BiggerPockets Real Estate Podcast - 373: Invest Locally or Out of State? Why Not Both! BRRRRing & Building with Lee Ripma

Episode Date: March 12, 2020

Four years ago, Lee Ripma was brand new to real estate. She vowed she'd one day appear on the BiggerPockets Podcast. That day has come. And we're all better off for it! In this action-packed episode, Lee traces her journey from full-time field biologist to newbie who jumped straight into long-distance multifamily (wait 'til you hear about her first deal!) to developing apartment buildings in the high-end Los Angeles market. You'll learn how she formed relationships with local, "boots-on-the-ground" partners on her BRRRR deals in Kansas City, why she came to prefer value-add multifamily deals over BRRRR, and how she's able to find higher and better uses for properties in Southern California. From looking at our podcast stats, we know a LOT of you are in hot markets like L.A., New York, San Francisco, and Washington, D.C. If you've ever thought to yourself, "My market's so expensive... How can I invest in real estate?"—look no further. This episode will get you motivated, and it may just ignite your real estate investing career! Be sure to subscribe to the BiggerPockets Real Estate Podcast, sample the other BiggerPockets podcasts in our network (just search "BiggerPockets" in your favorite podcast app), and as always, if you appreciate this content, please give us an honest rating and review on Apple Podcasts. In This Episode We Cover: Why she abandoned the idea of building a tiny house empire How her career as an environmental consultant prepared her for real estate investing Why innovation can be overrated How she screwed up her first deal and still made 28% cash-on-cash Why choosing a “submarkets” is more important than the general market you choose Why she shifted from BRRRR to value-add multifamily investing How she unlocks value in rundown apartment buildings Finding “boots-on-the-ground” partners for out-of-state deals How she learned the development game by apprenticing under an experienced investor How real estate development creates money out of thin air Tearing down single-family homes and building 4-unit apartment buildings How she moves projects more quickly by using “prefabricated construction” Why “value-add” drives the biggest returns on investment And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Webinar BiggerPockets Money Podcast How to Find Overlooked Opportunities in a Hot Market with Andrew Cushman BiggerPockets Task Rabbit BiggerPockets Podcast 092: No (and Low) Money Down Real Estate Investing with Brandon Turner Podcast Movement BiggerPockets Money Tiktok Check the full show notes here: http://biggerpockets.com/show373 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 373. I googled top 10 cash flowing markets in the United States. And I went down the list and I was like, yeah, Omaha, they're all in the Midwest. And I didn't know anyone in any of them. And I didn't know anything about any of them, except for I had been to Kansas City one time in college. And I knew it was cool. And my partner at the time was a Kansas City chiefs fan. So we're like, that's it.

Kansas City. You're listening to Bigger Pockets Radio. simplifying real estate for investors large and small. If you're here looking to learn about real estate investing without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. Hey, what's going on, everyone?

This is Brandon, host of the Bigger Pockets podcast here with my co-host, David Green. David, having a good real estate week I hear. Oh, my gosh. busiest state I've ever had in my life with real estate two days ago, but it came out awesome. The next day, we basically put four people under contract. There's a ton of people that are house hacking right now in the Bay Area, which is a perfect market to do it because housing is so expensive, but springtime's coming. So this is like that last mad push when you can try to get people into contract before it just becomes crazy. And it's very exhausting, but it's very rewarding.

Yeah, very, very cool. Well, congratulations on that. And I know you got some cool flipping stuff going in as well. So, you know, keep it up. And I'm excited to hang out with you. I think you're coming out here in a few days. A couple days, yeah, absolutely. Yeah, we're going to have a good time. You know, the last time I was there, you told me that you're like, you're the best real estate agent I've ever heard when you're talking on the phone.

And that really did a lot to help with my business. I just wanted to say thank you for that. Oh, wow. I don't remember saying that. But, you know, you're welcome. Every once in a while you say nice, intelligent things. If you wait long enough, it's... Speaking of nice, intelligent things, today's episode is with

Lee Ripma. I hope I'm saying Lee's last name, right. Lee is an incredibly intelligent real estate investor. Used to be like a scientist and takes her scientific methods of being awesome and puts them into real estate. And you'll understand why I... And I know I say this a lot,

but really, like, it's one of my favorite shows we've recorded, like, ever. So many good things we cover here. In fact, probably my favorite thing we cover in the whole episode was talking about apprentices and how being an apprentice can make you so much, like, gets you years ahead of everyone else around you.

And I'm not just talking to newbies. I'm talking to everybody, including David, me, Lee, everyone else. Listen for that. Also, we talk really in depth about how you can invest in an expensive market, in a cheap market, locally far away. It doesn't matter. Real estate is multi-dimensional. Stay tuned for that conversation and more.

But before we get to that, let's get to today's quick. All right, on today's show, we talk with Lee about partnerships, a bit about partnerships and how she's found partners, including partners on bigger pockets. And so here's what I want to encourage you guys to do is go check out your local real estate forum. We have actually sub forums. Like, there's like a California forum and then there's like a San Diego forum and a LA forum. So there's like sub forums inside the bigger state forums. Go in there. Go find some people in your local market. And if you can't find your subforum, just go to the navigation bar, the little like magnifying glass and like the search and search for your zip code or for your city name.

And just see who pops up. See who's active in your area because those people may end up getting you deal someday. You may end up partnering with them. Maybe they'll lend you money. Maybe you'll work with them. maybe they'll lend them money. The point being, real estate, you've got to take it from online to offline. And Bigger Pockets is a great way to find people to connect with in the real world. So that is my quick tip for today. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect

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Steadily, landlord insurance designed for the modern investor. Here's the thing about traveling. If you buy food at the airport, a burrito, salad, bag of peanuts, you start wondering if you should have opened a savings account for snacks. So wouldn't it be great if you could actually earn money while you're traveling? Well, you can. Airbnb has something called the co-host network. While you're away, you can hire a vetted local co-host with hosting experience

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But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims. And traditional insurance companies

aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builders risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. Now, let's jump into this.

David, any final notes before we bring in Lee? Yeah, listen to this one twice, everybody. Lee has a lot of information, a lot of value. Brandon actually says some moderately intelligent things this time too, so you don't want to miss those. I would just plan on listening to this one twice because there's a lot of good stuff. Good stuff. All right, well, with that, let's get to the interview with Lee Ripma.

All right, Lee, welcome to the Bigger Pockets podcast. How you doing today? I'm doing great. Thanks so much, Brandon. Yeah. So let's talk about your real estate. I got a little bio here of you and you look like you're crushing it down there. And you're in the L.A. market. Is that right?

Ellis, that's where you live? That's where I live. Yes. And I invest locally in L.A. and I also invest out of state in Kansas City. All right. Well, this will be fun because a lot of people that listen and say things like, well, you can't invest if you live in L.A. or San Francisco, New York, whatever. And you're obviously doing it in there and you're doing it other places. So you're like kind of hitting both ends of the spectrum there. Absolutely. Yeah. Very cool. So let's start the beginning then.

How did you get into real estate investing? Yeah, so, you know, I sort of took the more standard path, right? Growing up, I didn't know anyone who was a real estate investor. My parents owned houses, but they were really just to live in, that sort of thing. So I really followed my passions, and I loved math and science. And so I became a field biologist. And I did that professionally. I worked professionally as a biologist for 13 years.

And I actually just quit my day job about four. months ago. So I started out, you know, I had this other career and I just sort of had this epiphany that all day jobs are dead-end jobs, right? Even if they pay you really well, because you're always building something for somebody else. And so knowing that, I kind of had this idea. So for my day job, I worked in, I was part of the entitlement process for development. So that's my specialty is helping people comply with biological laws related to development and impacts. So, So, David, yeah, you live in California, so you know what like an environmental impact report is, right? Yes, I do.

That's my favorite part of my job is getting the privilege of reading those. Yes, pretty dull. So I write, I wrote the technical appendices that underlie those documents. Thrilling. So if you have like an endangered species survey, that that would be me. Anyway, so I did, so I was doing that. And so I knew a little bit about development. And I just kind of had this idea, like maybe I could become.

a developer, you know? This was like back in 2016. And I had this thesis that, you know, the future of living was smaller. And so I was like, I'm going to become a tiny house developer, right? This is like my whole idea. And so at home and I'm telling my roommate, yeah, I've got this idea. And he's like, well, have you ever heard of Bigger Pockets? And I had never heard of Bigger Pockets. So I started listening to episodes. And I had listened to about three of them. And I came home and told him, I'm going to buy enough real estate that I can be on the bigger pockets podcast. That's awesome. So here I am. It was like four years ago, right? So I have this idea. I'm going to become a tiny house developer, right? So in order to vet my idea, I have to learn how to

underwrite commercial real estate, right? So I can still remember, like, really struggling through this article on BP, like trying to figure out net operating income and all my costs and everything. And it was really, you know, it was hard. And but I got through it and I figured it out. And then turns out, my idea was terrible. The tiny house thing, like, it doesn't pencil out or what? The numbers were just awful, right? And so I realized, okay, well, that's not the path, but now I knew how to underwrite commercial real estate.

And I remember I was talking to my brother, and he's like a kind of a Silicon Valley, like tech guy. And he's like, okay, pitch me, pitching your idea. Right. So I'm trying to do all this novel stuff in real estate, you know, like, I'm going to be, future of living is smaller and I'm going to be a tiny house developer. And he was like, why don't you just do like a standard thing, right? and you can innovate later if you want to.

Wait, wait, wait. He's a Telecon Valley guy and he said you can innovate later. This man stands alone as a God among men. Practical thinking. I love it. Yeah. Yeah, so he said that. And then I remember on a podcast,

I heard Andrew Cushman talking about how he had all these different ideas, you know, and he was trying them all out. And I had the same thing, like, I'm going to make a backpack that can carry a yoga mat. I had all these ridiculous ideas, right? And then I was like, oh, this is great. I'm actually just going to follow the totally standard path. And then I can't.

I can innovate later. And now years later, I am innovating a bit. But I followed the standard path to get started. You know, this is such a good point because, you know, I bring this up on like Bigger Pocket's webinars where I talk about people, like, if you want to start a business, like let's say you're like have this really great idea and you're like, I want to do a mobile dog washing, grooming business for. for chihuahuas and you're like, I'm going to do it.

Like, that's like not been done in your area ever. And it's kind of a gamble. I mean, it's a huge gamble. Like, you're just completely risking everything. I'm like, when you get in a real estate, it's like not like dozens or hundreds, but millions and millions and millions of people have done exactly what you want to do. And so like, it's just like, okay, follow the script that's been done millions and millions and millions of times before and just do whatever else is doing.

And it tends to work okay. I heard such a good quote. I just got back from Dallas for the killer. Williams family reunion event and Gary Keller was talking. And so Simon Seneca was supposed to be talking, but he actually got the flu really bad. Oh, no. Lied out. And Gary said something that nobody wants to hear, but everybody needs to hear. And he said, you just have to make peace with the fact that success is going to come from doing the boring thing over and over and over. I just read that today, his quote, saying that, yeah. Really? I was like, that is so good. That's like a David quote.

And then that's funny. We never want to because innovation just sounds so much fun. right and that's exactly what happens you get caught up in that but but the reality is like you put in so much work to get good at doing something and and you've done like like surfing right surfing sucks I'm sure well Brandon loves it but I don't like doing anything I'm not good at it was not fun the first two times that I went because you just swim a lot and your shoulders get tired you don't never do anything so if I finally got good at surfing it'd be like oh now I learned it I'm going to go do something else why that's when you get to enjoy the fruits of your labor and I could not agree more you have to make peace with the fact that success will become boring if you just stay focused on what you're doing

and kind of scale from there. And there is a point to work innovation in, but it's not until you're on a well, well, beat path. Yeah, absolutely. Very cool. All right. So what did you end up doing? What is that, what is that well beaten path that you followed for the first deal? Yeah. So it was, I remember, it was right before my wedding in 2016. I took off. I went to Iceland with a friend of mine. We're driving around Iceland in the rain. And I put on a bigger pocket podcast. And I was like, I want to do this, right? And he's like, I want to do it too. So we're like, great, we're partners, right? So we started looking into a bunch of different markets. So we lived in San Diego at the time, so we were looking at that. And then we were looking at having a vacation rental in Mammoth

Lakes because we both really loved it. It's a mountain town here in California. And I kept everything I was underwriting, it just had negative cash flow. And I was like, I don't get it. I don't get how you can scale negative cash flow. This makes no sense. So why don't I do, why don't I go at a state, At the time, I was very sold on cash flow markets. And so I, this is great. This is how I picked Kansas City, right? I'm a scientist by training, ready? I Googled top 10 cash flowing markets in the United States.

And I went down the list and I was like, yeah, Omaha, Des Moines. They're all in the Midwest. And I didn't know anyone in any of them. And I didn't know anything about any of them, except for I had been to Kansas City one time in college and I knew it was cool. And my partner at the time was a Kansas City Chiefs fan. So we're like, that's it. They got a good team.

That's how I pick where I invest. Yeah, there you go. Actually, they weren't good though. They weren't good. Yeah, we were lamenting that we didn't buy season tickets then. So anyway. Can we just highlight how this is exactly what Brandon says, where he says, just pick something and go do it.

It doesn't matter what you pick as long as you pick it. Like you just chose a name out of some MSN.com list that somebody threw together. You're like, okay, I'll go there. And now I'm really excited to hear what you went and did with it. But I love that you're a super smart. You're a scientist. You said, I'll just Google whatever Google says and go do it. And what do you know?

You end up on the Bigger Pock's podcast. Obviously, you did it well. Right. And I think, and I'm all about that. Like, I tend to have an action bias, right? Where I'm like, it doesn't really matter what you do as long as you're moving forward because if you're moving forward, you can always pivot later. Right?

So I just wanted to get started. So what I did is I found what I thought was a deal in Kansas City. I called up a broker who I found on bigger pockets. I was like, hey, is this a deal? And he was like, yeah, that's a deal. And I was like, okay, great. So I flew to Kansas City. And it was, I remember it was winter.

And so everyone in Kansas City is wearing like, you know, like jeans and like sweatsh. And I have this giant parka, like, down jacket. It's not hard to spot the California when we go out of state. Yeah, these snow boots. And I'm like, what? It's so cold here is like the dead of winter, right? So then, yeah, so I ended up that deal. I ended up like losing that deal, right?

And someone else bought it ahead of me, which I think was fine. And but while I was there, so this is totally crazy, I was driving around Kansas City, right? And I'm like, okay, I need to find, you know, and I talk about this a lot. Like the MSA, you know, Kansas City, Indianapolis, Cincinnati, whatever it might be, right? L.A., it doesn't matter as much as the sub-market. So within each of those MSAs, there's a sub-market, and there's great sub-markets, and there's sub-markets that meet your needs. And so you're really after a sub-market, right? And so I'm driving around, I'm looking for that sub-market, and I'm like, ah, it's like not it. It's like not it.

You know, this isn't it. Oh, this is it. So I found this place, and I just really thought, like, this is it, right? It's only 10 minutes north of downtown. There's a bunch of redevelopment going along the main street. There was this cool bar that had all this pickleball going on and lots of young people. And I just thought, okay, this is it, right? And then there was a guy posting on bigger pockets. This has not happened before or since. Like, I've got this deal under contract and I don't know how much the rehab's going to be. I end up talking to this guy on the phone. I'm like, hey, look, if you bail on that deal, like, let me know. So he's like, yeah, I'm bailing on the deal. So he gives me his inspection report. So I've got the inspection report for this four unit,

building. The owner is in distress. He has a commercial loan and the bank is called a note on the loan. And he's also getting divorced. So he's like double motivated, right? And so I look and on the same street, he actually owns multiple properties and he has one other one on the market. So I'm like, okay, this is great. So I make him a cash offer. So the list on the fourplex was 175 and the list on the duplex was 150. So it was six units total, duplex and a four-flex. So I make him a cash offer. The total list was $325. Cash offer $2.25, right? And he immediately accepts it. And I'm like, oh, man, it should have offered lower. That's exactly what they say. So that's what I did. That was actually my first deal in Kansas City. So it was a Burr deal. It had a ton of rehab. And did I mention that I don't know

anything about construction. All right. So let's go into that. A lot of people are terrified by that first deal if it's a rehab. So how did you get through the rehab? What was that like? What was your experience? Was it all easy?

Did you learn a lot? No. It was not easy. It was actually a total nightmare. But I got through it, right? And I think that's the important thing. So I think what I did is I took everything that I've been hearing on the Baker Pockest podcast.

Like, what does everyone say? Like, you got to do value ad. You got to, don't buy single family. I'm like, just go bigger. Okay, well, how about I just listen to these people, right? So I went and I did it and it was great. So I thought that I kind of had it figured out, but it turned out that I didn't. So I had this broker and that broker was both a property manager and a rehabber red flag. So he, he, like, while we were still in escrow, had come up with this rehab budget for me. And I thought I was really ahead of the game because I had this thing, you know, and I think the rehab budget was like 45 grand on the

4plex and it was like maybe 20 grand on the duplex was like 60 grand all in. And, you know, it was all laid out and everything. And so I thought, okay, this is great. Like, I'm just going to send this guy checks. He's going to send me pictures. And this, you know, this rehab's just going to be, it's just going to all be buttoned up, right? But it wasn't. So the communication kind of starts lagging on the rehab, right? And I just told my partner, you know what? I'm just going to fly out there. I'm just going to fly out there and I'm just going to see what's going on. So I get out there and I will never, I will never forget this. It was a heat wave in Kansas City. It's July. And I go into my fourplex, which is completely, it's basically gutted, right? And I just remember thinking like,

man, this project is such disaster and it's like never going to be finished. And so I go in, I don't really know anything about construction. My partner knows about construction. But I know a lot about project management and getting things done. And I knew that what was going on was a complete disaster, right? So I remember calling my partner and just saying, we have to fire this guy. I don't know what we're going to do, but we can't use him anymore. And so we did. We fired him. We ended up taking over the project. We almost acted as like general contractors. Then we found another contractor. So I thought I had this $60,000 rehab that was going to take me a couple months. It's going to be great. I was going to, you know, and I was in it all cash.

So we could talk about financing on it if you want to, but I was in it all cash. And so I thought I was going to do this refinance. It was going to be great. Well, it ended up taking me to finish at rehab. I closed escrow in March and I didn't get my cash out refinance until December. So it took me a long time to do that rehab. And the rehab was also way more expensive. Like I thought it was going to be 60 grand and it was 150 grand, 140 grand. Oh, wow. So it was way over budget, way over time, but it actually totally worked out because I did a nice rehab, I could get these high rents and my values actually came back really, they came back from really high from the bank. So I was able to cash out pretty much all of my money. So I actually did successfully complete

a burr deal and then I later exited those projects out of profit. So it all ends well. But at the time, it was very, very difficult, you know, going through it. But at the same time, I ended up spending a lot of time in Kansas City, getting to know a lot of local people, having a nice local network, which I think is key in your market, you know. And so there's a lot of good things that came out of that. I also learned a ton about rehab. So to go back to this surfing analogy David used earlier, it's like the first time you went out on the surfboard, you went out there and you fell off your board and then you got hit by a wave and you scraped your face in the bottom of the ocean, you got a little scar. And then you went out the second time, you did it again and you went out a couple more days.

And so like most people would look at it and be like, man, surfing sucks. You should just quit. That sounds like a horrible thing. But now today you're like riding waves like, you know, doing yoga while, you know, upside down on a wave. Because like you can't get to the other end. You can't become a good server without being a crappy one. You can't become a good real estate investor without going through the difficult times. But most people just stop.

They just don't do it. So do you regret those first deals or you obviously would just do them differently today? Not for a second. Actually, I wouldn't do anything differently. Right? I mean, I would have, like now, when I do deals like that, obviously I'm aware of my rehab budget going in. I'm aware of the timelines. You know, obviously those are, those go smoother, if you will, today. And I have structures that make it go smoother today. But I wouldn't take that back for anything, right? Because that experience was so, so valuable. And I learned a ton and I also made money. I mean, the thing that really, I remember I ran kind of my numbers when I finished the project. And my on cash return was like 28%. And I was like, great, boom, sold, you know?

Like, that was a botched job. You know? Isn't that what's awesome at real estate, especially if you're doing a bird deal that you can screw it all up in your consolation prize is a 28% ROI. And I'll hear people complain about that. I thought I was going to get all my money back out of the deal. The contractor screwed me over.

The ARV came in, though. David, in your book, you said to do this and I did it. And it didn't work. And I'm like, okay, so everything went wrong. and you have a 28% return on money and $40,000 in equity on the first deal you ever did. And a million dollars in education. Yeah. That's, see.

Killer deal right there. Lee, you have the right perspective. It's that you didn't expect surfing to be easy when you first did it. Right. So what happens is Brandon and I are metaphorically surfing in real estate. And we're having so much fun that we're talking to each other. Like, we got to tell everybody about this. It's just the best feeling ever when real estate works great.

And you make $100,000 on a flip. you get this cash-filling property and you get to live off the cash flow. So we're people who espouse the virtues of surfing. We are like out there, disciples of we love surfing. We're telling everybody about it. And so people hear about it. They say, that sounds fun. And then they go have the experience of, you know,

scraping their face on the bottom of the ocean and swallowing salt water and not catching a wave. And they say, oh, that's a bunch of crap. It doesn't work. And it just, I shake my head because, well, did riding a bike go that way for you? When you got on a bike, did you just take off down the street and you were super good at it? Why? And every other thing in life, were you okay to put, to take the bumps and the knocks learning how to do it? But with real estate, there's this understanding that, oh, it should just be

easy right away. Yeah, it's, yeah. And there's just, there's just no way through it, right? There's, you've got to have these projects. You've got to go through these rehabs. And what's amazing is how much you learn going through it. Like, you can read, you know, you can read about it in a book all you want. But the experience is really what is going to teach you. And I think I have this relationship with just, I have like mental fortitude where I'm able to go through that. And even when I was standing, you know, in that moment, I always remember when I was standing in my half done vacant project that was just like basically like, I don't know, catching my money on fire. Like it was just just like churning through all this money. I still, even though that was hard, I was like,

I will get through this, right? I believed that I would be able to get through it and I would be able to be successful. And I had no illusions that it was hard, but it's okay that it's hard. Most things in life that are worth doing are actually hard. Yeah. Yeah, that's really good. So what came next? I mean, you didn't give up. So did you buy more in Kansas City then? Yeah, I did. Yep. So I started out and doing really like these burr deals, right? And I have since transition to doing, I mean, it's always been multifamily, but I would say I switched to doing more of a value-ad multifamily model in Kansas City. And to me, the difference is, you know, a burr deal is like highly distressed, right? And you can only get cash financing. You kind of have these really unknown problems,

this big construction budget, right? And if you do a value-ad multifamily, you're going in, you have these identifiable problems. You're probably turning one unit at a time. time and you can get bank financing. So you're still getting the same result, which is that you're adding a lot of value and then you're able to do a refinance. It's just, it's just on a little bit of a longer time scale, but it also really reduces your risk. And so going in, you know, I didn't have that much capital to start with. And so I really wanted to get these high cash on cash returns. And Burr was really appealing. And now the value add multifamily is actually more where I'm focused on my on my long term portfolio. That's a pivot. You started?

You learn, you realize, okay, I've got momentum going. Now I can take what I learn and apply it and something works better and you pivot. Yep, exactly. But if you don't get started, you know, there's nothing to pivot. Yes. I was thinking when you started talking about that whole momentum idea and I couldn't come up with a good analogy, but it's really good that if you're like, I don't know which direction I want to go, getting started is always the hardest, no matter what direction you're going to pick.

So you're better off to build momentum in some direction, and this is where I couldn't come up with an analogy for the first time. and then move your momentum from wherever you started to the next area and enter that with the momentum, as opposed to stopping and starting. Apollo 13 style, you can like swing around the moon and pivot by using your momentum and gravity. That happened in that movie. It did. It did.

They went around the air. Space cowboy. Yeah. There you go. But they couldn't have done that. They weren't not moving. So very cool. All right.

So you started doing these value ed. And I like the way you kind of differentiate that because when we think burr, again, I think like usually single family house or very small multifamily. It's a nasty property. You usually buy it with a hard money lender or cash or something like that. And then you fix it up and you go to a bank. And it's a little bit, it is risky. I mean, it's not a it's not a risk free thing because you're dealing with a big rehab versus you're buying a multifamily that's already rented. It's just not in maybe not it's not it. Maybe it's a C class property and you want to turn it to a B class property. So you buy it at C and you improve it one by unit at time. to a B, and then maybe you still can refinance, get your money back out and go do it again. So it's just, that's kind of how you differentiate, right? Yeah, yeah, exactly. You know, I think a bank, you know, a bank doesn't want to touch those really nasty properties, right?

If there's a giant hole in the roof and, you know, some of the units are gutted and it's vacant and, you know, that's not a bank financing type property. That is their collateral and they're not interested in having that as collateral, right? But once it's nice and it's rented, and a lot of times it'll be, just like you said, it's a reposition or you've got tenants who are paying maybe $500 a month,

but you know in that area, if you were to renovate nice, so you could get $800 a month. Or, you know, there's some delta there in, you know, potential rent versus rent right now. And all you have to do to unlock that is some cosmetic renovations. Like, great. Yeah. Yeah, you know, one thing we don't talk about a lot on the show, but I'll bring it up here because I'm just fascinated by this,

that concept that real estate is so, like, multidimensional. Like you said, like, it might be rented for 500 a unit, right now. And maybe you're fine with that investment. It works out just fine. But I like asking that question, well, what if you were to rehab it with 30 grand? Then what it would rent for? What if I read I have rehab? Rehab it for 150 grand. Then what it could have rent for? And I'm not saying you put more money and you naturally are going to get higher rent all the time. There's limits. But this is where you can see opportunity where others don't because you realize, hey, this market is actually improving dramatically. And there are some higher rent, you know, higher comp rents around the area. Yeah. And so you're saying,

hey, I'm going to think creatively about what this could be. And so you're finding deals that way, which is cool. I'm curious, I guess, of how you're able to do this long distance. I mean, living in L.A., you're not flying out to Kansas City every week, I'm sure. So what are some of the tips and tricks and tools and ideas that make this work for you buying in Kansas City without being able to be there every day? Yeah, absolutely. So I have a structure that I don't know, I haven't heard anyone really talk about,

where I have a local partner on all of my deals. And so we're splitting that deal in some way, right? And they're actually there. They're doing the rehab. Sometimes they're doing the property management as well, especially while we're turning it around. And then we're, yeah, we're splitting it. And so we're both bringing to the table, you know,

whatever we're bringing to the table. But that way they are there. They're invested in the project and they're making sure it's the success. So that's been really powerful for me. And I know other people have other systems. and I'm sure those work, but this has been great for me. I love the idea of local partners

if you're going to go a long distance. When I bought my mobile home part the first time, when Ryan Murdoch brought it to me, he was just like, hey, I don't know if you want this, but it's a 50 unit that you said you wanted. So here you go. And I was like, I love this deal. There's no chance I'm doing it without you.

Because like, yeah, I don't know that market. I don't know the contractors. I don't know the first thing about anything in that market. And so, yeah, that's super smart. So how do you find, how are you finding partners? And then how do you vet them and how do you like know you're going to work well with them? Yeah. And, you know, I have found them through different ways, right? I think most of it's just networking could be chalked up to networking,

but like one of them I met through my agent. He was also working with her as an agent. And then another one I met because we were investment property neighbors. He owned the property next door to me. And another one I met through bigger pockets, just through networking. And I think one thing to think about when you're looking if you want to do a local partner or just want to work with anyone is that you really have to vet kind of their mindset and their approach and make sure it jives with yours. Yes. That is really, really critical. And I have made the mistake of not doing it.

Yeah. Yeah, that's because not everybody wants the same thing. Not everyone approaches problems the same way, business the same way. So you want somebody to like, like a partnership. It matters like their skill, but it almost matters more their heart. You know, like going into stuff. Because when things go bad or when you have a disagreement, how do you get through those things? Yeah.

How do you treat people? How do you treat your contractors? What's your relationship like time versus money? You know, what's your, right? Because I remember my first partner, we were friends and I didn't really vet him. He's a great guy. He's a great friend. But his primary motivation was to save every single penny possible.

And I remember us having this argument where he was like, $100 is $100. And I was like, not if it takes two weeks. Yeah. And we had this fundamental difference. That's probably why David and I don't work together yet. I'm putting together IKEA chairs in my kitchen. David's like, let's hire someone to do this, man. What are you doing?

I'm like, yeah, but I can save $20 by putting together this IKEA chair. Well, I really like the point you made Lee about like money is money, but so is time. And really, if you think about it, for almost everyone listening to this, money and time are the same thing. Because you trade time to get money for the most part, even if it's not working out of a job. You're still trading time out of your. day to make money. So when you think about something costs $100, you also have to think about how much time will I spend to save the $100 or get back if I spend $100. If I can spend $100 and have someone else do the work, can I make $1,000 with that time? Right. And I've really changed

the way I look at money and I've almost looked at money as just a different representation of time and then throw into it energy, right? But Brandon likes to put that IKEA chair together because it relaxes them and he feels accomplished and he enjoys doing it. I don't. It frustrates me. It takes me too long. I want to be done. I want to be doing something else.

Yeah, I'm with you. I mean, I'll call someone from TaskRabbit to assemble my IKEA furniture. If I had a task grab bit in Maui, I would probably do that. Listen, Brandon, you can find someone to assemble your, do you have Craigs? I may. Lee, it's a lot of cause. Don't wait for time. This morning, just before this, I was, I was transcribing my own video that I recorded this

morning. I'm like doing transcripts and edited the whole video and the whole time I'm like, what am I doing? Like I even have like people that work with me and that do video editing, but I was like, I don't take me longer to upload it than it will be just me to do it myself. Not true. That's, uh, so Mario, my flip partner, Mario Mazamuto, he's Brandon's friend and I. We had the very same conversation. Mario runs an appraisal business. And he told me about how he and I wanted to flip more houses, but he didn't have time because he's doing like tons of appraisals.

and it was a super easy thing to leverage. Like he's got assistance and know how to do it. He's trained them what to do. There's a science to doing appraisals. He really just needs to verify like the last couple steps to make sure it was there. Why is he going to the house and taking the pictures and entering all the stuff in himself? So he finally is like, I'll give it a try. And in two weeks, he said, I'm never going back.

I don't know why it took so long. And now we're flipping all these houses because Mario has time. So this is a complete side note. I don't know how we got on to this topic. But I'm a very big fan of. leveraging other people to do stuff and focusing on what you do best. And it sounds, Lee, like what you're saying is when you're picking a partner, find someone with a similar philosophy. If your partner wants to be out there doing the works, like I read a critique on

good reads of my longest investing book. And the guy said, a book about buying rehab properties from a guy that does know how to change a lock. No thanks. Why would you want the guy that changes a lock to write the book on how to put systems together? Well, here's the thing. That guy doesn't have time to write the book. He's out changing lots. Or even buy the houses. Yeah, he's changing my locks for me. That's exactly right. But it's a good point. You don't want to partner with that person. If they're going to be out there, you know, saving money, finding old nails they can straighten out and put back into the wood instead of looking for the next deal or managing the people or, you know, saving money somewhere better. Yeah. And I've always had this philosophy. Like when I was in graduate

school, I was kind of famous for saying time is money because nothing is less valuable than a graduate at students' time. I mean, they would just spend, it drove me nuts. They would spend three months to save like $500. I'm like, you know you can outsource that, right? So then to do my thesis project, you know, I wanted to do this really complicated DNA sequencing thing. And I outsource it. And everyone was like, shocked, right? I'm like, I got a grant to pay for the outsourcing. And then like, lo and behold, here's my project. And the thing, yeah, anyway, the thing about this DNA sequencing, not to go too, too high into it is that you didn't know if it didn't work until the end. So, you know, you could waste two months and then it didn't work and you wouldn't know, right? Let's test that out

to a professional. Yeah, that's great. So what are some of the things that you do now leave with your time? Whenever you found is the highest and best use of your time? Yeah, that's a really good question. So I think one of the, so I have these different things that I'm doing, right? Like we've been talking about my portfolio in Kansas City, but I also do development here in L.A. So that is, what I quit my day job to do. So I think right now in development, you know, I spend a lot of time talking with investors, talking with potential sellers. So I think connecting with people is a good use of my time because no one else can do that in the way that I can. Right. And I used to run a consulting business and I could, I had staff that would, you know, they could go and do the work. They could go

and do the surveys for the keynote checkers spot butterfly. But I was the one who talked to the clients and explain to them like, this is what we need. Here's how we're going to approach this project. Here's what it's going to cost. And I couldn't outsource that portion of it, right? So I think talk, I know, it sounds strange, but connecting with people, forming relationships with people, I think that is actually a very good use of my time.

And yeah, even, and I still do, you know, I do all my own underwriting. I'm looking at deals. I'm going through deals. I'm calling agents because what I'm doing in L.A. is I'm usually buying like a single family home, tearing it down and building a fourplex. It's actually two duplexes on a lot.

But anyway, so I am the one who knows like, okay, this is the zoning that's going to work. And they, you know, oh, there's this setback. And, you know, that's the kind of thing that's pretty hard to task out to someone else. Did you say you were buying single family houses tearing them down and then building up four plexes on them? Yes, but it's actually two duplexes, but yes. Okay, let's talk about that because that's super cool. How do you get into that? Like, how are you going to do you're like, I'm going to go tear down a house and go build a four units on it?

No, no, that's a great. That's a great question. Well, you know, going back to the beginning of my story, right? We talked about how I had this kind of idea that I could become a developer. And that was actually something that was always intriguing to me because, okay, so backing up, I really love real estate because you can create money out of thin air, right? You create money. And as a scientist, I'm very taken with this, right? Because matter cannot be created nor destroyed, but money can. Real estate is the real alchemy. Right? So that, you know, creating equity has always been really what I've focused on.

And I'm a big fan of creating equity. And I'll talk to people about how equity is really like the big driver of your return on investment. But anyway, so development fits into that, right? Because you're creating a lot of equity. You're taking this, you know, I don't know, crappy old house. And you're tearing it down and you're building two big duplexes. Right. And so you're really increasing the value of that. And you can create a ton of equity doing it. And so I really like that. But so how did I get? What are the steps that I took to get into development? I did it actually through personal relationships. Right. So I started out in real estate. And I remember I met this guy. It was actually at a pride parade. So he's the kind of guy who's in a pride parade. Not gay. And our wives actually worked together. And so we're in this parade, this pride parade. And then he's the kind of guy. And then he's the kind of a pride parade. And then he's, like this real estate developer. And I'm like, oh, that's so cool. You know, I want to get into real

estate. And then once I had done a couple deals, I sent him. I was like, hey, check, you know, check it out. Like, check out what I did. And I just kept in touch with him over like the years. And then finally it kind of came. He was like, well, why don't you come in? Like, we need someone to do acquisitions. You're an agent. Why don't you come in? And you can help us and you can learn. And development is actually very, very complicated. And so I'm was, it's more of an apprenticeship almost the only way to learn it is to almost be an apprentice, right? And I had tried to teach myself some of this stuff and I was not very successful. So getting in with them and then being able to provide value because I was an agent and I was able to close these deals. And then they showed me like,

okay, this is what you do. This is what you need to look for. Because they taught it to me and their masters, I learned it so quickly, right? And so now I can go out and do it and then I can, yeah, I can, yeah, I can source those lots and then I bring them to them. And I'm like, okay, this one works. See, here's all the underwriting. Then they check it and they're like, yeah, that works. Okay, let's do it. Right. So that is how I went from, I guess, being a biologist who had never invested in real estate to being a developer four years later. So I want to bring something up here. We don't talk enough about this, but for thousands of years, I don't know, maybe longer, forever, humans operated on the apprenticeship sort of model.

You just learned from somebody else who taught you that. That kind of went away over the last 50 years. but that is one of the greatest ways to get started invest in real estate is to go work for a real estate investor. And people today, I feel like are, I don't have the greedy is the right word, but like so independent. Like, no, I'm going to figure this out on my own. I'm going to go like do this. Like I can guarantee you if I would have spent the first, like I've been now for 14 years I've been in real estate or 13 years. I've been in real estate. Had I spent the first three years instead working for somebody who was doing what I'm doing today,

I would be way further than where I am today. Like in the beginning, yes, you might be feel like you're going slow because you're not actually buying real estate of your own or you don't have the biggest share or piece of the puzzle. You might be getting either no equity or maybe one or two, five percent of a deal, whatever. And so you feel like you're going slower than somebody else to start at the same time. But because you're learning so much more and way faster right then, your five, 10 years down the road, you're going to be so much further ahead. I mean, actually just yesterday, my buddy Micah just started working for me. He's actually in my C-Shed here right now. I just started working as a kind of our bookkeeper, but he's jumping in from not having bought any real estate.

So now we've seen how we buy hundreds of units in mobile home parks and flip six figure houses. So like hopefully 10 years from now, he's way farther along than where he would have if he wouldn't did it all by himself just starting from day one. And so, yeah, again, I think the apprenticeship thing is just such a good idea. In fact, David, you've done the military apprenticeship thingy, right? Yeah, several times. Yeah, I'm doing my first one here shortly. I got a guy coming out to move to Maui for six months to do an internship. Nice. So what Brandon's referring to is, it's called the Skills Bridge Program and the Air Force. Different branches have names. But the military will pay military members for the last six months of their employment to go intern with somebody for free and learn skills to help their transition. So if you're in the military and listening, call me, you call Brandon when you want to get out.

But this is on my mind every single day. It's like I cannot stop thinking about this because as I'm trying to grow my business, I have all these people that say, I want to come learn from you, David. And then we sit down and they know nothing. about how to do the job they want to do. And they want to me to pay them to learn how to do something they're supposed to be helping me with and take six to nine months before they even know how to do the thing that I've been paying them to do. And then I don't even know if they're going to do it well. And it doesn't make any economic sense. So what happens is I don't, they don't get hired. They don't learn. They keep listening to a podcast and they never actually make any progress. And I was getting interviewed on a different podcast for Acton Academy a couple of weeks ago. And I realized what I was saying it, that I make more money now in real estate in one month than I

used to make in about two years when I was like in college or right after college. It almost from a financial sense didn't make sense for me to work during that time when you compare how much money I can make now with the skills I have versus that my time is worth so much more. And if I had done what you said, Brandon, if I had trained underneath someone else who was doing this for free, when I finally started being able to do it, you're going to make so much money if you average it out over the year or two that you didn't make much or anything, you still come out way ahead. And that's the thing is like what Lee said on that bird deal, I got a $100,000 education or maybe Brandon, you said that. And I ended up making money. And if you

really want to learn tough things like this, that's the way you have to think. Yeah, absolutely. And I used to hire right in in my former life as a biologist. I would hire a biologist. And I would never hire anyone unless they had one marketable skill. So you either had to know how to identify birds. Like you had to have something that I could put you to work on right away. Otherwise, you didn't get hired with me. And it's like, oh, well, I can learn. Well, I don't care. Go learn then. And then give me a call. Yeah. Yeah. That's exactly what I tell them when they say, hey, I'm a really hard worker. Bring me on and hire me and teach me. I'm like, then go learn how to do it. And then you have the skills to apply for the job you're asking to get, right? Or if you don't want to do

that come work for me for free and I'll and I'll teach you. And so far, I've had four people that said I'll do it and then all of them flaked before they actually came. They didn't want to come learn. And it's a very high chance that a year from now, they'll be in the exact same situation that they're at in life. So true story. I mentioned Micah a minute ago. Micah, I'm going to talk about you again. So Micah, like here's the story of how Micah came on. So Micah sent me a letter. He's been listening to the podcast for a little bit of my house, just said, hey, thanks for the podcast. Sent me a gift card. What was like 25 bucks or something like that? It's a monkey pod, which is my favorite restaurant.

So clearly knew what I was interested in. So then I asked him just to help out just helping out with the bookkeeping. He had experienced bookkeeping and doing like financial stuff. Just like helping with the flip stuff organizing it. Just gave him a little bit because he brought a marketable skill to the table, which was like knowing how numbers worked and knowing how bookkeeping worked. And anyway, did an awesome job of that. Just knocked out of the park.

And so then like, I don't know what it was a month ago. I offered him a full-time job like working here. And so like, yeah, bring that marketable skill. but I didn't even know that until he'd worked for a couple months, like just helping me figure out on a small level. So yeah, the apprentice thing, the working for other people, it's so, so key. So I would actually challenge everyone listening to this.

I know there's like two types of people right now listen to this. There's people that are just getting started going, oh, man, I want to go work for a bigger real estate investor. But then I want to turn the table a little bit and talk to everybody who's like David and Lee and me. Who can we? Not that we're going to go drop everything we're doing right now and go work 40 hours a week, but who can we learn from that's where we learn from?

and that's where we want to be five years from now. Right? Because oftentimes we kind of, the experience people have this big head of, like, we're the top and there's somebody else that's going to learn from us. But we actually, if we humble ourselves and say, hey, we're just kids and newbies at the same time compared to where we're going to be. We're newbies to our future self. So who can we go learn from an apprentice under that's 10 years further down the road from

where we are? And how can you add value to that person, right? What can you do? Because reciprocity is like a strong human emotion, right? So maybe that person needs an introduction to an investor or maybe they need your take on whatever it would be, right? Don't go to them and say, how can I help you? That's the worst, right?

Yeah. Think of something that you can help them with and go and add value and it'll come back to you, right? And it's okay if it doesn't, you have to go into it like with no expectations, but it will. It will. It comes back in life, right? and yeah, and I have this whole sort of philosophy of life, right, where you have to think about other people's needs and make sure their needs are getting met, right?

So I have these local partners. And I would never try to like hose them on a deal. Maybe I would be in a position to, but I never would because if you host someone on a deal, you're going to do exactly one deal with them. I'm not interested in doing one of anything. I would say like, do one so you can do 10, right? So I'm building these relationships with people

so that we can go do lots and lots and scale together and do lots of stuff. I'm always negotiating to fair. Anyway, that's just something about working with people, I guess. Yeah, yeah. You don't want to screw people over because it's going to come back to you. I mean, I had this conversation yesterday with a guy who is local here to Maui. A friend of mine wants to get into wholesaling or like find, you know, he wants to get into flipping eventually and rentals eventually.

But in the beginning, I was just like, you know, just help me find some deals. and like, we'll make sure you're compensated. We'll make sure you get paid somehow. Whether or not you do the official wholesale contract, assign it, blah, blah, blah. And I was like, normally that's not done that way because somebody could screw you over. Like, if you bring me a deal, like, I will make sure I take care of you. But like, I would, like, and he kind of asked the question. Like, well, you know, what if you just like took the deal for yourself?

And I've heard other people say that as well. Yeah, but then I'm never getting a deal from you again. So why would I? Why would I screw you over if you brought me something good? If you have the skill to bring me a deal, why would I say? screw you over because I just like would be shooting my I'd be killing the golden goose right yeah absolutely and you know trust and relationships really make the world go around right we may write up everything into LLC operating agreements and things but those are that isn't what governs every day communication

and partnerships 100% agreed so lead can you share with us a little bit about what your portfolio looks like now yeah so right now I'm in the in the middle of an exchange actually but so currently that I own, I have 23 units. So 22 of those are in Kansas City, Missouri, and one of them is in Mammoth Lakes, California. Oh, you got the vacation rental? I sure did. That's awesome. Yep. Next, you just need the tiny home community. You're set. All your dreams have been come true. It's so amazing, though, really? I've been thinking about it. I should buy a mole home park and make it into my tiny home unit. You probably should. Actually, we have been having legit conversations out here in Maui lately about building a campground, like a time. It's a time.

tiny home community slash campgrounds slash like, get a bunch of old like VW buses. And I don't know, you and me could, we can make a nice, I could be your local partner here in Maui and you can do the rest and it'll be great. Let's do it.

I've got an exchange. I'm ready to buy some land. Like, let's do it. That's great. I have a feeling no, like the reason we haven't moved forward is I've thought it's going to be very much like your first entrance into tiny homes. It's like,

wait, this doesn't make any financial sense. It doesn't make any sense. Sounds so cool. You know why it doesn't make any sense? Because the cost of, a tiny home is way too high. Yeah. Which... It's tiny and yet it's so expensive. And I think there's solutions to that that like, especially if you like can get them pre-built. Like I've also,

I wonder why don't they just build them in China and put them on a boat and send 20 of them over here and you get them for five grand apiece. That feels like it should be a thing. But it's not a thing. It is that is a thing, but it's not five grand. Yeah. It should be five grand. Yeah. The problem with China is quality. So you got to like really check your your quality control over there. But yeah, so absolutely. And then in LA, so I don't own any of my own deals. I just own sort of shares in the deals, if you will. So I buy into my own deals. But I don't own 100% of them. I think listening to Brandon Turner talk about tiny homes is like listening to Andre the giant talk about weight watchers. What he's going to be? Brandon would need like three tiny homes

stacked on top of each other just to get inside a one. I used to live in a car. So, okay, I stopped in a car. live in the car. I slept in the car every day. Yeah, with the windows rolled down and your feet sneaking out. I just curled up in a little ball and crying myself asleep. Listen, compared to a Prius, a tiny house is a picture. I agree. I thought I, Prius camping, we did that for years. Yeah, we called you the Trias. It's true.

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Amazon gift card. That's bill.com slash bigger pockets. I like it. Okay. So you've got a portfolio of 22 Burr properties or 23, 22 in Kansas City. And then you're into value add multifamily now. Can you give us like a brief overview of what that looks like as far as how you work yourself deals and what you're concentrating on to build your business now? Yeah, you mean for my portfolio

in Kansas City? Is that where you're doing the value-add multifamily? Well, there's the duplex duplex model in L.A. So I could talk about that. Yeah, let's go there. Yeah. So that's, it's really kind of a cool model. So in L.A. you have, you know, obviously there's zoning, right? And so there's a lot of zoning that is single-family home, but there's also a lot of zoning that allow multi-units. But on those multi-unit zoned lots, you just only have one single-family home, right? So it's one of these highest and best use questions, right? So what is kind of the maximum build of that property? And so what I do in L.A. is I look for properties, you know, in areas that are like, I like to call them trend-setter adjacent. So they're not, you know, it's not your like hot,

market. It's the market like right outside of that. And then I'm buying a single family home and I'm tearing it down and I'm building two very large duplexes. And what we're actually doing is, as you guys know, when you do construction, you're exposed to a lot of like time and cost risk. And so the group that I'm with, we're like, how are we going to control this? Right. And so we ended up going with prefabricated construction. So prefabricated construction is really, really cool. It's like a kit of parts. And what you do is you have like a parallel process, right? So, you know, you've got your, you've got your lot, you scrape the lot, and then you pour foundations. And while you're doing all of that, you're actually in the factory building all of the pieces that are going to be, that are going to become your house.

It's kind of like Legos where you're building all the pieces and then you're taking them to the site and then you're putting them all together. So it's, it was really cool because there was a project that we were doing and it was next to a stick built home. And it was just ridiculous. Like it was basically done before they had finished framing the second story, you know? And so it was just this awesome comparison. But yeah, so it's just way faster. So it's not necessarily cheaper, although it's a little bit cheaper, but the real savings is on time.

And getting back to time is money, it's huge, right? You're quicker to bring this, you know, to rent, to market, whatever it's going to be. And you just don't have that exposure when your projects don't go over a long period of time. Yeah. So, yeah, so it's prefabricated construction. It's two duplexes on a lot. Everyone is a little bit different. That's what's cool about prefabricated versus modular,

which is like what you were talking about of, you know, can they pre-sumble this and try to ship it over? That's modular where it's already totally built. But this is a kit of parts. So it can be completely customized to the lot. And, you know, this is L.A. And real estate is very valuable. So we want to maximize every buildable square foot that we can.

That's the permit process like with like earthquake code and stuff like that for these modular homes. Oh, prefabricated construction. So it's exactly the same as stick built. There's no difference. But so what we do is buy, there's another risk that I didn't talk about is entitlement risk, right? So if you have to go by in front of the planning board and talk and, you know,

talk, you know, the public into approving your project, you don't want to do that because it takes a long time. So what we do is buy right construction. And so I mentioned, you know, we're buying like a seven, thousand square foot lot that is zoned for four units. So that is called by right construction. And so you basically just go straight to permitting. And so yeah, you know, you hire a structural engineer. You have an architect and they design your project and then it goes through the permitting process. It usually takes about three months. And we'll even try to get started on all that

stuff while we're still in escrow because it's, you know, it's free. Once you haven't closed, it's still free. So, all right. So is it, by the way, is pre-fab the same as like sit panels? Like, I've heard that term sit panels. Is that the same thing? Do you know? You know, I've never heard that term, but it wouldn't surprise me if it's the same. It doesn't appraise for any different. I mean, it's still standard materials. It's still wood and everything.

It's just because you've already done a lot of that assembly work in the factory. It's just way faster. So, like, you can frame out, for example, one floor of like one duplex in a day. Yeah. It's really, really fast. I'm a buddy who did that. It actually builds his whole house that way. They built the panels outside, brought him in, and he just operated a crane.

and they just like dropped all the pieces into place. Yeah. Are they pre, is the wiring already in there? Or does that come after this drywall there? Or is it just the actual bare wood walls or what's it like? Yeah. So it's basically the kit that you get is the dry wood walls. And then it includes like what we call MEPs.

So like your mechanical, electrical, plumbing, all of that comes with this prefabricated kit. And so it's all built. So it's built at the factory. So they actually have this thing called a core. So they build this core. And that's where all your plumbing and electrical and everything is. And then everything in your house backs up to that core.

So it's really an innovation on construction. And it's actually very, very cool. And that's all been assembled at the factory. So they just bring it on a crane and then they drop it in. That's cool. You can finish it out with whatever you want. So you get basically a shell, right? And then you just put in your flooring and your drywall and your cabinet, whatever you want.

That makes sense. Yeah, I wonder if you couldn't do that with, like, tiny homes. Like, maybe that's a way to bring it on the prices. Like prefab tiny homes. Maybe that's how they do it. I don't know. But it feels like you could build them out. Yeah, you know what makes it really cheap, Brandon, is if you put together your own tiny home.

That would make that. So like, can you buy a tiny home at IKEA? Yeah, I will do it. I built the shed that I'm in right now. Okay, I didn't. I had a contractor build most of it. But, you know, this whole entire shed costs like, I don't know, 20 grand to build. And, you know, got no bathroom, but whatever.

You built the, you built the, idea that the contractor executed on your shed. There, look that, see. And I did the flooring, but whatever. See, I have the shell and then I finished it up. All seven nine-minute panels. Exactly. So I want to know more about the details real quick before we go to,

before we kind of close this thing out about the build, the numbers. But I want to go to deal deep dive. We're going to go a deal deep dive soon. So I'm wondering, in your deal deep dive before I go there, are you talking about a one of these fourplex things or should we go there first? Let's go there first because I wasn't going to, that wasn't my deal deep.

So let's go there first. I'm just curious, what do you typically buying a lot for? What does it cost to tear down a house? What does it cost to build a new one? And then are you selling them or are you renting them? And how does that kind of the math work behind this? Yeah, yeah. So all great question.

So, you know, the lot acquisition really depends on where it is, right? And so we're buying the lots anywhere from like between the cheapest one I got was I think 550 and then, or 520 and then all the way up to like 1.15. I usually cap out around 1.2. This is a teardown, but this is L.A. Right? Keep in mind it's L.A. So we purchase those. That's our kind of our acquisition price.

And then our exit is based on what our cap rate is going to be because these are rental properties. So they're built as rental properties. So we talk about like a build cap, which is similar to like a cap rate if you're just buying an existing multifamily, right? And so, yeah, so how much does it cost to do these things? It really all depends on the lot.

But what we're really looking for, usually this is the profile of the lot. It's between 6,000, 7,000 square feet. It has certain zonings that work for four units, but not more, right? Because if it had a zoning where you could build really, really high density, then it would be more valuable. We wouldn't be able to buy it, right? So usually, like, the buy-right construction on the site is maybe between, you know, I don't know, between four and seven units or something like that, right? So it's not super high density. And this is what we would call infill development, right? We're in neighborhoods, all the loss are. built out. And so then, you know, in terms of demolition, again, it depends on how big of a home is there, but that'll, you know, the site prep could be anywhere between 20 and 50. I mean, it could go, we had one lot we looked at and we thought the demo was going to be around 125. So, I mean, it can be, it can get, and that's all of the site prep. It's not just the demo of the home, but so it depends on how large the home is. And we just figure, you know, we just underwrite every single line item cost, right? And, and calculated and say like, okay, well, what's the, what's the rent

when we're finished and, you know, how much is this going to be worth? And we back into, well, we can afford to pay 800 for this lot or we can, you know, but like I have one closing on. It's just like working. We just work backwards. Yeah, you just work backwards. And so, yeah, it'll only work, like the rents have to be decently high. And we're also building large units. So we're building like either four or five bedroom units. And so, and the reason we're doing that is because of parking requirements. So parking kills all deals in LA. Interesting.

But you can't do underground parking because it'll kill every deal. Anyway, so I could go on and on about exactly what we're looking for. But think about it, like a build cap is like the similar to when you're acquiring a mobile home park or when you're acquiring a multifamily or something like that. Okay. So then the idea being you're selling these to investors who are just trying to get a return on their investment. So I'm rich investor. I want to just get a return.

so you build this property. I'm like, okay, I'll pay $2 million for that fourplex. And then that's how you guys eat your money back. Is that right? Yeah, it's usually more like $3 million. Really? For a fourplex?

Yeah. So, yeah. What are they rent for? Like what's a $3 million dollar fourplex rent for? So yeah, the exits are usually between two and three million. So it just depends. And we always forecast really conservative values.

So what's cool about this model is that we are building for sale products, but they are rental properties. And so if anything, you know, this is always preparing, right? Real estate is cyclical and you have to be prepared. I always say, like, winter is coming. How are you preparing? Right? And so what's, what I really like about this model is that although you are building a for sale product, you can rent it out. And we can rent it out and ride through any kind of correction in the market or anything like that. So you've got that downside protection. And so, yes, people are coming in. We always say, you know, we have, it's a four unit. So we have to look at

comps, but then we also are looking at a cap rate. And we're always pretty conservative on it. Actually, we always underrated like a, between like a 5.1 and a 5.2, even up to like a 5.4 cap on the exit and then never exceeding the area comps. And so, and we use a construction lender. And so they're, they're actually, you know, checking all of that, right? So if they wouldn't lend on the project, then that means that they don't think that the exit value is high enough to lend. And so that's a good indicator that the project might not be viable. That's smart. So I'm just,

I'm blown away that like an investor like would pay like $3 million for a fourplex. Like, like what's a four bedroom half of a duplex rent for in LA? Like, well, it's like, I mean, is that $10,000 a month or is it $1,000 a month? Like where is it?

Yeah. So a four or five bedroom will rent. I mean, I think on the low end, maybe 3,500, maybe in our more B minus area. I guess. And then on the high end, probably for a four unit, we always, I don't think we've ever gone over 4,400, but I actually think we can rent them for more than that. But again,

you always want to be, you want to be conservative in your underwriting, but you also want to be realistic, right? Otherwise, no deals ever going to work. So yeah, I know, but it is that value. So think about how much income it's actually producing. Plus, you're getting a brand new product, right? Brand new. And the other thing is that, you know, rank. control in LA and California rent control. So these properties are exempt from that. Oh, interesting. So there's a lot of value there. So you could get, you know, there's that, you know, that you have this new, new construction and it's not subject to rent control. And then you could also just some, I mean, it's like the ultimate house hack, right? To buy this four unit. It's expensive, but you have four, you have all these bedrooms, right? You have like between, I don't know, 16 and 20 bedrooms. Right. So if you do the rent by the room model, I mean, you could, you could really kill it. I know it sounds crazy because we're not at the 1% roll with this. Yeah, it's like, it's like $1,000.5 a lot, but it's about half or let, right?

Like $4,000 a unit is about $16,000 total. So it would have to be $1.6 million. If you're selling it for three, you're a little over half, maybe like 0.55. But here's what you're not thinking about in California real estate. They're not looking at it from an ROI perspective as much as they are from an I-R-R perspective. They're thinking, I'm going to buy this thing. I'm going to hold it for five to 10 years. It's going to generate some kind of money.

but then when I exit, it's going to be worth $4.5.5 million. That's kind of how California real estate is a different animal in that sense. And what Brandon's saying is a very good point because that's what everybody else looks at. Like when we're helping house hackers in the Bay Area, I'll get, what do you mean I'm going to be coming out of pocket, $1,200? I thought you guys said you could get the house to pay for itself. I'm like, yeah, it does work that way in Kansas City, Missouri, where you can buy a triplex for $80,000.

But in California, your mortgage would be $9,000 a month in Silicon Valley. you're going to be coming out of pocket $1,400. That's a pretty big win. That's a really, really big win. It makes sense to do it. It's about understanding, kind of like tempering your expectations and knowing what the play is because it's not uncommon when we help people out here

that house hack will buy a place for 1.2. We'll spend 50 grand to be able to turn it into something they can house hack. Their mortgage will be three grand a month instead of nine grand a month, and it's now worth 1.35. It's common all the time. There's houses right down the street with comps that are that. not more, much more. And in two years of this crazy, crazy like springtime, summertime nuts, like it's like the hunger games around here with all these people fighting for the same house,

it's going to be worth 1.8. And then when you sell it, you look like a genius that made 400 grand and saved on your rent. But it's completely different than what you can expect if you go to somewhere in the Midwest or the South. And that's kind of what you have to think about with what Lee's doing here is it's going to appreciate a lot. You don't have to fight to buy a property and try to evict a tenant that has some kind of like rent control protection where you can't raise the rents on them and they're only paying $1,200 a month. We run into those problems in California a lot of the time. Yeah, absolutely. And, you know, looking at, there's these four wealth generators of real estate, right? There's, you know, appreciation, which is both market and forced appreciation. There's

tax benefits, there's cash flow. And then there's principal paydown, right? And so I, you know, like, I'm pretty analytical. So I've looked at this and I've looked at this for my actual deals. And I have a real deal actually in mind. So going through those four, right, my overall contributor to my ROI, right? If all four of those were equal and you pictured a pie, it would be split 25% for each, right? But it's not at all. So on my recent deal, it's 78% of my return came from forced depreciation, some market appreciation as well. 11% came from tax benefits.

7% came from cash flow and 4% percent. came from principal paydown. And so if you want to make a big win, you know, look to where the big drivers on that return and investment are. Yeah, I've never known anybody that actually quantified those percentages. You're my kind of people,

just so you know, like we're, this is great. I love it. You basically articulated what Brandon and I just kind of do by our subconscious or by second nature is you made an algorithm in your own head that said, if appreciation is the main driver in an IRR model, then that makes sense.

And Brent and I've actually had a conversation very similar where we realize at a certain point, cash flow isn't necessarily as important as when you're new. We had this example of, what if you bought a house in Beverly Hills for $10 million and you lost $1,000 every month or $2,000 every month? And then five years later, that mansion was worth $16 million or $15 million. Would you really be that upset that you lost $12,000 a year or something that you just made $5 million over that period of time? but what you have to do is zoom out.

When you zoom in super hard, which is always what happens when you're scared. When you're feeling fear, you just zoom in and you look at what could go wrong. And you have to force yourself to zoom out and see, oh, what could go right and then make an informed decision. That's a great point, Lee. Like, well, if cash flow is 4% of your overall profit,

why is that the part you're focusing on so hard? Yeah. And so, I mean, a note on cash flow. You know, when I first started, I was very sold on cash flow. I think a lot of new investors are. And cash flow is really, really important. because it is your hedge.

Your cash flow is your margin of safety. It makes it so that you do not lose your property. And that is really, really important, but it is not a very big contributor to your overall ROI. I say that all the time. Cash flow really is a defensive metric. It protects you from losing the property. But people who build big wealth through real estate do it in a very boring way,

like we said earlier, holding property for a very long period of time, letting the loan pay down and letting it appreciate. Yeah. Yep. Absolutely. Yeah. One last question before we move the deal deep. On those properties, are you separating the water?

I'm assuming so tenants will pay their own water or is the landlord responsible for like, is it one just meter going in? Oh, no, it's all submetered. I mean, it's all new construction, right? So we can totally do that. I want to bring that point out because like when you buy, if you were going to go because water bills, primarily water, but because the usual electricity is already submetered.

But when you're looking at a fourplex, like some people are like, well, when I pay a million dollars for a fourplex and the biggest question I always want to know is who pays the water. And so when you're building new construction, I love the fact that, let's say you just built new construction forplexes just to own for yourself. Like if you were doing that, let's say, right? You can sub-meter them. You can add the additional bedrooms because you're going to get way higher rent for it. We talked with Joe Asamo a while ago about the Section 8 numbers, how dramatically they're higher for more bedrooms. So you can do all those things to make it way better than buying a used fourplex that you pay the water and the property's going to fall apart every

year and you got to fix all the stuff and the roof's going bad in a few years. So again, it just goes back to what I said way earlier that real estate is multi-dimensional. It's not, is this a good deal? There's a hundred ways to skin a cat here and to try to figure out what makes a good deal. And so you can invest in LA in an expensive market and find a way to make it work. You can invest in Kansas City, find a way to make it work. And you can find a way to make it work in every other market in between. So people just come up with excuses why it doesn't work in their market. And I love that you are doing both. I think that's just like the theme of the show is like, You figured it out in both markets, so way to go.

Yeah, absolutely. And the strategy is different, right? And so you have to know, you have to know those markets. You have to know what's possible and where your returns are going to be and everything. But yeah, both are really great real estate markets for different reasons. And I actually think they're a great combination. Yeah, 100%. Right?

More Kansas City is like the bonds in your portfolio in L.A. is like the Apple and Tesla in your portfolio. But what's really cool about what I'm doing in L.A. is that it does have this downside protection. And I wouldn't want to do it if it didn't. Yeah. That's why we're doing the mobile home park thing right now because I look at the mobile home parks. I'm like, I'm just filling like, I'm buying properties that have like 70% occupancy. So there's like 30% room there. So if the economy turns like more more people are losing their job, more people need to move to mobile home park. So we just infill more and still like it's downside protection again. I'm always thinking like right now like I'm not worried about a recession, but I'm always thinking

about a recession. You kind of said something earlier about that too. Like you're always thinking what if that happens? And smart. Very smart. Yeah. Cool. Yeah. You always want to make sure you're protected.

My attorney said you can't say recession proof. Nope. Recession resistance. I won't. That's what I usually say. Yeah. Yeah. She didn't like that either actually.

So I just don't say. Downside protection is my... Yeah. I like that. I like that. Well, very, very cool. Well, I want to keep talking about this for about 10 more hours. But we've got to get on with this show.

So let's get over to the next segment. It is our deal. Deal. Deal. Deep dive. All right, this is the part of the show where we dive deep into something that you've done, a deal that you've done. So, Lee, let's get into that. You got something in mind that we can pick apart?

Absolutely. All right. So where, what is this property? Like, what is it? And where is it at? It is a fourplex and it is in Liberty, Missouri, which is a suburb of Kansas City. All right. And how did you find this deal?

This is great. So I joined all of these Facebook groups. You know, there's like buy, sell local Facebook groups. So I joined all these ones in Kansas City thinking one of these days, someone's going to post a property on these. And my wife was making fun of me because she saw my Facebook feed. And she's like, what is all that junk in there? It'll be like one baby shoe. Like there's someone selling counterfeit laundry detergent. Like it's just ridiculous, right? But I knew, I knew one day this would happen. And it did. So here it is. I just joined three of them in the Bay Area because I'm so tired of all the deals that are on the MLS going for 25 offers on everything.

and like at least if you're in one of these groups, you may pay fair market value, but it's better than paying $200,000 over. Yeah, I'm a fan of the Facebook groups. You should be joining them, everybody. Just not the ones where I live. I don't want the competition. Yeah.

Yeah, so join your local Facebook groups. And so it was actually in sort of an obscure one. It was like the Northland swap meet or something. And I see on there, so it's Bob, and he's got his phone number, and there's just a picture of the outside of the fourplex. That's it. found it on Facebook.

That's awesome. All right. How much was it? What was Bob asking? So Bob was asking $150,000. And I, you know, the market really well, and I know what kind of rents are achievable

with a nice rehab. And so I knew fixed up, it was worth very conservatively, 280, probably more like 300, maybe even a little bit more. So I knew that was a deal. Now, it needed some,

it definitely needed some rehab. Okay. So you bought it at the 150? Yeah, I did actually. I bought it for 150. So you have another question about how did you finance it? But basically Bob was at was I talked to him on the phone. So I see this ad, right?

I talk to him. I give him a call. And it's because he's posted in this as obscure group. It's only like me and one other person, right? So I call it my local partner who's awesome. Derek and Trista Fenner actually met them through bigger pockets and we, you know, became friends and then we started working together. And they're great.

Total rock stars. And so I call up Derek and I'm like, hey, can you meet this guy, you know, tomorrow at 10 a.m. So it's, I'm like, just go over there and bond with him, right? And so, you know, of course, they have stuff in common. They both race cars. I don't know, right? And it was just us and one other group. And so Bob was saying, I'll give you 10, if you give me 10% down, I'll give you 6% financing with a 20 year and a year and a 10 year balloon. So I really, and I knew that there was all this upside. So could I have negotiated and tried to get it for 120 or when. 30. Yes, I could, but the way that I beat out that other party was basically by not negotiating. And, you know, I knew that there was a lot of upside, right? So I knew that I was going to be able to get, I don't know, 70 grand in equity, right? So like, sure, I could get 80 grand in equity or I could just take the 70 and get the deal done, right? David, you bring this. And then Bob was. And David brings that up a lot. Like, like, people

are so keen on getting a deal. But it's more about like, does it, does the numbers work? Like, if you pay 10-vent over-asking price, does it work? So stop whining about it. I just had a conversation about that with a group I belong to the other day where we shouldn't be saying, did I get as good of a deal as that person? Or could I, making up a scenario in your head and then saying, did I get as good as I could have gotten? You should just be saying, is it better to buy it or not buy it? It really is that simple. Do I want to lose this deal over 10 grand and walk away from $70,000 in equity? Right.

30 years later, while I even care that I could have got 80 grand in equity instead of 70 when it's got. at 500 grand or a million, right? And that's, I really changed the way I think because we shoot ourselves in the foot so often. I see this with clients all the time that don't want to pay ask price or don't want to pay over asking price on a house that's worth, like it's listed at 900,000 and they have to pay a million 50 to get it. But there's a comp on the street for 1.15, 100 grand more, right? Like it just, it all is where you put your baseline. Is the baseline the baseline the copper is the baseline of the list price. And it's really, really stupid to get caught looking at the wrong one. Right. If you're getting a bunch of equity in a deal,

you know, just focus on that, right? Like this was a deal and it worked. And it, because Bob was asking 150 and I paid him 150, it was super easy to get the deal done. Right. That's exactly right. So, and the seller financing was also very valuable to me. Well, you got to wonder, if you tick off Bob, does Bob still want to give you seller financing? Is Bob coming after you for a better interest rate now? Right. Like you mentioned earlier. Well, it's interesting because actually we're about to refinance it. So we've finished like the total reposition and we're going to cash out refinance it.

But I was thinking what I'm going to do is I'm going to get the appraisal from the bank. And then I'm going to call Bob and say, hey, I'm going to refinance the bank for this. But you rather this is you. Yeah. That's smart. In fact, actually, I just approached the guy yesterday because I said, I got a hardmail lender that will do 8% on this flip I'm about to do. Would you like 8% instead? Like that's such a great negotiation because it's like not a big deal.

Take it or leave it. Like I'm not asking you do something unreasonable. But hey, if you want 8% on your money on this flip, you know, you can have what the bank's going to have. So I love that you're doing that for Bob. That's such a great negotiation tactic. Yeah, yeah, absolutely. And the great thing about, you know, seller finances is so many less fees, right?

Yeah. Oh, yeah, totally. You save a lot there. What if you said no on seller financing? You had to pay closing costs to buy it. And then you had to pay closing costs again when you went to go refi it. And maybe you work out a deal with Bob where he does a. make you pay any interest while you're repositioning it.

And you save way more than the 10 grand you think you could have got on the purchase price because you weren't worried about a vanity metric. You were actually looking at the big picture. You're zoomed out. You're really smartly in case somebody's ever told you. Oh, that's nice of you, David. I was saying, David, you should write a book called Zoom out. That would be a good business book, right?

Yeah, Zoom out. And it's all about looking at your business as a whole. Do you guys see what I'm saying about Brandon is the best marketing mind in the world? There's nobody better. He just pulls these things out of his beard. Oh, thank you. I think you said it. All right, moving on.

You talked about how you funded it, then, stellar financing. Those are unfamiliar with stellar financing. It basically means Bob carried the mortgage. You paid him every month. It's kind of like if you sell your car to your brother and your brother pays you $100 a month for your car, it's the same thing, just with a house.

So there's no bank involved. But now you're going to refinance was awesome. So what did you do with it? Yeah. I mean, you kind of mentioned you still have it today. You're going to refinance it, right? Yeah, absolutely. So I bought it about a year.

and maybe three months ago, something like that, late 2018. And so when we got it, we had what I like to call legacy tenants, which usually don't work out very well. But so we had one unit vacant. So we went ahead and turned that unit. And then we, you know, one of the guys wasn't paying. So we ended up evicted him and then we turned his unit. And so we're, the delta that I look for, you know, between current rent and market rent

is usually like between 250 or 300 and more is fine, but, you know, at least that. You need to have that delta. So sometimes it makes me laugh. You see like a broker's back and it's like value add potential $25 more per month on the run. You're like, well, that's pretty much at maximum rent, right? You need to have that big jump right to add a lot of value. But so yeah, it was the same. I knew the market. I knew with a nice rehab, we could get, you know, 795, something like that. and all the rents when we bought it were like 500, 550, something like that. And so, and it wasn't fixed up. So that was the market for the current condition, right?

But then it could be repositioned. So yeah, then we just turned each unit slowly through time. And so now we have the upper two rented. And then the bottom one, we just finished renovating. And then we have one, this is about my record on legacy tenants, about 25% of them work out. So one, we have one good one. And so then it's like this woman or her husband, So they moved into the one we just renovated so we could renovate their unit because they agreed that they would pay higher rent if we renovated.

Then they're going to move back into their original unit. Then we'll rent that last one. So that'll all be finished. I just think in a couple of weeks. And we've already ordered the appraisal from the bank. So I have a takeout lender. And he's willing to do 75 LTV because we've held it for more than a year. So again, like the value conservatively is 280, probably a little bit more. And we will get. the bulk of our money back. And that has been my experience in value ad deals or burr deals as you get most of it, but I've never actually gotten all of it. And that's okay. The difference between leaving $5 grand in a deal, getting all of it out or pulling an extra $5 grand out at the end of the day is really just $10,000 plus or minus. It's not, it doesn't have to be a certain way to make it a win.

No, absolutely. And I'm totally happy with it. Actually, my favorite is to leave like maybe $10 in because an R-O-I, right? And in cash on cash return is kind of unsatisfying, but like a 12,000 percent cash on cash return. That's a really good point. I left $4 in the deal. When you don't leave any money, you're like, well, there is no ROI because there was no I can't count. Yeah.

Yeah. Yeah. Yeah. That's fantastic. Like, it's amazing. Yeah. I also like what you said about like legacy tenants 25% of the time work out. That's probably similar to what I see.

That's exactly what I see too. It's huge. So most people, when they have a property that's performing well with good tenants and they're not thinking about it, they don't want to sell it. Most landlords say, screw it, I want to get rid of this thing when something's causing them trouble and it's usually the tenant. So it's not a good thing just inherently when someone says, oh, buy it with tenants in it. You'll have no vacancy.

Like, no, you're probably just buying an eviction is what you're doing. Yeah. Yep. Absolutely. Yeah. Which is also why one of the strategies I like talking about for finding deals is to contact, like get the local eviction records from the courthouse and then just contact all those landlords that are in the middle of an eviction that just file for eviction.

because all those landlords are in that pit of hell that they, I'm like, I hate this rental property. And then all of a sudden somebody randomly calls them and says they want to buy the rental property. Yeah, you're buying an eviction, but, you know, it's already been started for one thing. That's so good. I just told someone that the other day, they said, why would anyone ever want to sell their rental? Everybody wants them. I said, because not everyone listens to bigger pockets.

I said the same thing, too. I'm like, because they don't read our books and they don't listen to bigger pockets. So like most landlords are terrible landlords and hate being landlords. And I didn't want to be one in the first place, right? They adhered in the house from someone else or they lived in it and then they rented it out and now they're stuck with it. That's exactly right. For them, you're buying their problem. Yeah, that's true. All right. Last question of the deal deep dive, David. What lessons did you learn from this deal?

Well, always, you know, the value of relationships, those local partners, you know, the fact that Derek took my call. He said, yeah, of course I'll be there at 10 a.m. if you think this is a great deal, right? So that's huge. And then what else? I think. the value of kind of what we were already talking about. You know, if the deal is good at the list and you can buy it from the seller at that price, you know, don't negotiate just to negotiate. You know, actually negotiate for something. And in this case, I could pay them what he wanted.

Everyone was going to be happy. I was going to get all these other benefits. And I just think it's important to remember that. Did you, I, you know, I could have gone in and tried to negotiate down 20 grand or whatever. But it wasn't worth it. again, zooming out, right? It wasn't really worth it. And I can kind of suss that out, right? And I so I built a relationship with him, the seller and his wife. They were moving to Florida. And then, yeah, I had the relationships with the local partners. And sometimes, you know, people are really

focused on the deal, but they're not focused on the team and the relationships. And that can be as important as the actual property itself, right? Yeah. Yeah. So good. Yeah, so good. I think one of the biggest negotiation mistakes people make or the things that can help the most is just to understand the situation which you're in, like whether or not you should negotiate more or not. Like, I mean, there are times where you can definitely negotiate. Like, we got to call on a house a couple days ago from our website. We have a lead gen website. We got a call on it.

And we knew that we were the only one that this person was talking to because we built a relationship. We built the report. So we knew we could push harder. And so we got, I mean, I think we ended up negotiating them down 75 grand or something like that, 65 grand. But we only knew we could do that because we knew she wasn't competing. If it was on the MLS, I can guarantee you I would have just paid the, you know, like either

paid the full price or offered what I could. could and known that I wasn't going to probably get it. But yeah, know where you're at is a huge tip on negotiation. Yeah, absolutely, right? And it's always, you know, those funny people will say, well, yeah, knock, you know, 75 grand off of it. And you're like, there's a full price, you know, cash backup offer. Like, we're not in a position to do that. And so know your position, right. So good. All right. So know your position, but also you usually have a little more power than you think you do. So I probably could have pushed on that. I just, it wasn't,

really worth it to me because it was fair and there was so much equity and the juice was not worth the squeeze. Yeah. All right. There we go. All right. Well, let's close up this deal deep dive and head over to the last segment of the show. I think we'll bypass the fire round this week because we is a long show.

But it's so good. But let's get to the famous four. This is the part of the show where we ask four questions that we've asked every guest for hundreds and hundreds of episodes. and we're going to throw them at you right now. Are you ready for this? I know you've heard the podcast, so you know what's coming. I think I've listened to every episode since I started listening back around episode 100. That's awesome.

Well, with that, it means you might not have listened to episode 92, which was my story. Actually, I don't think I did. Oh, man, you got to go back in here, my story. All right. That's all right. All right. Let's get to the famous four. But before we do, I want to hear from Mr. J. Scott to see what's going on this week

over on the Bigger Pockets Business Podcast. Hey there, Brandon and Bigger Pockets real estate podcast. Listeners, this is Jay Scott, your co-host for the Bigger Pockets Business Podcast. And this week on the business podcast, we have Lara Spalding. She is a former police officer who started a crime scene cleanup business that did so well that she ended up franchising it all around the country. On this episode, she tells us all about franchising, and she even gives us some of her most interesting crime scene cleanup stories. So check us out this week on the Bigger Pockets business podcast. Now, back to your famous four.

All right. Number one, favorite real estate related book, Lee. So I actually think a great real estate book is the ultimate beginners guide, the Bigger Pockets Guide, which is free. And I was, you know, I was telling about my story and how I was driving around Iceland with my friend, right? And I said, I really want to do this. And he said I do too. And I, on the plane ride home from Iceland about eight hours, so I downloaded that.

and I read it and I like really, really read it and I picked and it says like go through and like pick your strategy and I was like, okay, this is it. This is the strategy that makes sense. So I actually really, I mean, I give Bigger Pockets a ton of credit for teaching me these concepts of real estate and providing these great resources, right? I mean, that's an incredible book and it's like a free pamphlet. Well, thank you. It's people can get it by going to biggerpockets.com slash UBG on Ultimate Beginners Guide. So that was the very first thing I ever did. I think me and Josh did when we started working together like seven years,

eight years ago, whatever it was. We're like, let's just write like a free like online book that people can learn how to invest. So it's good to see at least one person's Reddit. What about your favorite business book? So I'm going to go with one that I've never heard anyone to mention, which is choose yourself by James Altiture. Yeah, do you know?

He knows every book ever written. No, that made a big You're all I was thinking I was going to get you, Brandon. I made a big impact on me as well. It was an awesome book. Brandon named his new son Wilder. His mental name is Dewey after the Dewey Decimal System because he's basically a librarian.

Brandon's going to retire as a librarian. Yes, hoarding all these books. He's going to be this really wise old man. I think it was Kevin actually. Was it you Kevin? Kevin's our producer. He's on the call. Was that you that text me the other day about

meeting James Altiture or is that Mindy? Somebody just met. Okay, Mindy just met James the other day. Yeah, podcast movie anyway. And I was very jealous because I have not met James yet. Anyway, choose yourself. Tell us about it. So the premise is basically, you know, whatever, the corporate hierarchy is kind of dead.

And so whatever you were going to go do for someone else, just go do it for yourself, you know? And this was kind of my realization where I, you know, built a business for someone else. Yeah. And a book, it applies in so many areas of our life too. Like, yeah, you could wait for someone to choose you, like to be a real estate investor, to be wealthy, to have financial freedom, to get a vacation time, to be a podcast. Or you can just be like, hey, in today's economy, you can choose yourself. Like, stop waiting to be picked, like, put me in, coach.

Just like, go make your own game and then put yourself in. Just know that might mean you have to apprentice for a while before you can do that. There's a trade-off, right? Yeah, I think it's kind of about, you know, mindset. So just, you know, thinking about, okay, am I waiting for someone to give me permission to go and do these things? You know, they're not, that's not going to happen. No one, no one really cares what you're doing. So if you want to go do something, you want something, like, you better go get it.

That's a very good point. All right. I love that. What are some of your favorite hobbies? So, you know, I really love nature and the outdoor. That's why I became a field biologist. And if we ever go hiking together, I can tell you the scientific name of every plant,

bird, butterfly. And I love, I absolutely love the eastern Sierra. And so I'm really excited that I just bought this rental property for myself up there in the mountains. And it's already been really fun. And then I was, yeah, so I love backpacking. So I'd like to go on like a couple big backpacking trips per year. So this is like niching in, right?

I really like temperate mountain landscapes between 40 and 45 degrees latitude that are above the tree line. Wow. That's knowing your niche for sure. That's funny. Crazy. All right. Last question for me. What separate successful real estate investors from all those who give up, fail, or never get started?

So if you'd ask me this a couple years ago, I would have said action. But what I realized is that mindset is the mother of. action. And so it's really just all about your mindset. It's deep. But I agree. 100%. 100%. It's not about tactics. I mean, we can all figure out tactics. It's like, why aren't you making those phone calls? And that usually has something deeper. That's a mindset issue. Now, why aren't you analyzing that deal? Deep stuff. I know it is because Brandon and I, as we sit here at Mastermind trying to figure out, how can we help more people? It always inevitably comes up to mindset, not real estate tax. Every time. Yeah, every time. Well, Lee, this has been fantastic.

Thank you so much. I think David's got one final question for you and then we'll get out of here. Yeah, this has been awesome. You are a very intelligent investor and I learned a lot listening to you. So thank you for sharing. You should write a book, Lee, called The Intelligent Investor. Yes. It's been done. That's a wonderful name. I wonder why that sounds so familiar. I wonder if that book has been written. Anyway. So where can people find out more about you? Yeah, so I'm actually pretty active on Bigger Pockets. I don't really use a lot of other social media. Although maybe through this,

maybe I could be motivated to kind of get on Instagram. I think I posted like three photos ever. TikTok. That's where all the kids are going to do this. I want to see you do some dancing on TikTok. That's where all the kids. I know. I really got to get on TikTok.

Yeah, I don't know what I'm doing. So yeah, so Bigger Pockets is actually a great place to hear more about me. And then I have my own websites. You know, you can see it in my signature on bigger pockets. It's called red hair holdings. And that's just the name of my company. And I've got a couple, you know, I've got some before and after photos of my projects and things. And honestly, I haven't totally kept up with it. But I have a couple cool blog posts where I talk about, you know, passive losses and understanding some of these concepts in real estate that have been

really transformative to me. Very cool. Very cool. All right. Well, Lee, this has been really, really, really good. I guess I can't wait to kind of see where you're head in the future. Maybe we'll have you back in a few years and we'll kind of get when you're at the next level. It's exciting. Awesome. Thank you so much. Thank you. Lee. This is David Green for Brandon Tick-Tock Turner. Signing off. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online.

By the way, David, did you finish your book yet? Zoom out? Yeah. David's the kind of guy. He'll start a book on like two in the afternoon about like 3.30. He's got 150,000 words written. Just done. Yeah.

You know, he texted someone, you know, while he was on the podcast and then now they're writing. That's actually probably true. He texted his ghostwriter and they're writing. Katie was super worried about that. She thought I was giving a ghost writer. It's like, no, I'm not going to get a ghost writer. I just need an editor. But yeah, that's funny.

Everybody probably assumes. This isn't even David. This is a person I hired to pretend like I'm David. None of you know what David Green really looks or sounds like. Yeah, this is. Hey, thanks, Paul. It's been a good episode. You tell David, hi, or you see him later.

That would be actually the funniest thing. It's an entire podcast is all. The big of the film was, I'm not actually, David Green. David Green hired me to prove that his method works for outsource. You can outsource anything. Yeah, that would be really funny. That's really funny. Thank you all for listening to the Bigger Pockets Real Estate podcast.

Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicokech, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own.

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