like you have both
the hard money loans and the DSCR loans combining them to do
the birth strategy. Can you talk to the listeners a
little bit about what the birth strategy is and and how your
(38:03):
company can accommodate for those types of loans?
Absolutely. And I've got plenty of examples
of my own deals where sometimes I would buy a house, get into
contract even just after I've closed on it and I still really
wasn't decided on am I going to flip this or keep it as a
rental. So I would do a bridge loan,
meaning a fix and flip loan, which is the short term 1, then
(38:25):
decide am I going to keep this? And if I'm going to keep it, I
would use the bridge loan with the rehab funds to fix it up.
And then I would refinance into a debt service coverage ratio
loan, ADSCR loan. So now maybe it took me 6 months
to do the renovations. I leased it out.
Now I've got a lease showing howmuch my, my rent is and I go
(38:50):
back to the lender and sometimesthis is the same lender, just
like my company, we do both. So now that it's all stabilized,
as we say it's rented out, there's no more rehab needed.
Then we can put the long term financing on it, the 30 year
fixed rate loan, you're good to go.
So that's, that's a typical Burris when you're, you know, buying
it, renovating it, renting it out, refinancing, repeat.
(39:14):
I hope I got that right. It's been a while since I've
spelled it out. I think so.
There's a lot of Rs. There's always one more R than
you expect. Everyone throws the repeat on
the end. It's like, Oh yeah, I got to do
it again. I got to.
Do it again. That's right.
What's one piece of advice you would give to someone who's
doing a fix and flip today? There's really three things you
(39:35):
can do wrong or there's three areas that you really need to
look out for. What you're paying for the
property that's in your control,how much you're spending on the
rehab that's under your control,and then what you're selling it
for, which is not under your control.
So if you take the first two things, obviously you you've
heard that you need to buy, right.
Don't buy deals that you're not like absolutely certain that are
(39:58):
going to work. But the other part that I think
is really the most important part is who you're hiring to do
the work. I mean, if you think about it,
this is probably somebody's mostriskiest financial venture
they're going to have in their life.
It's not buying your first home.I think if it you're going to
flip a house, that's more risky than buying your primary
(40:18):
residence, right? So if if it's the riskiest thing
you're going to do, spend more time evaluating your
contractors, make sure that the person you're hiring is not
going to be the reason that you're losing your shirt on this
deal and maybe never investigateor maybe go bankrupt.
I mean, you really got to think about it that way and realize
(40:42):
everything you thought, oh, I'm going to hire a contractor.
I'm going to call three of them and spend 30 minutes and then
that's it. I'm going to pick one of them.
Like that's not enough. You need to act like you need to
take this seriously because whenI've had bad deals in my career,
it usually came down to the contractor.
It wasn't like necessarily what I paid.
It was we went wrong in construction is because maybe I
(41:03):
got lazy or complacent or something else happened along
the construction process. And a lot of it's under your
control. So you got to be better at
evaluating your contractors. If you're going to spend all
this time evaluating deals, spend more time, get to know
these people, get references, make sure they do flips and talk
to their investor clients who have flipped, you know, had
(41:25):
their flips, and ask questions. Don't be afraid to ask and do
background checks on these people.
Yeah, that'll help you. One thing I noticed when I'm
dealing with contractors and subcontractors are there's a
difference between a contractor working with like a homeowner,
we'll call them a retail client and an investor client, right?
(41:53):
Sometimes I have, you know, I, Itry to be transparent with my
contractors and Subs and tell them I'm flipping the house.
You know, I may not be able to pay as much as like a normal
retail client, but if, if we work out well together, I can
get you 3 to 4 projects a year, right?
So by giving them more of a volume and like maybe repeatable
(42:14):
business, I need a discount on on each project because, you
know, I have very strict numbersto reach, right.
So in your experience, have you dealt with contractors that
sometimes may give you like a retail price and you're like,
dude, that's not going to work? Or I mean like what's your
experience with like the pricingthat contractors give you?
(42:36):
I first approached contractors and part of my initial, you
know, first two minutes of talking to them, I asked them
how they, you know, position themselves.
Are they a contractor who works mainly with homeowners and not
really with investors, or do they work with a lot of
investors? That loan right there will
eliminate a lot of the people that you don't want to work
with. You want to work with
(42:56):
contractors who work with investors, but I don't like
asking them or telling them thatI want discounted pricing
because that puts them on a little bit of a defensive mode.
It's harder to do this in the beginning, but over time,
through keeping track of all my expenses and learning what
(43:17):
things cost, what I do now is when possible, I tried to
propose pricing to the contractors and say, you know,
either if it's just, you know, kind of a broad discussion
upfront, it's like, you know, how much would you charge for
this? Here's kind of where I need to
be. Do you think that's something
you would do? If so, OK, cool.
And I think we can take it to the next step.
(43:38):
But even like on my one of my last rehabs, I pretty much
itemized everything and said, here's what I'm paying for this,
here's what I'm paying for this.Can you work with this?
My contractor loved it because Isaved him a bunch of time trying
to estimate everything and figuring it out.
And we had already worked together.
So he knew that, you know, he liked working with me.
But sometimes these guys, like they get tired of bidding every
(44:03):
project, not knowing if they're going to get it.
You know, they'll go look at a house, spend 3 hours estimating
it, and then they were like a waste of time, you know, So
giving them transparent pricing,you know, maybe they can counter
too if it's like they'll do it, but maybe they want a little
more. OK, well, at least now I know
that I'm still kind of within mybudget and he's happy, I'm
happy. Let's get going.
(44:23):
So I approach it a little bit differently, but it took time to
get there. That's a really good way to look
at it, you know, kind of have itmapped out and more of a hey,
can you do it for this? You know, I've done a lot of the
work and research for you, you know, and like you said, maybe
there's a counter. Maybe they're like, no, that
bathroom is going to be an extra1000.
Does that work? And might be yes, might be no.
(44:43):
So yeah, that's a really interesting way to kind of work
with contractors and figure it out.
Because I mean, I just know thatsometimes if if you work with
the wrong ones, the price, it can be like the difference in
quotes is just astonishing to mesometimes.
Like I've gotten quotes for $10,000 jobs and then someone
who ended up doing it and did you know a good job did it for
(45:06):
2000. So it's like you really got to
shop around, you really got to pay attention to the
contractors, the work they do, the subcontractors, all that
stuff. Now you're starting a meet up, I
hear. And can you talk about the meet
up and maybe invite some of the local Sacramento or Elk Grove
(45:30):
area investors to it? Yeah, absolutely.
Thanks for bringing that up. Launching the Elk Grove real
estate investor meet up. I live in Elk Grove and that's,
I realized when I wanted to get back out and, you know, meet
more of the community that therewasn't really any events down
there, at least not that I couldfind.
So I thought, well, I'll just launch one myself.
And I've kind of always wanted to do that.
(45:51):
But when COVID hit, we stopped networking as much.
And then I was just busy with work.
And so I didn't take the effort to come out.
And, you know, I moved up here to the Sacramento area during
COVID, so I didn't know a lot ofpeople.
And then not networking after a while, I didn't really get
ingrained into the community. I kind of always wanted to, but
I just took my time. And I realized now is the time I
(46:14):
want to do that. You know, I want to get out and
meet people. And it always meant so much to
my business to have a good network.
I wouldn't have been able to start without a network.
So it really is critical, no matter what stage of your
investing career you're in, is to stay in touch with people.
And that's also where things happen.
You know, that's where the magichappens.
So I'm putting together an Elk Grove meet up.
(46:35):
It's going to be at the District56 Civic Center City Hall area
and it's June 18th is the first one.
But you can either go to meetup.com or Facebook groups
and just type in Elk Grove real estate investor meet up or can
reach out to Ian to get more information.
But yeah, you can find us eitherone of those paths and we look
forward to having people out there and also look forward to
(46:57):
having some good interesting speakers.
I like the format of some open networking mixed in with the
real estate market update and then a presentation on some
different topic with an investing and more networking
after that. So that'll be the structure.
Awesome. Thanks for sharing that.
I'm going to do my best to make to that first meet up, get out
there and support you and, and try to bring in as many
(47:20):
investors as we can and new people.
I mean, even it sounds like you and I kind of got kind of the
same start in regards to like, hey, we knew that we had to meet
people. We had to learn stuff from
people. We had to network.
So if anyone's listening and thinking about getting into real
estate or getting involved, I highly encourage you to go to
meet ups, go meet people in person, find out how you can
(47:44):
help other successful investors.You know, anyone will tell you,
you know, you come up to a fixing flipper.
It's like, what do you need? Well, we need deals in dollars.
So if you can provide any of those things, we're more than
happy to, you know, work with you.
I mean, we'll work with you anyways.
A lot of the times I find that the real estate investing
community is very nice and very understanding, very giving even
(48:06):
to people just getting started because they understand that
they were at one point just getting started and they were
newbies. So yeah, so we highly encourage
you guys to get out and talk to people and start to learn some
of these strategies. I mean, a lot of people start
with wholesaling or maybe bird dogging, but you could also meet
(48:28):
maybe your future fix and flip mentor there and you know, blow
up your career from there. So I highly encourage you guys
to check out his meet up. And so now what we do every
week, we do a free book giveaway.
Jake, I'm going to ask you, you'd already mentioned the
(48:49):
Robert G Allen and the Rich Dad,Poor dad, any of the have you
read any of these other ones or any of these other ones stand
out to you? Yeah, I think I've read the E
myth. I think I've read, let's see,
probably the cash flow quadrant.And I I know a little bit about
the 10X rule. So not all of them, but a few of
them, yeah. Yeah, so these are some of the
(49:09):
ones we're giving away for the listeners.
We have Rich Dad, Poor Dad, cashFlow quadrant, 10X rule E Myth.
There's another E myth too, which is a really good one.
The one thing by Keller and Michael E Gerber, E Myth
Revisited. Love that book.
I can't talk enough about that one.
Setting up systems in your business, working on your
(49:30):
business to that in your business, overcoming
entrepreneur seizures, as Michael Gerber likes to say.
So for our listeners to enter, all they need to do is like the
episode and comment which book they'd like to win.
And we'll pick one lucky winner seven days after the air date of
each episode. Jake's story reminds us that
(49:52):
your role in real estate can andshould evolve.
Whether you're swinging hammers or funding deals, the key is to
stay curious. Stay sharp and play the long
term game. The best investors aren't stuck
to 1 strategy. They build the right foundation
and stay flexible as new opportunities show up.
(50:14):
So if you're just starting, remember success is built on
reps, systems and focus. Build your skills now so that
when your strategy shifts, you're ready.
Thanks for tuning in and we'll catch you next time.
Thanks for joining us. Thanks, Ian.
The other part that I think is really the most important part
is who you're hiring to do the work.
I mean, if you think about it, this is probably somebody's most
riskiest financial venture they're going to have in their
life. It's not buying your first home.
I think if it you're going to flip a house, that's more risky
than buying your primary residence, right?
So if if it's the riskiest thingyou're going to do, spend more
(00:24):
time evaluating your contractors, make sure that the
person you're hiring is not going to be the reason that
you're losing your shirt on thisdeal, and maybe never
investigate or maybe go bankrupt.
Welcome to the Real Prop Pro podcast, where strategy,
innovation, and wealth converge to redefine real estate
(00:45):
investing. Hello and welcome to the Real
Prop Pro podcast. I'm your host Ian Deitler,
Sacramento based investor who does fix and flip investing and
multi family. On the show we talked to real
people doing real real estate deals.
(01:08):
At Real Prop Pro. We train investors on everything
from fix and flip, short term rentals, tax deed, tax lien
investing, creative financing and much more.
If you want to learn more on howto do deals, build cash flow or
scale up, please visit realproppro.com.
Today's guest is Jake Knight, a real estate investor who has
(01:32):
flipped properties, wants short term rentals and now lends
capitals to other investors as part of the Conventis team.
Jake brings a valuable dual perspective, not only just an
operator who's been in the trenches, but now as a hard
money lender who works with fix and flippers across the country.
(01:54):
Jake will talk about his journey, how his mindset has
shifted and how his roles have evolved.
Jake, welcome to the show. Hi Ian, thanks for having me
here. I've been listening to some of
your previous episodes. So excited to be here in studio
with you and chat today. Great.
Thank you so much for coming on the show.
Taking the time from here on theshow, we like to dig in on
(02:16):
people's backgrounds and kind ofupbringing.
So can you tell us a little bit about where you're from and
where you grew up? Sure.
I grew up in the East Bay, Contra Costa County, not too far
from here in Sacramento. I grew up very middle class, you
know, had a good family growing up, you know, good childhood, a
lot of happy memories. But one thing we were missing
(02:37):
was in our, in our community were a lot of inspirational
people that, you know, that we're going to college that were
having careers and you know, their path in the future.
My, my parents didn't go to college, My older sister didn't,
my extended family. There was almost nobody that had
a real career, so to speak. So when I was in high school, I
(02:59):
had already been working, I worked for a family construction
business. My only goal was to get out into
the world and start making some money at a job.
It wasn't to go to college. And I was always envious of the
people who at that age knew whatthey wanted to do in life
because they could just, here's what I want to do, here's the
path to do it, and they're set, right?
It's just that one little thing that seems so obvious, but if
(03:20):
you're missing it, life can be alittle bit more challenging
trying to find your path. So a little bit out of high
school, my mom had started to get into real estate and I kind
of learned about it too. And we went to some seminars
together. We went to a rich dad, poor Dad
seminar and this was probably inlike 2002 thousand and one.
(03:42):
I had read the books. I also had read a Robert Allen
book, one that you have here. I had bought the Carlton Sheets
DVDs for no money down and I wasreading all of this stuff, but
it might have well have been chemistry because I didn't know
what to do with it. It sounded great.
The concepts of, you know, cash flow were really appealing, but
(04:04):
there was not enough actionable advice for me being young and
kind of not knowing what to do with it, you know, So I had
basically decided I don't know what to do with this.
So I'll just go get a job in themortgage business in kind of a
back office role and just learn what a real estate transaction
(04:26):
is and, and what goes on and who's involved.
And eventually that will hopefully lead me to investing.
And I actually had one opportunity, a colleague of my
mom's who was a real estate investor, and he let me come to
one of his properties. He showed me around, but I had
actually gotten a promotion at my job and moved away and didn't
(04:51):
really, you know, realize that opportunity and what it was.
I didn't know about networking. I didn't know about meetups.
There probably weren't many backthen.
And if there were probably a bunch of, you know, 6 year old
guys and I would have walked in there feeling like really
insecure and unconfident and notknowing what to do with it.
You know, I didn't know, was I supposed to go door knocking on
(05:12):
people who had a foreclosure notice in the paper and say
here's some creative financing offer when I didn't understand
it? Like to me, you know, without
the resources that we have todaywith the Internet, I felt so
lost and I wasn't that type of go getter to just, I'm going to
figure this out. You know, no matter what it
takes, I'm going to figure it out.
What the few books that I read there was, it was not enough for
(05:34):
me to figure it out. So I got a job working in
mortgage and that lasted until the crash where I got laid off 3
times in 2007. And that sucked pretty bad.
I didn't lose like a ton of properties.
I lost my one property that I had and then it was hard to get
(05:54):
a job. So I went into tech sales for a
little while for a couple years.But the same time I decided to
go back to school and get my degree because you know, I'll be
darned if I'm going to be, you know, 55 years old in the future
and not have a degree and then get laid off again.
Like I didn't want that for me. So I started studying business.
(06:16):
I was working full time, going to school part time.
I did this for like 8 years and it was a pain every single day.
You know, go take lunch breaks at work and go study some, you
know, algebra book in my car. And I was miserable every minute
of doing it. But like, you know, that's what
I thought I had to do, you know,and I actually left the job in
tech sales that was paying good money, but I cut my pay in half
(06:39):
to go work back in lending around 2011, 2012 maybe because
I missed real estate and I knew real estate was going to be
somehow involved in my career. And so over the next few years,
it was a little bit of progression in my career.
I started working in commercial lending, just doing
underwriting. So I was working on kind of
(07:00):
bigger commercial transactions, all types of business loans,
still working out, getting my degree.
And then I found Bigger Pockets and I found, I don't know what
that light bulb moment was. I always try to think of, you
know, what was that one spark inmy life that turned me back on
to real estate investing? Because again, that was my only
ever, the only career path that I ever wanted to do.
(07:23):
And so it felt like a missed opportunity.
And once that spark came again, I went all in.
It was like not just a rabbit hole, but it was like a hole in
the earth that I jumped in and nobody was going to tell me
otherwise. I was doing this.
So I was at work, not working just, you know, going on Bigger
Pockets and reading and listening to podcasts and
(07:44):
YouTube on my walk, buying everybook I could find.
Like I was consuming like 9 hours a day of content to learn
this thing. I was not going to fail.
Like I've never been so convicted about something in my
life other than, you know, this time.
And so it took me about 8 monthsof all of that networking or,
(08:05):
you know, education, started networking, taking action.
And those are the three things Ialways tell people now, like
what do you need to get started?It's those three things,
education, networking and takingaction.
And finally, after eight months,I finally found my first deal.
So that's kind of the the originstory of me, you know, where I
grew up and how I got into investing.
(08:25):
Great. Thank you for explaining all
that stuff. I think it's really good for the
listeners to hear that path thatyou went on to get to where you
are today. Kind of rewinding back to some
of the stuff you're talking about just now, You said you'd
you'd already had one house before the crash.
Was that the first property thatyou'd purchased?
Yes, it was, but it was my own primary residence.
(08:46):
It was a condo and I had done a silly thing of getting a A2 year
fixed loan even though I worked in the business.
And it was like, what are you doing?
But you know, I just went for the cheapest rate and then it
adjusted and I was laid off and I was like, I'm sorry to the
bank, I can't pay this anymore. So me and millions of others at
the time, you know, let our properties go.
(09:06):
Yeah, I was going to say that was kind of the story during
that time, there's a lot of people were getting adjustable
rates. They shoot way up and then now
all the people just can't affordit anymore and causes runoff.
So that's really interesting story.
So you did complete college, is that correct?
I in 2017, I was probably three classes away from completing it
and that's when I started my business and my wife was
(09:28):
pregnant with our son and it waswork.
So if something had to give and it was my degree, unfortunately
I put so much time into it, but now I don't, I don't necessarily
need it. I would love to have it.
I had great grades. I was in the honors program at
San Jose State and you know, it would have been a great
accomplishment. But having this opportunity to
invest and start my business waslike something I could not pass
(09:50):
up. Yeah.
I always think it is better for people to either start a
business, get into real estate, like be serious about it kind of
like you were. I kind of feel like that's a
little bit better way to go thento go to college.
I know a lot of people might argue with me on this and stuff,
but college is really just priming you to get a good job,
(10:13):
right? Like that's kind of the goal of
college is how how do you pass tests?
How do you work well with others?
How do you stay focused in your job and do the just the work
that's going to get your boss oryour agency a lot of money or
whatever. So kind of to think of it in a
different way. If if you have your own
(10:34):
business, the, the potential to make money's unlimited real
estate, same concept, right? If you just start buying massive
amounts of real estate, then your potential's unlimited,
right? However, in contrast, if you're
working a job, it is very limited.
You can only get as much as you know your job allows and the
(10:56):
raises are only incremental, right?
So stuff like that. So for all the listeners, you
know, if it if it, if you're in the same spot as my friend Jake
here and it comes down to like, Hey, do I, do I go to college or
I finish college or do I, you know, get into this real estate.
Sounds like we're both on the same page.
Get into real estate. Do what you have to do to be
(11:16):
successful. And like you said, take action
in real estate. Absolutely, I agree with you and
you know, even I would throw in the trades, you know, these days
with everything, you know, all the degrees like software
development and you know, those things may be less valuable or
less in demand in the future with AI coming out.
So the the more real world physical, either trades or
(11:38):
services that you can provide people that are more tangible, I
guess I think those are definitely, you know, coming
back in style and definitely a path that people should really
consider instead of just your typical four year degree.
Yeah, I mean, that's a good point.
But they're also 3D printing houses at this point.
So I mean, how, how many construction jobs are being out
(12:00):
with that? That's true.
So yeah, it's it's always very difficult to kind of predict the
future and figure out which pathto go down.
But I feel like real estate is pretty safe as far as AI and
robotics kind of taking over ourindustry, especially in real
estate investing, right? Like there's always going to
need to be places to live. There's always going to need to
(12:21):
be managers, there's always going to have to be property
owners, stuff like that. So kind of going, so you, you
were kind of learning a lot on Bigger Pockets.
You were listening to podcasts, you'd really immersed yourself
for those eight months. What happened after that point?
I had simultaneously been looking at 2 paths within real
(12:44):
estate investing. One was short term rentals, but
more so medium term rentals, corporate rentals and flipping
houses. Flipping houses was going to be
the, you know, capital engine that would fuel the portfolio
growth. And I had gone to a seminar and
the owner of corporate housing by owner I think was there, and
(13:05):
I learned about corporate housing and that was really
appealing to me. So I had been, you know,
simultaneously researching both aspects of it.
And so I was trying to find a flip locally, but I was also
researching markets out of statewhere I could buy rentals.
So a right around the same time actually, I had identified a
property that I could buy and furnish as a rental in
(13:27):
Knoxville, TN. And I think a month later,
actually my first flip came, butbefore the out of state part, I
was looking at maybe 5 differentmarkets.
I was on the phone every day at lunch.
I was doing calling property managers and researching
neighborhoods and all kinds of due diligence.
(13:48):
I was even secret shopping otherowners out there in those areas
and just asking questions, posing as a customer to learn,
you know, what the supply and demand situation was.
Air DNA had existed. This was 2016.
Air DNA was around. But you know, I was more
interested in the medium term stuff and there was not like a
(14:09):
data source for that. I don't know if there is now.
I'm not in tune with it, but so I was just calling and learning
and talking to people. And I had found a house on the
MLS actually that had just gone online, had my agent, you know,
make an offer. It was a two-bedroom, 2 bath,
had a little sunroom, you know, kind of a woodsy neighborhood,
(14:30):
cute house already remodeled. And then I, we bought it and I
went out, I flew out to Knoxville the week of Christmas.
And I had, I had connected with a lady out there who's kind of
like a contractor, but also a project manager.
So I had networked with her. We met up, we went shopping, her
and her daughter and myself. We bought like tons of stuff.
(14:52):
And I spent, you know, like 18 hour days, three days in a row
furnishing this thing and then getting it online in time.
And then I came back home and like right after that, I had my
got my first flip under contract.
So it was kind of like these twothings hit right at the same
time. So it was pretty exciting.
You know, I like here I am now. I'm an investor, you know.
Yeah, things are moving and stuff.
So yeah, that was that was how it began.
(15:13):
Nice. Where was that first flip at?
Was that in California? Yeah, that was in Vallejo.
Vallejo. And I got that from a bird dog.
I think I'd met him on Craigslist, you know, just
putting, putting myself out there everywhere I could to, to
be in front of deals. And so found it through him.
Actually, he had an agent, it was an agent's pocket listing.
(15:35):
She knew him. He contacted me about it.
And the way I took that down wasin that previous period where I
was networking a lot, I had madea plan to joint venture with
more experienced investors so that I could learn from them on
my first few deals. And so I had connected with one
(15:55):
of I'll call him my mentor. He doesn't like when I say that
to him, but I considered him my mentor.
He he was generous enough to give me time on the phone and
help me when I was still just a nobody.
And so I thought, you know, I appreciate you doing that.
I want to pay it forward and let's go look at this deal in
Vallejo. And you know, we'll, we'll split
it, split the cost, but the profits.
(16:18):
But I need you to rehab it and I'll learn from you.
I'll, I'll help whatever way I can, but I, I need you to take
the lead. And my thinking was get 50% of
something instead of a, you know, maybe 100% of nothing.
If I screwed it up, I don't evenknow if I had enough capital to
take it down by myself anyway. But really that point was give
me some help. Let me learn and make money at
(16:40):
the same time. And I did that for my first 3
deals. Actually, it was a different
investor on the 2nd 2:00. But I, you know, my plan was let
me learn from different people and I'll take, I'll be a sponge
and I'll take different things from different people and apply
them to my business. That's a great way to get
started. We have a lot of new listeners,
so I really like to highlight different ways to get started.
(17:02):
I had a similar experience getting started, worked with a
mentor, flipped a house with some profits and started doing
deals on my own after that. Fixing flipping here in
Sacramento. You'd mentioned that there's
someone that you'd term to bird dog.
Can you explain to the listenerswhat a bird dog is and how that
(17:24):
might be a good way to get started in real estate
investing? Absolutely.
Bird Dog is somebody who basically goes and finds deals.
They're hunting for deals and then they can do different
things with them. They might wholesale it or just
get paid a fee, you know, for connecting the investor with it,
which is kind of what happened in this case.
So the skills of a bird dog is really just knowing how to
(17:45):
connect with sellers or finding deals through agents, the same
thing an investor may do or wholesaler may do.
Just putting yourself in front of leads and being able to
connect to people and have thoseconversations about, you know,
qualifying A seller to see if they're a good fit for an
investor. So.
So they're finding these deals and handing them off to other
(18:06):
real estate investors, cash buyers such as yourself, and
they're just making a a little chunk of change off of that, not
really taking possession, not really owning the property, not
even really wholesaling it either.
I mean, IA wholesaler is kind ofmore of someone who gets the
property under a purchase and sales agreement, getting under
contract and then assigns that contract to an investor buyer.
(18:28):
So bird dogs, even doing less than that, they're just finding
the deals, tossing them off and collecting a small fee.
Correct. Yeah, They're not putting under
contract. And later on in my career I
realized there's better ways to structure it legally.
So it's, you know, they have equitable interest and it's not
like you're paying fees and stuff.
I you know, my first deal, I didn't know all the legalities
(18:49):
of things. So you, you, you had these two
deals at the same time. You got to flip with the your,
with your mentor or not mentor, but investor, business partner
and you also got the short term rental.
Where did your path kind of leadfrom there?
Were they kind of both going? Was the flipping and the short
term rentals kind of going at the same path, the same rate?
(19:11):
Good question. Actually, no, because within
maybe not long after getting my first flip under contract, I
think even before I sold that, Igot a second one under contract.
And then maybe within eight months of that first Vallejo
deal, I had my third one. And once I sold that, I had made
(19:35):
enough money to leave my job. And it was the short term rental
in Knoxville was going great. But I'm making way more money
flipping houses and it was kind of hard to ignore that, not to
mention now that that's my source of income, right?
So I had to make sure that I wasstill focusing on that and
making sure that that third dealwasn't my last.
(19:57):
You know, I have to keep going or else I'm going back to work.
And I didn't want to do that. So I really put a lot more
energy into flipping houses and building a business.
You know, I was doing everythingI could to get myself in front
of as many deals as possible because the second person that I
mentored with, who's still a great friend of mine today and
(20:18):
we've done a ton of deals together.
And he was doing a lot of speaking at the meetups.
And one thing he said that really stuck with me was, you
know, this is a lead generation business, and you should be
spending 80 or 90% of your time generating leads.
And the more leads you have, thebetter deals you're going to get
because you're picking only the best deals.
You're not just doing a deal because it's the only lead you
(20:41):
have. That's where you get into
trouble. So that really stuck with me.
It's like, OK, I'm in sales. This is a sales job.
It's sales and marketing. I've just got to like go out and
do every marketing channel I canafford and do sensibly.
And so that's what I did. I just put myself in as I'm a
sales and marketer and I got to make sure that this lead
generation business is sustainable.
(21:02):
So that short term rental was actually the only one I ever
bought. I had it for years but my path
really went down flipping more so than the short term rental.
Yeah. That's really interesting how
you're talking about a lot of real estate investors,
especially like, you know, especially smaller companies
(21:23):
that have one to two employees. Maybe it's an owner in Ava or
you know, husband, wife type of situation.
You're right, like you, you are a real estate investor, right?
You're buying and selling or you're buying and holding, but
it's really you're really a marketer, you're really a
salesperson. You're really trying to keep the
deal flow going, right? The the lead generation and the
(21:47):
lead and you know, lead capture and, and closing on deals.
That's really what the business is all about.
Absolutely. If you're somebody who's only
buying houses that are on MLS, then you don't have to do all
that. I mean, maybe you have to do a
little selling to the real estate agents you're working
with, but if you're buying mostly off market, which is what
I've mostly done, then it reallyis a lead generation and
(22:09):
marketing business for sure. What, what type of volume did
you like kind of get into? Like what were some of the best
years for flipping for you look like?
I think around 2021 was probablymy peak.
I think I did maybe 28 deals that year.
It's gone down a lot in the lastcouple of years, partly due to
effort. You know, I haven't been, you
know, my foot isn't on the gas now as it was then.
(22:31):
But also just market conditions.I mean, there's far fewer
sellers selling their houses these days.
There's more competition. So I've done enough to, to be
comfortable and you know, I'm not as hungry as I was back
then, but I'm still doing deals.I'm still looking for
properties. But it's at a pace that I really
like because I'm a big work lifebalance person.
(22:53):
But in maybe 2020-2021, I was doing, I always had probably 5
to 7 deals at a time, but it wasa mix of things.
I was, I was selling the hedge funds for a few years.
I was still flipping and I was buying out of state.
I've done a lot of business out of state as well, both flips,
wholesalers and rentals. And there's pros and cons to
(23:13):
doing that. But I've, I've kind of found
some comfort, you know, in buying in different States and
being able to easily go into a new market.
I'm a little bit different without a state where many
people focus, they try to find the best market.
But I'll do a deal almost anywhere, not almost anywhere,
but a lot of places. And I don't think it's that
(23:34):
complicated to to do that. People overthink it.
I think they're looking for, should I go into Kansas City or
Memphis or Jacksonville? Which one's the best market?
And I'm just like, guys, like, you know, I've bought houses in
Saint Mary's, Georgia and Roswell, NM and Palm Bay, FL and
a ton of ton of other cities that people are probably not
(23:56):
looking at other than the residents there.
And I've made good money on those.
And part of that was because thelead channels I had set up,
we're bringing me leads in different places.
But after I did a few, with all the technology we have today,
you know, for photos, for inspections, for the boots on
the ground, property managers orRealtors or home inspectors, you
(24:19):
can be fairly confident and knowwhat you're buying without
taking on too much risk. And really the key to that is
just buying, right? You know, if you know, if I'm
buying a house in Dunn, NC, which is a place I bought a
house last year and it this was like the most rural property
I've ever bought. But I bought it for 35 K and I
(24:41):
sold it for 215 a few months later.
So there's a ton of spread on the deal.
But I wasn't looking for Dunn, NC.
In fact, when I talked to peoplein North Carolina, they've never
even heard of done. And so I'm like, man, your
state's not that big. Like, you know, have you not
know of this place? But I guess it is really small.
(25:01):
So. So yeah, I mean, I've done a lot
out of state as well. So, so some of your, it sounds
like some of your out of state strategies more like find the
deal and then the market can kind of follow after that it's
kind of secondary. Yeah.
I'd rather have a good deal somewhere that I wasn't looking
than looking at a market and I can't find a great deal.
And then I'm just trying to invest in Saint Louis just for
(25:24):
the simple fact that that's why I was looking.
I mean, I just don't believe in that philosophy, so, and it's
worked out well. What are some of your ways to
generate some of these leads currently?
Are you doing like paper clerk, paper lead?
Are you doing any marketing? What kind of strategies are you
implementing now? I've always believed that you
have to have, I mean, maybe somepeople don't agree with this.
(25:46):
Maybe they just go really hard into PPC, for example, and I get
that or maybe they're direct mail people.
In my earlier days, I realized that I was getting deals from
different channels. So I really wanted to be
involved in different ones. So I had my SEO was my SEO was
cooking for years and then I kind of got off of it a little
bit and I had a virus and it just, I never recovered.
(26:09):
So that kind of went out the way.
But I've done some paper lead agents have been probably the
number one source of deals for me.
But I used to drive for dollars and send direct mail.
I've gotten deals from cold calling myself.
I've used cold calling services and outsourcing for cold
calling, but it hasn't really performed well.
So I noticed that when I cold call, it usually works.
(26:32):
It's just you know how much timeyou're going to spend doing.
And that's where we all strugglebecause we want to delegate.
But you know, you're really moreeffective if you're calling as
the principal to the owner, you know, they just, it's just a
much better, you know, success rate by doing that.
So these days agents a little bit of direct mail, but I'm, I'm
(26:54):
less consistent with it because in the last couple years it just
hasn't really produced. And I haven't, you know, been
comfortable committing when, youknow, I'll go months, 8 months
even sometimes without getting adeal from it.
And it's like, how long do you keep going with this?
Right. But I've never gotten too, too
big into PPC very expensive and people are doing well.
(27:15):
But that's a a game that I didn't want to play in, you
know, with the capital requirements for it.
So I would say, yeah, agents hasprobably been my my go to
source. If I need a deal then I'll go to
agents. So it sounds like you're kind of
like doing some flips, you're doing all this stuff.
You then kind of got into hard money lending.
(27:36):
Can you talk about that transition and like what that
looked like for you going from kind of an investor to doing
some hard money lending? As a, as an investor myself, I
have done 90 or 100 hard money loans and rental property loans
for my own portfolio. And I had kind of had an urge an
(27:57):
itching to get back into lendingas more of a compliment to my
investing. But also, you know, sometimes as
investors, we're we have that entrepreneurial bug and we want
to do other things. And so there I wanted to do
something else in addition to flipping houses.
And so it kind of just made sense that I should combine
these two experiences, my lending background and my
(28:18):
investor, my investment experience and be be able to
offer other investors, you know,and give back to them and, and
give them a product that I know very well because I'm using
myself for years. I understand the lending process
very well. So when I realized that I wanted
to do that, I thought if you're in sales, you really should be
(28:41):
selling a product that you champion or a service that you
can really get behind. So I had been working with
Conventus as a borrower. And so to me it was an obvious
choice that I want to work for the company that I want to
submit my loans to. And so they, because they've
always been like really good on pricing for me.
The my loan Rep and the processing team were always very
(29:02):
commutative. They answered my questions.
They were very friendly and I wasn't getting that kind of
service level from other lenders, in fact.
And some of them were just like really bad.
And we're talking like big companies here.
But so I reached out to them and, you know, they had a spot
for me. So so here I am.
And I'm really excited about it because it's like it's, it's
(29:23):
different than flipping houses. You know, there's less risk by
having, you know, this type of income.
And I just enjoy the new challenge.
You know, I'm out there kind of starting fresh again.
I feel that hunger again, you know, as an investor doing it
for 9 years, I think I mentionedearlier that part of the reason
I'm doing less deals because there's less effort because I'm
(29:45):
not as hungry as I was when I first started.
So it's kind of that reignited passion that, you know, made me
feel really excited about doing it.
That's really cool. It sounds like a kind of a new
chapter in your life is kind of doing some lending while still
doing some investments on the side whenever you feel like it
really. Not that you, like you said, not
that you need to, but just to kind of stay current on it and,
(30:06):
you know, still have stuff to doon the side, you know, flipping
houses or whatever you choose, buying out of state.
Can you explain to the listenerswhat a hard money loan is?
And like, when would a person, you know, use a hard money loan?
A. Hard money loan is great for
buying. I'll just use the fix and flip
(30:28):
as a one example. If you're buying a house that
needs a ton of work, it's not financeable from a conventional
lender. If you go to Chase Bank with the
fixer upper that you need to close in seven days, you really
can't do anything. They can't do anything with
that. So a fix and flip lender has the
ability to close very quickly. They're not as worried about
condition because they're, they know what you're doing with the
(30:49):
house. They know you're going to fix it
up. So it's a shorter term loan
because they're only giving you the amount of time you need to
fix it and say 12 months, you should be in and out of that
property by that time. The rates are a little higher
than a conventional loan becauseit's technically more risky.
There's nobody renting it out, paying rental income.
So the rates are higher comparedto a conventional mortgage, but
(31:15):
it's really the right tool for the job.
And so there's that. It's a similar, we offer new
construction financing. So if you're doing an infill
development, right, we'll pay and for the fix and flip and
construction loans, you put yourmoney down on the purchase
price, say 10% or 20%, but we'refunding 100% of the rehab costs.
(31:36):
So this also allows you to not have to save up a down payment
and all the construction, but only really the down payment and
closing costs. So it's another very flexible
tool for somebody to use in thisbusiness.
So it sounds like these hard money loans are really good
geared towards fixed and flippers.
But you'd also mentioned that itcan be for ground up
(31:58):
construction. Can you talk to talk a little
bit about how that would work for ground up construction?
Yeah. So let's say you're buying,
let's talk about infill development, which is like, you
know, we're here in the neighborhood and I'm going to
buy the lot next door, demolish the house and build a new home
there. That's what we would consider
infill development. So you could, we could help you
(32:18):
finance the purchase of the landfor the lot and then the
construction cost. So if you're buying the property
for 200 K, maybe you need to putin 20% down towards the purchase
price. And then maybe 20% of the
construction cost will have to come out of your pocket.
But we'll fund 80% of the construction cost.
(32:39):
And you know, you've closed on the land, you've got all your
permits and your drawings. Now you're ready to build.
So you start building and then you do what's called a draw
request, right? You come back and say I've spent
$50,000 on the foundation and various tasks.
We have an inspector come out, verify that work and then we
(32:59):
give you the reimbursement of the 50,000 that you spent.
So that's how the draw the construction funds work is
through draws throughout the process.
OK. And there's various draws
throughout and say like maybe 3 to 4, like I don't want to put a
number on it, but there's various different stages where a
person would do the draw request, get inspected and they
(33:21):
get reimbursed going along through the project.
That's exactly how it works for fix and flips as well.
So if I'm doing a flip and I'm spending $100,000 on it, I might
wait until I've spent 15 or 20,000 and a few items are
completed, then do my first drawrequest.
There's a small fee like $260.00for the draw.
So you don't want to do like 20 of them right?
(33:42):
But you know you don't also wantto spend $80,000 and then do
your draw. I mean you could if you want but
most people will do say 4 draws for a fix and flip total.
Yeah, help get some of those people paid, some of the
subcontractor stuff like that. So talking more about hard money
loans, I want to kind of maybe talk about some of the creative
(34:06):
ways to use hard money loans. And there's also another loan
product called DSCRS. Do you guys you guys offer DSCR
loans? DSCR is a really cool product
that's becoming really popular right now for real estate
investors because it stands for debt service coverage ratio.
What that means is that's the ratio of your total gross rents
(34:28):
compared to your property expenses.
So the lenders using this ratio to determine if your property is
lendable, if you're making positive cash flow, essentially,
if you have an above 1.0 DSCR, that means you're above break
even, right? You're making money.
(34:49):
And that shows the lender that it's a it's a good, you know,
project, it's a good house. So we're also looking at loan to
value just like any other loan, but we're not looking at income
and this is where it's. Really.
Income of the borrower. Income of the borrower, correct.
We're only looking at how the property performs and you know,
your credit as well, but we're, we're trading off, looking at
(35:09):
the rental income and getting rid of the borrower income.
So we don't need W twos, We don't need pay stubs.
And that's where it's really difficult for investors to get
loans with conventional lenders is you have to, you know, if
you've got a portfolio, it is anabsolute nightmare to get a
conventional loan. I've done it.
(35:29):
I don't ever want to do it again.
I don't wish it on my worst enemy.
I'm serious. I've worked in mortgage for a
long time, so I can speak from both sides of it.
Getting a mortgage when you haverental properties is a pain and
all this documentation now you don't need it, but that's one of
the best parts. The other best part is it like
the rates are still really good.It doesn't mean you're going to
pay, you know, way over what youwould pay at a conventional
(35:51):
lender. Like I'm, you know, right now
rates, I mean, it's all based onthe timing of the market, right?
Like so when we're recording this, usually an investor can
come in and get like, you know, low 7%, some of them can get
high 6% all the way up to 8 depending on credit and loan to
value and all these other things.
(36:11):
But you don't really pay a lot more than you would for a
conventional loan for this product.
So it's a really, really great tool for investors.
That's great. And so to kind of hard just to
kind of go back to this DSCR ratio, what would a, what would
A1 ratio look like? It would look like your expenses
(36:34):
are $1500 a month and your rent is $1500 a month.
Is that correct? Yeah, and the expenses includes
your principal, interest, property taxes, insurance and
HOA if applicable. We're not talking about property
management, we're not talking about utilities, but insurance,
including flood insurance, that would be part of it too.
But yeah, as long as you're at least break even.
(36:57):
But sometimes we want a little more than that, depending on a
few things. But if you're underwriting your
own run properties, you should be doing this calculation as
part of your deal analysis. Like if you're underwriting a
1.2 DSCR, well that means you'reyour rents are 1200 but your
expenses are 1000. So it's a better deal.
(37:18):
The higher that number is, the better the deal is.
So you should look at that as well.
It's a it's a napkin mat thing you can do in 30 seconds.
And I mean you want cash flow, right?
So I mean at a 1 to 1. It's not great.
It's not great. Plus you have to pay
electricity, so it might be negative.
So I mean, you almost never wantto be at a one to one if you
want cash flow. You know, I know some people pay
for appreciation, but if you're holding a rental for cash flow,
(37:42):
I mean, you need to have cash flow in there.
Exactly. Yeah.
So thank you for explaining thatone strategy that I like to talk
about. And it sounds like you have both
the hard money loans and the DSCR loans combining them to do
the birth strategy. Can you talk to the listeners a
little bit about what the birth strategy is and and how your
(38:03):
company can accommodate for those types of loans?
Absolutely. And I've got plenty of examples
of my own deals where sometimes I would buy a house, get into
contract even just after I've closed on it and I still really
wasn't decided on am I going to flip this or keep it as a
rental. So I would do a bridge loan,
meaning a fix and flip loan, which is the short term 1, then
(38:25):
decide am I going to keep this? And if I'm going to keep it, I
would use the bridge loan with the rehab funds to fix it up.
And then I would refinance into a debt service coverage ratio
loan, ADSCR loan. So now maybe it took me 6 months
to do the renovations. I leased it out.
Now I've got a lease showing howmuch my, my rent is and I go
(38:50):
back to the lender and sometimesthis is the same lender, just
like my company, we do both. So now that it's all stabilized,
as we say it's rented out, there's no more rehab needed.
Then we can put the long term financing on it, the 30 year
fixed rate loan, you're good to go.
So that's, that's a typical Burris when you're, you know, buying
it, renovating it, renting it out, refinancing, repeat.
(39:14):
I hope I got that right. It's been a while since I've
spelled it out. I think so.
There's a lot of Rs. There's always one more R than
you expect. Everyone throws the repeat on
the end. It's like, Oh yeah, I got to do
it again. I got to.
Do it again. That's right.
What's one piece of advice you would give to someone who's
doing a fix and flip today? There's really three things you
(39:35):
can do wrong or there's three areas that you really need to
look out for. What you're paying for the
property that's in your control,how much you're spending on the
rehab that's under your control,and then what you're selling it
for, which is not under your control.
So if you take the first two things, obviously you you've
heard that you need to buy, right.
Don't buy deals that you're not like absolutely certain that are
(39:58):
going to work. But the other part that I think
is really the most important part is who you're hiring to do
the work. I mean, if you think about it,
this is probably somebody's mostriskiest financial venture
they're going to have in their life.
It's not buying your first home.I think if it you're going to
flip a house, that's more risky than buying your primary
(40:18):
residence, right? So if if it's the riskiest thing
you're going to do, spend more time evaluating your
contractors, make sure that the person you're hiring is not
going to be the reason that you're losing your shirt on this
deal and maybe never investigateor maybe go bankrupt.
I mean, you really got to think about it that way and realize
(40:42):
everything you thought, oh, I'm going to hire a contractor.
I'm going to call three of them and spend 30 minutes and then
that's it. I'm going to pick one of them.
Like that's not enough. You need to act like you need to
take this seriously because whenI've had bad deals in my career,
it usually came down to the contractor.
It wasn't like necessarily what I paid.
It was we went wrong in construction is because maybe I
(41:03):
got lazy or complacent or something else happened along
the construction process. And a lot of it's under your
control. So you got to be better at
evaluating your contractors. If you're going to spend all
this time evaluating deals, spend more time, get to know
these people, get references, make sure they do flips and talk
to their investor clients who have flipped, you know, had
(41:25):
their flips, and ask questions. Don't be afraid to ask and do
background checks on these people.
Yeah, that'll help you. One thing I noticed when I'm
dealing with contractors and subcontractors are there's a
difference between a contractor working with like a homeowner,
we'll call them a retail client and an investor client, right?
(41:53):
Sometimes I have, you know, I, Itry to be transparent with my
contractors and Subs and tell them I'm flipping the house.
You know, I may not be able to pay as much as like a normal
retail client, but if, if we work out well together, I can
get you 3 to 4 projects a year, right?
So by giving them more of a volume and like maybe repeatable
(42:14):
business, I need a discount on on each project because, you
know, I have very strict numbersto reach, right.
So in your experience, have you dealt with contractors that
sometimes may give you like a retail price and you're like,
dude, that's not going to work? Or I mean like what's your
experience with like the pricingthat contractors give you?
(42:36):
I first approached contractors and part of my initial, you
know, first two minutes of talking to them, I asked them
how they, you know, position themselves.
Are they a contractor who works mainly with homeowners and not
really with investors, or do they work with a lot of
investors? That loan right there will
eliminate a lot of the people that you don't want to work
with. You want to work with
(42:56):
contractors who work with investors, but I don't like
asking them or telling them thatI want discounted pricing
because that puts them on a little bit of a defensive mode.
It's harder to do this in the beginning, but over time,
through keeping track of all my expenses and learning what
(43:17):
things cost, what I do now is when possible, I tried to
propose pricing to the contractors and say, you know,
either if it's just, you know, kind of a broad discussion
upfront, it's like, you know, how much would you charge for
this? Here's kind of where I need to
be. Do you think that's something
you would do? If so, OK, cool.
And I think we can take it to the next step.
(43:38):
But even like on my one of my last rehabs, I pretty much
itemized everything and said, here's what I'm paying for this,
here's what I'm paying for this.Can you work with this?
My contractor loved it because Isaved him a bunch of time trying
to estimate everything and figuring it out.
And we had already worked together.
So he knew that, you know, he liked working with me.
But sometimes these guys, like they get tired of bidding every
(44:03):
project, not knowing if they're going to get it.
You know, they'll go look at a house, spend 3 hours estimating
it, and then they were like a waste of time, you know, So
giving them transparent pricing,you know, maybe they can counter
too if it's like they'll do it, but maybe they want a little
more. OK, well, at least now I know
that I'm still kind of within mybudget and he's happy, I'm
happy. Let's get going.
(44:23):
So I approach it a little bit differently, but it took time to
get there. That's a really good way to look
at it, you know, kind of have itmapped out and more of a hey,
can you do it for this? You know, I've done a lot of the
work and research for you, you know, and like you said, maybe
there's a counter. Maybe they're like, no, that
bathroom is going to be an extra1000.
Does that work? And might be yes, might be no.
(44:43):
So yeah, that's a really interesting way to kind of work
with contractors and figure it out.
Because I mean, I just know thatsometimes if if you work with
the wrong ones, the price, it can be like the difference in
quotes is just astonishing to mesometimes.
Like I've gotten quotes for $10,000 jobs and then someone
who ended up doing it and did you know a good job did it for
(45:06):
2000. So it's like you really got to
shop around, you really got to pay attention to the
contractors, the work they do, the subcontractors, all that
stuff. Now you're starting a meet up, I
hear. And can you talk about the meet
up and maybe invite some of the local Sacramento or Elk Grove
(45:30):
area investors to it? Yeah, absolutely.
Thanks for bringing that up. Launching the Elk Grove real
estate investor meet up. I live in Elk Grove and that's,
I realized when I wanted to get back out and, you know, meet
more of the community that therewasn't really any events down
there, at least not that I couldfind.
So I thought, well, I'll just launch one myself.
And I've kind of always wanted to do that.
(45:51):
But when COVID hit, we stopped networking as much.
And then I was just busy with work.
And so I didn't take the effort to come out.
And, you know, I moved up here to the Sacramento area during
COVID, so I didn't know a lot ofpeople.
And then not networking after a while, I didn't really get
ingrained into the community. I kind of always wanted to, but
I just took my time. And I realized now is the time I
(46:14):
want to do that. You know, I want to get out and
meet people. And it always meant so much to
my business to have a good network.
I wouldn't have been able to start without a network.
So it really is critical, no matter what stage of your
investing career you're in, is to stay in touch with people.
And that's also where things happen.
You know, that's where the magichappens.
So I'm putting together an Elk Grove meet up.
(46:35):
It's going to be at the District56 Civic Center City Hall area
and it's June 18th is the first one.
But you can either go to meetup.com or Facebook groups
and just type in Elk Grove real estate investor meet up or can
reach out to Ian to get more information.
But yeah, you can find us eitherone of those paths and we look
forward to having people out there and also look forward to
(46:57):
having some good interesting speakers.
I like the format of some open networking mixed in with the
real estate market update and then a presentation on some
different topic with an investing and more networking
after that. So that'll be the structure.
Awesome. Thanks for sharing that.
I'm going to do my best to make to that first meet up, get out
there and support you and, and try to bring in as many
(47:20):
investors as we can and new people.
I mean, even it sounds like you and I kind of got kind of the
same start in regards to like, hey, we knew that we had to meet
people. We had to learn stuff from
people. We had to network.
So if anyone's listening and thinking about getting into real
estate or getting involved, I highly encourage you to go to
meet ups, go meet people in person, find out how you can
(47:44):
help other successful investors.You know, anyone will tell you,
you know, you come up to a fixing flipper.
It's like, what do you need? Well, we need deals in dollars.
So if you can provide any of those things, we're more than
happy to, you know, work with you.
I mean, we'll work with you anyways.
A lot of the times I find that the real estate investing
community is very nice and very understanding, very giving even
(48:06):
to people just getting started because they understand that
they were at one point just getting started and they were
newbies. So yeah, so we highly encourage
you guys to get out and talk to people and start to learn some
of these strategies. I mean, a lot of people start
with wholesaling or maybe bird dogging, but you could also meet
(48:28):
maybe your future fix and flip mentor there and you know, blow
up your career from there. So I highly encourage you guys
to check out his meet up. And so now what we do every
week, we do a free book giveaway.
Jake, I'm going to ask you, you'd already mentioned the
(48:49):
Robert G Allen and the Rich Dad,Poor dad, any of the have you
read any of these other ones or any of these other ones stand
out to you? Yeah, I think I've read the E
myth. I think I've read, let's see,
probably the cash flow quadrant.And I I know a little bit about
the 10X rule. So not all of them, but a few of
them, yeah. Yeah, so these are some of the
(49:09):
ones we're giving away for the listeners.
We have Rich Dad, Poor Dad, cashFlow quadrant, 10X rule E Myth.
There's another E myth too, which is a really good one.
The one thing by Keller and Michael E Gerber, E Myth
Revisited. Love that book.
I can't talk enough about that one.
Setting up systems in your business, working on your
(49:30):
business to that in your business, overcoming
entrepreneur seizures, as Michael Gerber likes to say.
So for our listeners to enter, all they need to do is like the
episode and comment which book they'd like to win.
And we'll pick one lucky winner seven days after the air date of
each episode. Jake's story reminds us that
(49:52):
your role in real estate can andshould evolve.
Whether you're swinging hammers or funding deals, the key is to
stay curious. Stay sharp and play the long
term game. The best investors aren't stuck
to 1 strategy. They build the right foundation
and stay flexible as new opportunities show up.
(50:14):
So if you're just starting, remember success is built on
reps, systems and focus. Build your skills now so that
when your strategy shifts, you're ready.
Thanks for tuning in and we'll catch you next time.
Thanks for joining us. Thanks, Ian.
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