BiggerPockets Real Estate Podcast - 390: 7 Figures from ONE Deal with Leka Devatha

Episode Date: July 9, 2020

From fashion design work in India, to a corporate career with Nordstrom... to leaving that career to flip 40+ houses in 6 years – all in one of the hottest markets on the planet! Seattle investor Leka Devatha has quite a story to tell, and a lot of hard-won wisdom too! From her 6 tips for finding and keeping great contractors, to the exact criteria she uses when looking for a flip opportunity, Leka spills the beans and outlines a framework you can apply whether you choose to flip, BRRRR, wholesale, or buy and hold. We cover a crucial tax tip for anyone hiring a contractor, ever. Leka shares an unexpected silver lining brought on by the pandemic. And your mind will be blown when she tells how a "cosmetic" flip opportunity morphed into 3-year odyssey and wound up rewarding her with a 7-figure (yes, 7-figure) payday. Give Leka (pronounced "LAY-kuh") a follow on Instagram and let her know if you appreciate this episode... and make sure you subscribe to the show in your favorite podcast app, so you won't miss the next one. In This Episode We Cover: Flipping 40 homes in 6 years A "cosmetic flip" that turned into a 7-figure (!) profit through the magic of subdivision Why you should get to know the land use planner in your city Leka's system for finding and retaining great contractors How to start a real estate meetup Why virtual networking amid COVID-19 is more efficient Why she pays her broker a commission even if she keeps a house as a rental Leka's criteria for a great flip opportunity What W-9s are and why it's so important to get them signed up front And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Podcast Jason Drees Real Estate at Work (Seattle Meetup) Redfin Zillow Realtor.com Caleb Backholm's Insurance BiggerPockets Podcast 388: The 7-Step “Playbook” for Scaling Your Real Estate Business With AJ Osborne Check the full show notes here: https://www.biggerpockets.com/show390 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 390. Try to find solutions to all your problems. And if you can do that, then it's achievable by anybody, right? There's a lot of homes, small homes on large lots. So they're out there. And those sellers may want to sell because they just don't want to deal with it. So it's totally achievable. As long as you just have the grit to stay in it long term.

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. What's going on, everyone?

It's Brandon Turner, host of the Bigger Pockets podcast here with my co-host, Mr. David Green. What's up, David Green? How you doing, man? I'm doing absolutely fantastic. Business is going good. People are buying houses. People are refinancing rates are good. Today's guest, wow. This is, this was just like a mind-blowing

episode from several different levels. I think we've got a superstar here and everyone's going to love this. I think we do as well. Leah, Leika is a friend of mine. You guys are going to hear a story, but she has a phenomenal story. And she's really good at explaining like how to. Like, if you're listening to this and whether you're a new investor, you've been doing this for 20 years, like, you're going to learn stuff today from Lika that's just like, do this. Here's my six steps for this. Here's how I do this. Here's how I network. Here's how I find contractors.

Here's how I turned a cosmetic flip into a seven figure, like over a million dollar profit from one deal, which is crazy. You guys are going to love this story and a lot more. Again, very, very cool episode. But before we get to it, let's talk about today's quick tip. It's brought to you by David Green. David, what's your quick tip? Today's quick tip is be humble enough to acknowledge what you are not good at. On today's show, you're going to hear an incredibly successful.

investor that is also very approachable. Pretty much everything that we all want to be in life. And she is not afraid to say what she's not good at. It actually became a superpower and allowed her to hire other people, do things better than her. As she says, put people in positions that are better than me, sit back and watch the magic happen.

So as you're listening to this, resist the temptation to jump in and say, I have to learn how to do that and say, no, I have to find somebody who's good at it and I need to stay in my lane. Yeah, that's good. My coach Jason Jarees, he always says, don't ask how, ask who.

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flagship. This is a paid advertisement. Very good, man. Well, let's get to today's show. I guess that's all we got. So without further ado, Laca, Davetha. Lika, welcome to the Bigger Pockets podcast. Awesome to have you here.

Thank you, Brandon. I am so excited to do this. Well, good. Yeah. So we hung out in person in Maui last year when you came to my little Maui mastermind get-together thing. And I'd never met you before that. And then I quickly discover that you are like legit, awesome. And so like for the last year now, we've been talking about making this day happen.

And so I'm excited to finally make it happen today. So let's go into that right now. How did you get started in real estate? I don't even think I know your beginning stories. How did you get into this thing? Oh, my God. Okay. This is how it all started.

I moved to the United States from India in 2007. And honestly, that was like one of the most life-altering experiences that I've ever had. You know, I had to leave my friends and families, move to a new country, and then start a life from scratch. And so it was just, you know, it was once you do something like that, then I don't think anything else is as daunting. So back in India, I had a career in fashion merchandising. So I moved to Seattle and I said, okay, what are my options? luckily for me, Notstrom is headquartered in Seattle and I was able to join Notstrom corporate. I was there for a good seven years. It was a dream come true job. It was everything I could

ever ask for, but something didn't sit right. And so like one evening, my EVP was having a party and all the leadership and all my colleagues were there. And they were talking about how they had spent 15 years in the company and they were there for 25 years. And I went. back home that day. And I told my husband, I was like, this just is, it's jolting me. Like, it doesn't, like, this is not what I want to do. I have to somehow empower myself to do more than that. And, you know, I think that's, that's when the seed was planted and I just had to go out and find a different career path. But here I was in a new country. I had no experience doing anything else. And so I started my research. And then through my research, I learned about real estate investing.

I learned about flipping homes. And I started to dig deeper and deeper. I started reading. I started listening to podcasts. And finally, in June 2014, I remember this day like it was yesterday, I decided to burn the boats, quit my corporate job. And I bought my first deal a couple months after I quit my job. And that's how my company Rehabit Homes was born. You, like, jumped out of the airplane and decided to build the parish shit on the way down. That's awesome. Yeah. All right.

So, first of all, I love that you brought up the aha moment. Like, we don't ask that for a lot of our guests. Like, we, because a lot of people don't remember their aha moment. Like, but like, when you were like, this has to change. Like, I remember, like, I remember, like, applying for law schools and just thinking, and I read John Grisham's book, The Firm with like the main movie. Yeah, with Tom Cruise movie later on. Anyway, and it was like, the horrible life of a lawyer.

And I was like, I don't want to get shot. I work 90 hours a week. And I was like, that sounds. That was my moment where I was like, I got to do something different. David, do you remember yours? The other curiosity. I don't ever asked you that. My aha moment when I know I want to be a real estate investor. Yeah, you were like, I don't want to do this, you know, whatever, being a cop or, you know, you were a waiter, but you were a waiter, but I really liked my job. It was more that I just started like real estate more. So it kind of happened slowly. I remember the moment when I decided I want to do this real estate thing was when I bought my fourplex. And I, this is kind of embarrassing to admit, but I didn't listen to bigger pockets. I didn't have mentors. I didn't know what R.I was. I didn't know that.

That was a concept that smart people understood. Like return on investment for those who don't know. Return on. Yeah, there you go. I just learned what that even stood for six months ago. I just knew that when I did this math in my head, I realized I could make all my money back in three years. And I said that was like a 33% ROI.

I thought, oh my God, where else could you make an investment? You get your capital back in three years and then it's pure profit. I need to do this all the time. And that was my aha moment. And that's when the market tanked. Or I shouldn't say it tanked. It actually got too hot to buy. so I had to go buy out of state.

But it's a good thing I had that aha moment before. I never would have had the guts to go start out of state investing and kind of create that movement. Yeah, that's cool. All right. So like, tell me about that first deal. I mean, you quit your job. You got on the one on the hunt for a deal.

You wanted to flip houses, right? So that was, that was good. Yeah, I wanted to flip houses. All right. So what did you, how did you find that first deal? You know, I was just networking. I literally took everybody out to coffee that would even give me like 10 minutes. And so I just went through the process of like,

like, you know, finding deals on Craigslist, finding wholesalers, finding real estate brokers, escrow agents. And finally, that process led to me finding my first deal through a real estate broker that knew a little bit about investing. And it was such, like, everything that could go wrong, basically went wrong. First of all, I bought the house site unseen. Like, who would ever do that on their first deal? Please don't ever do that.

But I bought this. I, you know, and the home, like, after I closed on it, I found out that the home had every possible issue. So the plumbing and electrical were jerry-rigged. There was mold everywhere. There was dry rot. I mean, we live in the Pacific Northwest. I am from Seattle, Washington. And it rains here all the time.

So the basement obviously had a leak. So here I was taking on this flip that I thought was cosmetic, but it had every issue under the sun. Then it was about finding a contractor, right? I went through 15 different contractors to find that one contractor. And then we listed the house at the absolute wrong time. Like Thanksgiving week. And obviously we didn't get an offer for the first 30 days. Finally, like we closed, I believe it was February of the following year.

And I just came out of that feeling like a superwoman. I had made so many mistakes, but I had learned so much that no course, no webinar no podcast can teach you that. It was hands-on experience. Suddenly, like, when I first started you guys, I didn't know that drywall and sheetrock were the same thing. Mm-hmm. I didn't know.

Yeah, I didn't know. Right? So I learned so much. She Rock is, like, just for those who don't know, She-Rock is like a brand name, right? Of drywall. Kind of like Kleenex for tissue. But we all say clinics.

Yeah. I didn't realize that until like a minute ago. I'm just kidding. Like, a couple years ago. Like, it took me a long time to be like, like, anyway. That's cool. Yeah. Yeah. So and that, you know, like coming out of that experience is what got me really excited about what I was wanting to do. And then I just killed from there.

That's good. What happened on the first deal then? I mean, like, did you make money on it? Did you lose money on it? Or how did that turn out? Yeah, so I lost about $5,000. I didn't make any money, but I also didn't lose a lot of money. And that's because I, even to the last day, like I hustled, I found every way to make it work. And so, you know, it wasn't a huge loss. But like I said, like the learning was incredible. It's amazing. Yeah.

And I wish more people realize that, like, when we talk about it a lot on the show, but we'll say it again now, is David and I talk a lot about this idea where just getting started is like way more valuable than how good of a deal you make on your first deal, whether it's a flip or rent or whatever. I mean, nobody wants to lose money. We hope you don't lose money. We don't want you to lose money. Be careful not to. But don't let the fear of losing money stop you from ever taking action. Instead, do what you say. Be scrappy. Figure it out. Like, you know, be creative, resourceful. Exactly. If you lose a little bit or you break even, you buy rental, it doesn't cash flow or you get a flip that loses five or 10 grand. Like, it's like, yeah, that sucks. Or you have to

turn your flip into a rental because it just can't sell it. Whatever. Like, at least you did it. At least you have to train moving and that momentum is going to start building. Correct. Definitely what I think your story kind of alludes to. So we'll get further on. So what happened after that? You lost the money. Everyone probably was like, see, it doesn't work.

Go back to your job. Yeah, exactly. But here's what happened, right? So because I had gone through the process, I identified like key roles that I, I as an investor needed to play. And then I also figured out that to scale this, I had to do more. research. So early on, I decided, like, I have to find my strengths and my weaknesses. And then when I started to really dig into that, I realized that the absolute first thing that I needed to do is find

deals, right? If the money would come, the contractors would come, everything else would follow, but how would I find a deal? And then I also, knowing myself and knowing, like, I did direct, I did do direct mail campaigns, I did all of that, but I absolutely sucked at it. So then I said, okay, what is my strength? My strength is networking with like-minded people. Finding good people to add to my team that would then help me get my goal achieved. So I started networking with wholesalers and real estate brokers because they're the ones that first saw the deal. And through those relationships, I was able to get deal after deal after deal.

Like when people said, I can't find a deal, I had four deals in my inbox. And that was because I just knew who to call. I would just put out in the universe that, hey, I'm looking for a flip. And this is my criteria. And I would have deal after deal after deal. So I'd say, like, the huge thing is outsource and delegate what you're bad at because, you know, that's what's going to get you further. And focus on what you're good at. So let's dive into this.

This is so, so important. Like, I love the fact you said, like, you looked at the whole business and said, here's all the different roles that an investor has to play. Right. I like to say, like, everyone has different hats on, you know, like today I got my, you know, plumber hat or, you know, yesterday. I had my landscaping hat, right? And then you got your analyzing hat and you got your networking hat. And you just said, you know, which hat looks, which hat makes me look the best? Like, what do I just like wearing the best?

And you're like networking. That one's like, that's my jam more than other things. And so you just really focused on your successes or what you're good at rather than your faults. I mean, like all growing up, like I feel like we are trained to fix your faults. Like, oh, you're not good at swinging the, though, the bat, you know, go, you know, try to hit 500 baseballs. And like, that's not the way I feel like, it's not the way. it should be in real estate. Do you agree, David, on that? Like, do you, like, focusing on whether your, you know, your strengths or weaknesses.

Like, what do you fall on that? The first point that I love that got pointed out is that you're already wearing a bunch of different hats, whether you don't realize it or not. When you're taking your kids a soccer practice, when you're going shopping, when you're going to work, when you're at work, when you're doing the books versus customer service versus looking at Excel spreadsheet, those are all theoretically different jobs that you already work. So don't think, like, I have to go find a new person to do something. There's already someone doing it and it's you.

First off, right? This isn't like a brand new concept. A lot of people just don't realize it. So Lake is 100% right when she says, I just got honest with myself about knowing what I wasn't good at. And Brandon talking about we wear different hats. I mean, that's a game changer when you can recognize I'm already a door dash person because I go get my own food and I bring it back to the house.

You know, you're already a landscaper because you're mowing your own lawn. There's a lot of things we're already doing that can. easily be leveraged. So what was the second part of the question you asked me, Brandon? Oh, I guess, yeah. So she focused, obviously that was on her strength. But like, where do you fall on the whole like focus on your weaknesses versus focus on your strength? You know, like you got to look at your own time per hour. If you don't really have a skill that gets you a big income per hour, it's totally okay to be your own landscaper and your own DoorDash person. But when you're in a position like Laca where she recognized, she hasn't said this,

but I know because I've been there, every time I make a phone call and I talk to a whole seller or I network or I tell someone I'm buying houses, I miraculously get an email a month later with a deal with $400,000 in equity on it. That is such a valuable use of my time. In fact, if I just did that and I made $400,000, I could hire someone to do everything else that I'm saying that stops me from having more time to network. And that light bulb just goes off and you start to recognize that doing all these other things that you're not good at or they're not as productive is costing you so much money. Because if you can go do the hard thing, you can get the deal. You can employ a whole bunch of other people who really need your help doing that. They're not able to go get the deal. They don't have

that skill. So yes, and emphatic, this is what business owners do, is they constantly generate opportunity and look for a way to take that opportunity, get it off of themselves and onto an employee or a partner or someone who can help carry that task to completion so that they can go create more opportunity. And I have this analogy of fish catching and fish cleaning. There's a lot of people, they can clean a fish and that's where they have to start. They can't go out there and catch fish. Catching fish is a skill that's very difficult to learn. It takes some time. But you can jump in there and learn how to clean fish if you're just willing to work hard. But the fish cleaners dependent on the fish catcher. So as Laca goes and catches these fish and brings it back and they all

learn how to clean fish so she can catch more. Not only does she give them a job, but she gives them an opportunity to slowly learn fish catching while they're helping her with fish cleaning and they're kind of in her world. Yeah. Yep. That's good. That was great, David. That was. That's why This is why we keep David around. He's just like, here's some knowledge bombs. All right. So like, let's talk about networking because this is something that I feel like I have not been very good at in my life.

I didn't go to a ton of meetups. I mean, I did a few. I lived in the middle of, you know, Grace Harbor, Washington. You know where that is, right? So, like, there's like nine people there. But how does somebody go out and start networking? How do they start building those relationships and actually get wholesalers and others to want to bring deals to them?

Especially if you're brand new listening to this show right now or you maybe got a couple deals. How do they get there? Okay, you guys. So when I first started, it was all about one-on-one networking. I was not confident to walk into a meet-up because I didn't know what to say. I didn't even have the experience. I didn't have the background.

I didn't have the knowledge, right? So it was one-on-one interactions with contractors, with other people in an industry, like really doing stuff. And so that got me into like smaller masterminds, which then gave me the confidence to like stand up in a room and even ask questions. Like when you're first starting out, to you, every question is a dumb question. but there is no such thing, right? Like, you're asking a question could be so beneficial to the person sitting right next to you.

So for me, it was also about going into these smaller mastermind groups and really growing my network. And then what happens is you do one deal and then you do the second deal and suddenly you have so much confidence and you have stuff to talk about. You can teach from your experiences. And honestly, for me, like, I know that real estate can rarely be done in isolation. So go to your local meetups and network. And, you know, every deal has so many different aspects to it. I'm like, and back then, back in 2014, we didn't even have that many networking groups.

We didn't have a Facebook page. So it was a lot of like interactions with small groups of people. And I just feel like if you can do that and you can get started, then that can get you in a room with like-minded people. suddenly propelling you to do something that everybody else is doing. Yeah, that's really good. So what about like in kind of this COVID world of social distancing? I mean, how are you still networking today despite the fact nobody wants to touch one another? Okay.

So back in 2018, I actually started a meetup group for my local Seattle market. Nice. And it just, no one was doing this. We did something different. We, first of all, it was a daytime meetup. So you could just take a couple hours off from work. come have lunch and then fit with a kick-ass group of people. And that just grew and grew and grew.

And what's amazing is I co-host this meetup with two other guys. All three of us are super low-key. We're not public speakers. But what we have done, the one common thread, was that we grew our businesses through our networks. And we said if we can do that, then other people can. So that's how we started this meetup group. And now we have like 50, 70 people that show up every month.

but then COVID hit and now what do you do right? So what I started doing like just, you know, in March when everything shut down is I started doing online webinars where I interview some really awesome speakers in the local market and also nationally. And we go through, you know, just what their take on COVID is. We talk about their businesses. It's kind of like this. And we just have people listen in.

And that's been amazing. And people get to network. you know, see faces that they wouldn't otherwise see. So that's what we've been doing in COVID times. And the other thing, too, is that I've discovered, this is such an aha moment that I don't have to now drive 45 minutes to go meet someone. Zoom takes care of that. I've been networking with people in New York and L.A. and Chicago.

And I would have never done that if it wasn't for the telecommunication that we're so used to these days. So I think that's another thing is also network outside of your local market, because now you can. Yeah, that's very true. Yeah, I think Zoom has been super helpful for this time for real estate investors. It probably changed the way that real estate will be done overall. Because I've known for a long time, there's things that agents tell people, just listeners, as you're listening to this, take it from a broker that sells a lot of houses that are marketing employees.

When an agent says, I'm a local neighborhood expert that literally means, nothing when they're selling your house. The people who are going to buy it will never speak to your local neighborhood expert listing agent. They don't care who that person is. They're not going to pay more for your house because of the name on the sign. They just care about the house. There's certain things like that that when like Lika and I were both brokers in we sell real estate, it drives us mad when we hear these agents say these little sayings to get business, but they actually have no inherent value. And another one, a lot of people don't want to hear is I can take a listing from anywhere if I know how to interpret the data and the comps, right? As long as you get the house

in really good shape, you know what the data you're looking at. You can literally list a house and do a bang-up job if you have good negotiating skills and you understand the market. You don't actually have to go see the house. And so many people don't like it because it makes them feel good when you walk in. That's why we do listing appointments at their home because it makes them feel good. But when COVID shut that down and we started doing it in Zoom, the sales word literally no different at all. It was the exact same process, the exact same result. And I think that there's a lot of clients that are recognizing, oh, wow, right, they really can do this from somewhere else. It's the skill of my broker or my agent that matters, not just a personality. And I'm seeing this throughout real estate

altogether. I talked about it in long distance real estate investing and there was a lot of people that were skeptical. Like, what do you mean you don't see the house? But now we're getting to the point where they're recognizing, oh, I'm not allowed to see the house. And you're still buying homes and you're still doing your due diligence. The inspector seeing the house. The appraiser seeing the house. The house. At a certain point, you're going to want to go see it. It doesn't always have to be before you write the offer. And I think, Lakewood, would you agree that you're seeing that there's a lot of people that are finally having their eyes open to the practical aspects of real estate sales and investing as opposed to maybe the emotional or the personal ones? Absolutely. And even like sellers and

buyers, given just everything that's happening in the world, they don't want to put themselves at risk, right? And this is such a great way to not do that. And so, and it just makes everything so efficient. I would much rather interview like three brokers on Zoom than have three brokers walk through my house. Very good point. Brandon, what do you think? As someone who's not an agent, do you have any like,

nah, I don't think so or any questions about that? I don't know. I mean, like I said the same thing forever. Like, I don't think anything's going to change if this thing goes away shortly. And if it doesn't go away,

then I think we're going to all adapt the way that we do business. But yeah, I mean, I think just in general, people are way more accustomed to using, just digital stuff. And so it just, it makes sense that that would be

the way we're shifting. But yeah, honestly, I don't even know. I don't know. What about your Maui property that you guys are flipping right now? When you bought it,

did you go look at it in person before you wrote the offer? I did. And I still probably would. So what if you couldn't? What if it was on Oahu and you couldn't get a flight over there? And you had to put in contract,

but you had an inspection period that you could back out after you saw it. Yeah, I would do that. You wouldn't have any issues. Like, can you think of any logical reason why that could be a,

not a benefit. Yeah, no, I think that's fine. I mean, I think that, I mean, if I was selling a house on Oahu and somebody was like put an offer on from Maui and they didn't come see it first and they put a 10-day inspection and they could back out if they saw it, I wouldn't want to accept their offer. Like, it would make it a worse offer. That's true. But what if everybody was in the same vote.

Everybody was doing it, yeah. And that's kind of what we've been seeing. I guess what I would say is like, yes, that could happen. But then you're going to get the, then the way to beat the competition is just to not add that in there, which then that becomes a new norm. And so then it just, I don't know, maybe that's a maybe that's thinking too deep on this. But yeah, I don't know. It's kind of like today, like a lot of people will waive their inspection contingency,

waive their appraisal thing to be competitive. So yeah, I don't know. Interesting. Yeah. All right. Well, Laca, I want to know when this whole thing is over. What do people do to start a meetup before we, I want to go into more specific deals with you, but if they want to start a meetup of their own, what do they do?

I think just get together a bunch of people. and start even a small mastermind and then just keep adding on. Use social media to your advantage. Use Facebook. Use Instagram. Really blast your meetup out there. Get some cool speakers.

Try and get Brandon or David on to your meetup. And then just watch it flourish. But no, honestly, like, just add value, whatever you can. Once you add value, then you're worth my time. And if you can make that happen, then I'll come to your meetup. Like, I don't go to, there's like 15 meetups in my city because, you know, we're very investor focus. We have a great, like, family. Like, we have a really good group of investors here and we're all like family and we meet all the time.

But I don't, I pick and choose my meetups. Like, I go to Tarles or I, you know, I don't have time to go to every meetup. I'm a mom. I'm busy. You know, I have, I just have so much going on. So make sure that you are, your meetup is adding value. Yeah, so good. All right, well, let's move on.

Let's talk about some of the deals you did. After that first deal, like, maybe it gets to the end of your story. Total now, what's your business look like? How many flips do you kind of generally do? How many rentals do you have, if any? Like, what's your story now? Okay. So since that first deal in 2014, I have now flipped over 40 homes.

I got my broker's license in 2017, and I've helped dozens of sellers and buyers sell homes. I am currently finishing my first land subdivision. I successfully completed a 1031 exchange where I ended up buying a fourplex and a triplex. I'm also working on my first edition. I'm putting a 1,200 square foot edition on a 3,400 square foot home. And I advise a real estate lending tech startup based out of San Francisco and helping them expand their market nationwide. So just a few things. Is that certain lending?

That is certain lending. Yeah. With Charles? Yes, with Charles and shares. Yeah, legit guys. All right, very cool. So, okay, land subdivision. I want to talk about that. 40 homes flipped. That's amazing. So let's start with the flipping stuff a little bit. And then we'll go into some of the rental stuff. I know you said you did a 1031 into a fourplex and a triplex. I want to get to all that. How do you flip 40 homes? What's your team look like to be able to do that? How do you find deals? Let's go through some of those details. Okay. So first is finding the deal, right? And like we kind of spoke about that, you know, I have a process for finding deals. I have a set list of criteria. And those are. are the only homes that I'll ever buy because I have done so many bad deals to now know that not to do those anymore. Right. So what is your criteria? Yeah. Walk us through some of that. Okay. Let me walk

it through my criteria. So there's some aspects of homes that if you can find these homes, it's like an instant equity builder. So some of those are hoarder houses, mold, basement leaks. And often these are easy problems to fix and they scare away an average homebuyer. But also these are houses that are easier to negotiate the buying price on with a seller because the seller knows that there's an issue with their home, right? So that's like a great way to look at a deal. And then I also started looking for homes with large lots. So the potential for future build or subdivision, always thinking of the exit strategy. Like I've done so many homes in the beginning of my career that I'm like, man, if I just kept that, I could have turned that into millions of dollars

of profit. So always look to do more with one deal. So quality over quantity. Then I think my next point would be if you can find homes with an income potential like a mother-in-law, an ADU, that's always a bonus. Because what happens then is income offsets mortgage. And this means more people can afford to buy your house. Yep. And I've actually sold a house for 200K over asking because it had a mother-in-law. So that's another huge win. Yeah. And the more we keep pushing. in house hacking, the more popular that gets, hopefully. That gets. Those properties become more and more valuable.

Right, exactly. I'm a huge fan. And then don't build the best house in the neighborhood. I've learned this from experience, always be in median or below median price points. Because here's the thing, right? And this is an important tip. A large house does not equate more money for your home. Because price per square foot typically goes down as a home size grows, but then your rehab

costs don't. Yep. right so don't buy the biggest house on the block you know and get i was to say i once flipped a house and it was 3,500 square feet and i like budgeted like 40 grand for the rehab not realizing that a 3 500 square foot house would cost three times more than a 1,200 square foot house to rehab so i think i spent like 90 grand on it or something it was crazy exactly and we all learn from those mistakes right now i know now i know and then get really good at comping properties like use real estate data collection tools, there's Redfin, there's Zillow, there's Realtor.com, and get good at comping your own

properties. What your broker or wholesaler says that a house is worth is just the cherry on top. But if you can get to that point, then you're going to be just buying better deals. That's so important. So many people, I think, are stuck with that. I don't know how to find out what a property is worth. I don't know how to do comps. I'm not an agent. I can't pull my own comps. Do you have any tips for people? I'm like, how do you get good at knowing what a property is worth when it's all fixed up without being a real estate? estate agent? Go to open houses. Look online, like look through sifting through pictures, you know. This house has this certain look. What did that sell for? What were the days on market like?

You know, did this get multiple offers? Why did this get multiple offers? Like I just, like, my last flip sold like 225K over asking. There's literally no comp in the area that would support that resale value. My lender even had appraised it for like 850, but the house sold for a million, right? So just see, like, why did this house sell for so much more? Because it was mid-century modern, because the finishes were a plus, you know, like, get really good. Like, that's what I did when I first started to? And when you're starting out, like, what else is there to do? You don't have a deal, you know, you don't have much to do.

So just this is like a good foundation that then you can layer on top of. Yeah, I always say, tell people, like, go analyze 100 deals. I don't care where you get them. I'm just getting from realtor.com or Zillow. and there's a hundred deals, then come to me in the same market, then come to me and tell me you don't know how to estimate ARV or what the value is. Because like, you're so true. You're going to know.

Yeah. That is so true. David, what do you think? Your agent and you deal with a lot of investors as well, how does somebody know without having to call you up and be like, David, what's this house worth? It's all fixed up. So before I comment on that, I want to comment on the whole know what you're doing thing and how that is not appreciated as much as it should be.

So I just started a mortgage company and I'm a lender. So I do loans now. And I have my assistant. me to submit these loans to the different lenders that we're going to like get rate for. And what I told him was you are going to practice submitting just a fundamental part of what you do, okay? Take a loan, upload it to this bank, go through this process. And you're going to do it so many times that you can close your eyes. I will log on my computer and you can tell me where do I click on which page, on which cursor, and what do I type that you can do it from

memory without even thinking about it. Because when he just runs himself through 20 different scenarios the same time and practices where everything is. Your anxiety levels go down. And when you actually have to go do it, you don't feel nervous, you don't feel scared, you feel very comfortable. And that confidence translates into the conversations you have with the clients, right? Like, Lake, I'm sure you remember the first time you ran a CMA, how nervous you were. What am I missing? What am I getting wrong? Am I really doing this right? A CMA guys is what an agent does to look and see what we would sell your house for. It's essentially looking at the comps. And after you've done it a few times, you get super confident and you're just like, oh, give me that address. You throw it in there

and you run through it. That repetition is very, very important when it comes to feeling confident with what you're doing. And that confidence will translate when you're having conversations with different people that you're looking to get a deal. In regards to the question of what should people look for, the number one thing that I see most people get wrong. And I see this when someone goes to flip a house in a market and everything makes sense except for the fact that they did not look at the average days on market. It's such a powerful metric that you have to know. You can get a house for, man, there's somebody in Napa that Napa, where all the wine grows that wanted me to sell their property. And they were trying to figure out what it would be worth. And it needs a little bit of work. And it's such a hard house to comp because there's nothing that has sold in the last year and a half around it. There just is not a comparable sale. And what the client wants to hear is what's my house worth. And you can't really give them an answer because you don't have anything to base it on. If you don't have comp, you don't know. You don't know what the appraiser is going to say. The average days on market is so high in that market. You almost can't flip a house there with any kind of certainty that it's going to sell. So,

When you go try to flip a house in an area that has a very high day on market, it takes a long time for houses to sell. It doesn't matter if the numbers that could in theory, you're probably never going to hit them. And conversely, if you're in a market where the days, the market is very low, 10, 15 days or less, if you screw up on a lot of the details of that flip, you're okay. Somebody has to buy a house and they're going to buy it. That's really when you're flipping house is where you want to start. So like Brandon, you always say know your market, know your area.

You're 100% right. The first thing you need to know is what is the days on market in this area? Am I flipping in a place with so much demand that I'm going to get nine showings in the first two days and I'm going to get offers in the first couple hours, it's there? Or am I flipping in a place where it might go three months before anybody even calls me to look at it? And it doesn't matter what tile you used or what finishings you used when there's not enough demand to buy there.

You could do everything right and still lose money. Have you had that experience, Syka? Oh, my God, yes. And then throw on like a bad flip that I did back in the day. and you are just toast. Even floor plans matter, right? Like I just did a house where there was like one bedroom on the main floor. And every single, and it was a family neighborhood.

So every single buyer that walked through was like, yeah, but I don't have a room for my kids on the same floor. Right. So yes, demand can drive your sales, but also like knowing your market, knowing who your target audiences, those are things that are super important. So you've done, obviously, I'm sure, a lot of successful. flips and sounds like you've done something that didn't go as well, right? So what's the, what's the difference? What, what have you learned over 40 flips that has taught you? This is what works well when I'm flipping house. That's how I make money and this is mistakes that make me lose money. What kind of trends do you see there? Yeah. So I think, again, like going back to

knowing your market, that's huge. I think it's also the way I buy a deal now, right? Like I went through my criteria. It's simple things like buying a house in a good school district, right? Those are always like a quick sell. And so like just from some of the mistakes that I've made, market timing is one of them, right? Make sure that you're listing, like even if you have to wait till January 2nd week, wait it out. Nobody's shopping over Christmas, right? We've been quite fortunate like in our area because our inventory levels are so low that anything you put on the market is getting snatched up. So we're kind of spoiled in the greater Seattle area. But at the same time, it's like bad flips can sit on the market forever.

So just making sure that your finishes are great, making sure that you have a really solid, meaningful floor plan that is more versatile for an array of buyers, right? So like homes with just stairway access, that doesn't work in this neighborhood because that just shrinks our buyer pool. Because younger families with strollers, they don't want this house.

And older people that have to walk up and downstairs, they don't want this house. So it's just so many different metrics. And that comes from experience and also like knowing your comps and making sure, you know, that you know your market. Yeah, that makes a lot of sense. So what I want to know is you're doing 10 to 14 deals a year. And while that's a good number, people don't realize if you're doing 10 to 14 deals,

you're analyzing like 40 to 50 deals. You know, it's just like when you're an agent, when they see, oh, you close two houses this month. You probably were working with six to eight people as if you were doing all the work, but only two of them actually closed. So that's a lot of work that has to get spread out over different people. How did you structure your business to have different people doing different components? And where do you sit within that structure to make sure everything goes smooth? I feel like I'm the puppeteer and I'm moving all these little pieces and I'm finding and

adding the right people to do these things that I don't want to personally do on a day-to-day basis, which is why I hire a license and bonded general contractor to run all of my projects. I hire, I have, you know, developed these amazing relationships with wholesalers. They don't blast deals that they send to me. They call me and they say, hey, this is an awesome deal. You've got to come see it. And they know that I would close quickly. I'm serious about, you know, buying a deal and I'm not going to flip-flop.

I have amazing, I'm a real estate broker, but I also have amazing brokers that sometimes list my properties when the house comes with a list back. So they kind of know my quality and how to market that house. I have the same escrow company that I've used for the last six years, do all of my deals. Whether it's real estate transactions, it's an investment purchase, it's a 1031, whatever it is, it's the same people. So I feel like when you work with also the same team and you really take care of your team, like say I list a house and then I'm like, you know what, this would actually make a really good rental.

I'm going to take it off the market and keep it as a rental. I still pay my broker because she puts. put in the effort to market that deal, to list that property. So take care of your people because then your people take care of you. And then I get to do less, right? I just get to hang out with my kids. I get to, you know, travel and like I don't have to really be in the business as much. Yeah, that's smart.

And that's the way you, that's the way you start to outsource your business by hiring professionals to do stuff. You don't even have to have a big team of employees. Like real estate has so many companies that take care of every single one of those hats that you can just hire professionals ideally to do that. You know, one thing you mentioned there that I want to reiterate on is that, you know, back in the day, I used to always shop for the cheapest insurance because they're like, I'm as an investor.

I want to get the cheapest insurance. So I'd call this insurance company, this one, and I'd always be renegotiating my insurance rates or trying to find the cheapest option. About eight years ago or six years ago, seven years ago, I stopped that finally. I was like, this is stupid. I have so many insurance policies that would stop going. I couldn't figure out the end of the year, how much I paid an insurance. Like, I just went with one person, like back home insurance.

It's not just me that did the same thing. I'm like one insurance company. There is his insurance broker. It's Caleb back home. Super cool guy. And I was like, Caleb, from now on,

you handle everything. Like, like, it's not that I don't like, no, I don't, I don't even check prices. Like, honestly,

whatever Caleb tells me, I'm just going to pay that because I know he shops around for different prices. You give me a couple options because he's a broker. Yeah. But I do everything with him.

So a few months ago. And you get a person. You don't have to go look up a portal on 14 different websites to get the answers and end up spending 40 hours to do something that he would have done in 10 minutes so that you could save $27 a year on that policy. I made the exact same mistake and I kicked myself all the time about why I did that.

Yeah, I literally, I literally like a couple months ago, I was doing my taxes, get my tax ready. And of course, when you get the document from the, this is an annoyance of the real estate world is when you get that end of your tax, or end of year, was it 10, 10, 10, whatever the form is from the banks that shows how much interest you paid. If your property is, yeah, what is the form 1098? 1098. Okay, so you get this form from the banks and you pay this much interest.

If you have an escrowed property list, every bank I have right now, they don't tell you how much of your escrow went towards insurance. So I have no idea how much I paid insurance. My CPA wants to know how much did you pay insurance for insurance? So what I used to do was called every one of those 15 insurance companies to find out what each one. This year, I sent one sentence email to Caleb. I was just like, hey, can you tell me how much I paid insurance for every property I own? And like the next day I get this a list of like every property I own with the exact amount I paid

in insurance. I'm like, that right there is, like, I will pay any amount of insurance for him. I don't even double check. So anyway, I'm glad you brought that point up. I don't know if we've ever talked about that here. But like, find a team that you like and work with them, even if they're maybe not the cheapest. I use the same title company in Washington anyway for everything there. Same thing.

I guarantee you that there's a world full of insurance agents that are like, hallelujah, thank you for saying this because we keep getting undercut by some online-only agency. And then everyone complains about the service. And yeah, that's human nature. We always want to look for the cheapest thing, not always the best. best thing. And then you get one person like what you said. This is such a good example of how a good team helps. Because as Lake is hiring people, when she gets a person on her team, they can do what that insurance agent did for you, Brandon, it makes everything so much more efficient and she

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especially if you're flipping or if you're doing Burr, which I know you've done some burr, right? Yes. And if you're building, if you're subdividing them and all this stuff, contractors play a huge role in your business. So, like, how do you find a good contractor? How do you, like, make sure that they're doing a good job? Like, any tips on that?

Yeah, contractors are such a huge part of my business. Like, when you flipped as many homes and you're a real estate broker that is focused on investors and you want to, like, refer contractors to them, you better be sure that you want to have or you have a really good team of contractors, right? The first, like, 10 deals that I did, majority of the deals that got busted was because I had a bad contractor. And so then I decided to, you know, have to spend time, like, looking and hiring and retaining a damn good general contractor. And now 50% of my last, like, few flips are done by two of my general contractors. So, and I'm able to defer this contractor out.

So for me, the best place to find a contractor is from recommendations from other investors in your market. Talk to your friends throughout in your network. Hey, I am looking for a general contractor. Like, who do you have that you can recommend? And those have worked the best for me. When they have a good track record, it just makes things so much more honest. Like, if I can go see their projects or see photos of their past work, I know that they're a good contractor. Another way to do it is if you pull up permit records for a city and contact the general contractor listed on the permit, you know that they're legit working on projects.

and you can go look at their projects. So I've done that too. And that's how I found another amazing contractor that I've worked with that has done like 15 projects for me. That's cool. So yeah. So that's, I would say that's how you go looking for a contractor. But once you find a contractor, I always have them write out a scope of work. Like, I can write a scope.

But I want them to walk the project with me. I give them all the details and have them write the scope. So that shows me how detail-oriented they are and also speaks to their work ethic. The third point I would say is project cost, right? Pricing can vary from general contractor to general contractors. So what you need to do is you know your numbers. You should go out and find the pricing. And just for the big ticket items,

like what does it cost to replace a roof on a 2,000 square foot home? What does it cost to replace kitchen cabinets? What does a bathroom remodel cost me? Like I know that just a simple bathroom remodel would cost me $5,000 to $7,000 in my area, right? So then when a general contractor gives you their numbers, you know if they're somewhere, you know, on the average scale or like if they're lower, if they're higher. And that kind of also tells you a lot about the contractor you're about to hire.

The other thing, too, is payment schedule and contracts. Those are such important things because if you, God forbid, have to go into a court of law. Like, you want to cover all your bases. So set expectations up front on how you're going to pay them. For me, I never do advance payments. I only do progress payments. I always get lien waivers signed before giving them a check. This is another thing that I never did in the past.

And a lot of people that I know that don't do it, but always get them to sign a W-9. So you don't have to track them down during tax season. I'm so glad you brought that up because I never do that. And every time I kick myself at the end of the year, like why didn't I get them to sign a W-and-you- And you can't do afterwards. You go and ask them for the W-9.

And then you suddenly can't find them. level. When somebody wants money is the best time ever to ever ask them for anything at all. When a contractor says, can I get paid? You say, sure, can you go fix that thing? You said you're going to fix? Watch how quickly somebody's on that job and they're doing it, okay? When you get them paid, it's four months later before they decide to pull somebody off of something. It's just such a valuable lesson to learn that you don't ever take advantage of people. You don't want to withhold their money to keep them from earning a living. But when you need something, you need a thing signed or you need a W9 filled out or whatever. You've got to get it done before.

they get their money. And it's like an easy answer for them. And it's funny, I just watch both of your Lakers face light up when you're like, yes, how many times have I been in that thing? How many times of I made this mistake? I mean, especially after you fired your contractor, try getting a W-9 at that point. Yeah, exactly. Yep, I know. That's what it is. Yeah. For those who don't know, can you explain why is it important to have a W-9? What is the, what is that and what does it mean? You're basically reporting to the IRS that this is how much money that you paid someone, and then they're reporting their own earnings and paying taxes on that earnings, right? You don't one the IRS come back and say, you didn't pay taxes on this money, especially when you get audited.

That's not fun. I mean, more or less, it's a way of saying to the IRS, don't tax me for this. Tax them for that. Tax them. Yep, exactly. Which they never want to do if they just got paid and they didn't fill one out. They just got tax-free money. And then people don't realize if I pay you $1,000, but I can't write it off and I'm

getting taxed at 40%. I really paid you $1,400. And you only got $1,000. And if their tax rate is much lower than yours, it's in everyone's best. interest that you get the W9 filled out. Yeah. Almost every contractor I know, like I've ever worked with, always wants to do it without the W9.

Oh, yeah, yeah. Like they always want under the table. And like, even bring it up, like, you know, like, it's always like, oh, wait, well, I thought this was a, you know, a handshake deal. Every time. And I'm like, no, I run a legit business here. But yeah, and usually I will forget to ask them to W9 until the project's over and then it's, I bet you if there's a contractor podcast, they're having the same conversation.

Like, this is how you get paid before you fill out of W9. Exactly, the other side of that coin. But also, I think to the last point I want to make on that is you have to learn to pick your battles with your contractors. Like, don't beat them out on timing, on price, on quality. I mean, at the end of the day, they're trying to earn a living too. And for me, sometimes my contractor comes back and he's like, I'm going to charge you $5,000 to install like 200 square feet of tile. And, you know, I'm okay with that because at the end of the day, day, I feel like he needs to also feel like he's winning. And that makes him feel safe to continue

to working with me. Right. But it's not like I'm going to spend all my profit on my contractor. But if they can get a little piece of the pie, then they're just going to stick with you longer. And here's a ninja tip, you guys. I have hired some of my best general contractors by asking my subcontractors who they like to work with. So I work with the same like electrician, plumber, HVAC. And if they say, you know, this is a really good guy. He pays us on time. He shows up to work. Then those are the best general contractors that you can hire. It's like almost like rock stars like to party with other rock stars. With other rock stars. Exactly. Yeah, you don't see a, I don't know who's a famous rock star. You don't see the guys from Journey partying with David Green. Yeah, I'd say like Jimmy Hendricks

isn't going to go get a keyboard player that's mediocre to try to keep up with them, you know? Yeah. Yeah. Yep. That's funny. All right. So that's really good. So just a. reframe what you just said basically is like find them through your network and then your last tip was like through your network especially through other subcontractors you have them create a scope of work which I think is brilliant to see how their level of detail is and how oriented the detail oriented they are make sure you know your project costs ahead of time so you know like if they're going to be ripping you off you know what a roof cost if they're going to charge you 80 grand there's I've said this before on the podcast I'll say to again now in in my old town where I used to

live there are two primary roofing contractors that that are the biggest I mean by far the biggest roofing contractors in town. It's a small town, right? Almost everybody goes to one of these guys. You go to the phone book. There's these two big ads. You see billboards, two ads. They both are owned. It's like a father and son. And their prices are like four times more than everybody else. So like their average roof is 20 grand. For everybody else, it's like five grand. But of course, what do people do? They call the two biggest contractors. They get two bids. And the bids are always within like $100 of each other. And it's amazing because then people are like, well, I guess that's what a roof costs is $20,000. And so then they'll go with one over the other.

and it's the same company, the same crew. It's just, it's totally shady. But Brandon, that is genius. It is genius. It's genius. But I'm sure it's illegal or at least unethical in some ways. Or maybe it's just like one of those, hey, that if you're, if you're dumb enough to to only get two bids from the same company, you know, yeah, it's shocking their bits coming

$100 apart all the time, no matter how much it is. It's crazy. Anyway, okay, so know your project costs. And then you said, really the payment schedule and like the contract with the W9. Like that whole thing is so important. We could, I mean, we have spent entire episodes talking about that kind of stuff. But specifically, like, just like making sure you don't pay them ahead of time for the work that they're going to do will make them work better and faster.

And then pick your battles, retain those relationships, know what matters, no it doesn't matter. And kind of go back to the insurance conversation we had earlier, right? Like, even if contractors could charge you a little bit more, it's nice to have somebody you can depend on and rely on over and over and over. So that's, that's a good, like, what, five or something. six quick tips there for working with contractors. That's good. Yeah. All right. Well, let's go to, let's go to subdivision, like land subdividing. You said you did what your very first. Was that a

success? Was it, did you learn a lot of lessons? What happened there? Tell us a story. Okay. This is a fantastic story. It's one that I wake up every day and I'm like, wait, did I just do that? So back in February, I think February 2017, I bought a single family home from a wholesaler and I honestly bought it because I had spent and cultivated this relationship with this wholesaler, but never bought a deal from him. So two years after he kept sending me deal after deal after deal, which I knew were bad deals and that's the only reason I didn't buy them, he then shows me this one flip and it was just a cosmetic home. There's a lot of stuff in it. But I knew that once we got rid of all the trash, then it was just a cosmetic flip. So I bought it for 570 and I was going

to flip it. It would take me about three months and put it back on the market for 800. make a 30K profit and I was just happy with that. And so it was in a great school district. It's in a submarket of Seattle called Sammamish, Washington. And so I ended up buying this home. Now, the day that I closed on this house, I was walking my contractor through the house and I was like, hey, let me just do a neighborhood drive around.

So I like to do a drive around once I buy a house. So I know who my competition is. I know how to flip this property. So I'm driving around the neighborhood. And these homes, like each of these houses were in mass. massive lots. So I drive through my neighbor's lot and there's a huge plaque outside that says that the land's being subdivided. And I was like, what does that mean? So I looked on Google. I was like, what does a subdivision mean, right? And then I was like, hmm, interesting. You can actually

divide your one parcel of land into multiple lots. So I went to the city and I was like, hey, this is my address. This is my neighbor's address. Can I subdivide my lot? Because my lot's bigger than my neighbors. The city looked at it. They said, they spent some time on it. And they said, yeah, you can, why not? You know, there was no environmentally critical areas. The land was pretty flat. So I was like, that's great. But then they also said, you know, your land is on septic. You would need sewer to subdivide. And so maybe that's not a good idea. So I'm walking away. And then this other guy from behind the desk calls me back and he's like, well, Toll Brothers is putting a 30-unit short plat or long plat

right behind your house. And they're bringing in all the utilities, sewer, water, electricity, gas. So you could just take from them if you subdivided your lot. And I was like, ding, ding, ding, this is amazing. Let's go back and get to work, right? So here's what I then did. I still rehabbed that house. I rented that out. So the rent would cover my mortgage. And then I started the process of subdivision.

I started in May 2017. I found out from the city after we submitted plans and whatnot that I could actually subdivide my lot into three parcels where I would have two empty lots and then one lot with the existing house on it. And so that process, the city said would take me a year. But in reality, it took me three years. And last Friday, the city gave us our final short plat. We recorded it with the county. and now I'm the proud owner of three lots in Sammamish, Washington. That's awesome.

All right. So you took one lot. You subdivided took three years. That's crazy. Why does it take so long? It's insane. It's a lot of process. Plus, when mine is riding on a Toll Brothers short plat, which is a 30-lot shot-plat,

that's a longer process. And then I think cities are just so inundated with construction in this area that everything just takes much longer. So when the city says a year, really account for a little bit more than a year. So a couple quick definition things. Short plat, what does that mean? A short plat is when you're subdividing a piece of land into like five or less lots. So it's shorter.

Along that is when you're like 30 lots. Okay. And then Toll Brothers, is that a home builder? It must be? Yeah. Toll Brothers is a pretty popular building in this neighborhood. They started out in the East Coast and now they build tract homes here in Washington. All right.

So what does that look like in terms of like? Like, are you going to make more money? You were planning to make what, was a $30 grand on the flip? Like, are you going to make more than $30 grand then by selling the houses or what happens? So I basically took a $30k profit and turned that into a seven-figure profit. Wait, seven figures? Yes. That's insane.

I know. So the house itself, like, remember back in 2017, I was on the list this house for $800K, fully fixed up. That has appreciated in value so I could actually sell it for about $9.50. And each of those lots are now worth about $500. piece because once you build a home on it, a four to 4500 square foot home, those homes sell for 1.5 to 1.6 million in that neighborhood. Wow. Yeah. So you're going to build or are you going to sell the lot? I'm going to sell the lots. I'm going to sell the lots and use that money to go buy more multifamilies or self-storage. I just watched AJ's amazing podcast and I'm like, I need a self-storage

facility. So that's what I might do. Or you just buy a house out here in Maui and just come hang out and we'll serve you. I would love to do that. Or no, buy a lot out there in Maui, short plat it. Make yourself another million dollars. All right. So here's what I want to do. For people that listen to this, there's going to be half of them that think that's too good to be true. And half of them that think I want to go do it. So let's cover both of those. I think we can get it by, we can address by first off saying what you noticed that brought so much value to this deal. And then how people can look for similar opportunity in stuff that crosses their path. Because I know the reason you did so good on this is that you saw opportunity where other people didn't. They were all looking

for the same thing. They were all hunting for that deal that just fit the mold came right out of the box. And you took one step further and said, how do I make the box what I want to be? So can you share what you noticed, why you think you added so much value to these and maybe why other people missed it? Yeah. Like even the wholesaler missed it, right? He brought me this deal. I bought it for 570. I could have even paid up million dollars and I'd still be okay. So I think, you know, when you're out there looking for deals and you get a deal, look at all your various exit strategies. This is when your network really matters. You go out and you say, hey, I have this house and it's on a pretty large piece of land. What can I do? Right. Look at your different exit strategies.

In my case, it was a land subdivision. But maybe in your case, you could put an addition. You can convert it into a rooming house. Go talk to your city. I think the most important thing to do is always talk to the land use planner in your city and have them tell you what is achievable, right? Like you may want to do X, Y, and Z, but if the city doesn't allow it, then the city doesn't allow it. So always talk to your city and get their take on what you can do. Yeah. And then, like, there were so many hurdles that I had to go through with this one. I could have at any point just said, I'm done with this. I don't want to do this anymore. Let's just put the house on the market and sell it and just, you know, make another, like, make 50K

and be totally happy with that. But for me, it was like taking it one step at a time. This deal felt like a hundred bricks just being thrown at me one after another. And I was like a ninja, like just getting rid of one brick after another, right? I'm like, no, I got this. I got this. So you just have to take it one step at a time and try to find solutions to all your problems. And if you can do that, then it's achievable by anybody, right?

There's a lot of homes, small homes on large lots. So they're out there. And those sellers may want to sell because they just don't want to deal with it. So it's totally achievable. As long as you just have the grit to stay in it long term. Yeah. So good. You mentioned something that most people don't want to hear, which is that I made such a

good profit on this deal because I dealt with so many things nobody else wants to. And you had the ability to do that because you had a team in place that could go, hey, you call the city, you go ask these questions. Hey, we know this guy. Go ask him or her, how is this part going to work? And that was also due to your networking. So having a team, having these connections, gives you a superpower that you can take down a deal like this,

that the person who says, I don't want to put my time and invest into building an infrastructure or an environment around me that will make me successful, they just see a bunch of bricks are going to hit me in the face. They don't have a way to process it. And it reminded me of something that I've been thinking about all day, every day as my mortgage company is expanding and my real estate team is expanding and my investment opportunities are expanding. And what I'm noticing is that behind every single opportunity that I have,

there's a problem or several problems that have to be solved, which is why most people don't go forward. I get a person who's supposed to help me with that and they come back to me and they say, it's just hard. It's just hard. There's all these things that make it hard. And they keep coming and telling me all the reasons why it's not coming easy as if that's an excuse that I'm going to accept. Well, of course it's hard. That's why the opportunity is there. And it reminds me of a quote, Elon Musk said, which was something along the lines of the amount you get paid is in direct proportion to the difficulty of problems you can solve or something like that. And I thought, like, amen, that is exactly what life is worth. A doctor gets paid more because they can solve

very complicated problems. A CEO or an engineer can solve difficult problems. A person who cuts grass for a living, and there's nothing wrong with that, but they're not really solving super difficult problems. They're trying to make sure the lawnmower starts. And I want to ask you guys what your experience has been like that in your own businesses. Well, I was just going to say that that's why Burr is so profitable or can be so profitable because the burr is a lot of problems and you're putting together a lot of different things to make it work. But what do you think, Leika? Yeah, I think if you are able to find solutions that keep your eye on the price and it doesn't

matter what you have to do to get there. But if you can find solutions and you can find people to help you along the way and you can hustle and bustle and get through your problems and, you know, just get to that ultimate finish line. Like I honestly, in the last three years, I didn't think there was a finish line. I knew. I wanted three lots. That was the ultimate price. But I knew that, you know, at any given time, like, this could all go kaput. Another thing that I wanted to add on this one deal is that your lending partner is so important, right?

The financing piece of this. I had these lots that I was creating, but it would cost me 500K just to do all my horizontal construction to get that subdivision done, you know, including city fees and permit fees. And again, I go back to certain lending because if the. they didn't believe in me and they didn't like partner with me on this, then I wouldn't have the money to actually go out and do all that construction. So also finding good lending partners, having good private lenders, being able to raise money, these are things, these are skills you're just going to pick up along the way.

But they're important skills to have in your back pocket. Yeah. Yeah, that's smart. Love it. All right. Well, let's move on to the next segment of the show. it's our deal deep deep dive. All right, this is the part of the show where we dive deep into one particular deal that you've done.

Like, did you have a deal in mind that we can pick apart? Oh, yes. Yes, in a good way. It's a single family home that I bought in a submarket of Seattle called West Seattle. Okay. So single family house, that's good. How did you find the property? So this house was listed on the market.

I wasn't a broker back then, but a wholesaler that I was working with. that was also a broker brought me this deal. Okay. So it was on market. On market. But a wholesaler who's also an agent basically just came to you and said, hey, I think this is a good deal. Yep. Exactly.

Did they have it under contract when they came to you? No. They didn't have it under contract. And I know that there were multiple offers on the home already. So there was a bidding war. Okay. So this was a wholesaler that was also familiar with the MLS, basically. They were just very involved in their market.

All right. So how much was this house? when they brought it to you and what would you buy it for? Yeah. So the house is listed for 450. We ultimately got it under contract for $475. Oh, you overpaid. I'm sure you lost money on this deal.

You paid over asking price. That's for suckers. Yep, exactly. Exactly. And how did you come up with the $4.75? How did you negotiate that price? We basically put in an escalation clause and we were the highest at $475. Can you explain what that is?

Because that's a really cool tool to escalation clause. You know, in a hot neighborhood and a hot market, that is an amazing tool to have. Basically, you put in your offer and you say that this is my offer price. It's $450. But I'm going to put in an escalation clause up to $475. That means if there's a bidding war and there's another buyer that's going to put an offer on this house for $470, then my offer beats their offer by $5,000. Just like what we do when we're an online bidding auction. Right. This is my bid, but I'll go up to this much, but they only actually make you go up that much if somebody else went up more.

Here's my question for you guys, because you guys are both brokers and I never understood this. Let's just say this exact scenario happened, right? $450 is what you offered and said, I will go up to $475 if there's another offer, right? What's to stop the agent from just calling up their buddy and saying, hey, man, would you go put an offer in for $474,900 on this property? You're not going to buy it. It's just going to bid the other person up to what I, because you're basically putting your cards on the, table saying, I'm willing to pay $475.75. So why wouldn't the agent just make you pay $475 then by putting in some bonus or bogus offer? Is that just fraud or is that like how it's done? It is fraud.

Okay. And at the same time, there's probably nothing that would stop them from doing that. No. No. Yeah. You literally just call your brother and be like, hey, go put an offer on this. Absolutely. And I've actually seen that happen. Now, there are ways you can get around it if you really want to. You can say, okay, show me the offer that was written, and then the agent's name and DRE number will be on there. And then you can call or email that agent and say, did you write an offer for this amount? And was it in good faith, right? And at some point, someone might get kind of scared and be like, no.

And so if you really wanted to, you could pursue this. Like if you saw something was sketchy, you could maybe. Okay. But it's hardly ever going to happen. Yeah, that's a great point that you bring up because every time I'm in a bidding war and my escalation, you know, is kicked in. I always ask for the competing offer. Okay, yep.

Smart. Just to make sure it's legit. Yeah, smart. All right. Number five, how did you fund this deal? Okay, so that's another interesting question because this was the first deal that I actually raised private money for. So I used a hard money lender, but I also raised private money from my own network.

It was someone out of California that I had been in touch with. They had a lot of money and they wanted to basically partner with someone that was honest and trustworthy and had some experience flipping homes. So they came in as my private lender and I just paid them a fixed interest rate. And then the other thing too, I set it up so that it would be a balloon payment at the end of the deal. So when I closed on the deal, they would get their interest, like all of their interest payments as a balloon once the house closed from the proceeds of the house. Okay. Yeah, that makes sense. So you don't have to pay them monthly is what you're saying. Monthly. Yep. Yeah. Very cool. Okay. So what did you end up doing with this property?

Okay, so this, it goes back to my criteria for finding a deal. When I said don't buy the biggest and the best house in the neighborhood, it was because of this deal. This house was 3,200 square feet, whereas all the other houses in that neighborhood was maxed, 2400 square feet. All these other houses were selling for 600K. And I had this one house that I was going to list for 850. Like, that's a big, no, no. The house sat on a cliff.

It had incredible views of the speech. Needle of the Century Linkfield. So just like water views and like incredible space needle views. So for those who haven't been, Seattle has some of the best skyline in the entire world. Like it's unreal. Yeah. The mountains and the sky. Yeah.

It's stupid. So stunning. So stunning. So even the laundry room had a view of the space needle. So I was like, this is the sickest laundry room that I'm ever going to be in. So then I went on to remodel this home. My budget was 175. I ended up spending $225K. The basement had a huge crack in the foundation, so that needed to be fixed. And what I thought was an easy fixer became such a major fixer

because one thing led to another and then it had to all be fixed up. So it was just like a deal that I should have never bought that I was just not set up to do. And again, market timing is everything. And we listed this house in fall where, you know, there is no hot spring or summer market. So there were so many things that went wrong. But here's the thing. Again, it goes back to identifying exit strategies. So this house too was on a pretty large lot. But what was different about this house was that it had historical lot lines on it, which means that the city, back in the day when they first subdivide this entire neighborhood, they put historical lot lines. So I could go to the city and say, I want to assign a new.

tax parcel ID number for a few of these lots. So I would sell the house on one parcel ID. I would take the remaining lots, put it on another parcel ID and keep that lot for myself, for future development. So this house came on five lots. I sold the house with three lots. I kept two lots that equate to 6,000 square feet. Now this is undeveloped king county, so it's just never been like there's no been no construction on it, but also just imagine putting a brand new home on it with the same killer views, that would be worth a lot in the future. So at that point, I was like, okay, I got to do this. So I worked with the city and I, that's what I did. I put two tax parcel IDs on it. Okay. So what happened then financially was? What did the end of the deal look like? Okay. So then we

listed the house for 825 because the market had dropped from when I first bought it. And we ultimately, sat on the market for like 60 plus days and we sold a house for 775. You guys, that was a loss of 50k. Ooh. Okay. So my saving grace on this deal was that I had put in the work to go figure out my other, my plan B for an exit strategy. So then what I did was I kept the lot and today that lot is now worth 300k because everything around it has been developed. Homes now in that neighborhood are selling for 1.2 to 1.3. So in the future, I could either sell the lot or I could build a house, but I kept a lot. So you lost 50 grand technically, but you got this lot now that you could sell for a few hundred thousand dollars. So it's kind of like long term. It's a profit. You've pulled it out.

Exactly. Exactly. That's cool. You know, there's a really important lesson here that real estate's very forgiving over time. It is very forgiving. Yeah. More than any essay class I've ever seen, even if you screw up a lot, if you wait long enough, you still look really smart. And this is, I mean, really, really smart. This is a really good example of Lake is saying, I did everything wrong. I didn't know what I was doing. I'm still really glad I did that deal because I came out on top if you just wait. Exactly.

Exactly. Yeah. And I think this goes back to your, like, I might just say it earlier, but I'll say it now because it fits here as well, is like just a good tip for everyone. It's always asked the question, what's the highest and best to use for this property? It's always asking that question. What's the highest and best to use? And sometimes the answer is it's already, you know, it's already doing it.

But in your case, you're like, what's the highest and best use? Oh, I could sell this without those extra two little lots there. And I can keep that extra tax parcel for myself. That's the highest and best use for this property. And by asking that question, you get, you know, good, you know, Tim Ferriss, what he always says, right, is ask good questions. They lead to good answers. So you asked that question.

And I've got you there. So the other thing, too, is delayed gratification, right? If you can just wait it out, yeah, you're not going to make 50K today. but in the future, you can make so much more money. That's just, you know, it's delayed gratification. And you just wait it out. Same with my Samamish land deal, right? It took me three years.

I could have sold that, made a profit. But I just decided to hold out. And it leads to greater, bigger things. I want to point out something that I think you did really well in your business and your life so other people can copy. Can you give us a quick summary of what highest and best use is referring to? Yeah. So sometimes you just take something.

something small, right? And then if you can add on to it and you can like create value where other people are not seeing it, right? Go talk to your, go talk to everybody you know, listen to books, listen to podcasts, see what other people are doing? Like, what can you do out of this one deal that nobody else is thinking of? And really go and go get after that. And Brandon, you'd agree that's like what you're getting at with that phrase. Yeah, yeah, exactly. I think he's just trying to find out like what can be done here. What are the possibilities?

The potential for that property is maximized, right? So now, could I turn this to a vacation rental? Could I turn this to a house? Should I burn? Should I flip it? What should I do? Now, Lakea, here's what I want to ask you. I would guess you're good at that because you've had to do it in your team members also.

You have to look at all of them and say what's their highest and best use. this person's a great accountant, would, but would they serve my business better if they were in this role dealing with customer relations or something? And I'm wondering if you learn that during your corporate time at Nordstrom's because you had to supervise people. Am I, am I off or is that accurate? You know, I think it's like a life lesson for me is that I've had so many different relationships living in a few different cultures too. And you just try to identify the best in people that you work with. also like I'm happy to tell you that I'm a lazy person. So if I can get someone else to do it better than me and empower them to do it,

and then I can just sit back and watch the magic happen, I'm all for it. Yeah. So when you find the highest and best use in the people around you, they are happy to be used in the way that you've provided for them to do it. And you benefit from that. And once your mind starts to recognize these patterns, it can be applied to real estate. It can be applied to people. It can be applied to stocks. It can be applied to business.

It can be applied to writing a book. There's all of this incredible opportunity that opens up for you in life once you see the rhythm of looking for highest and best use. Absolutely. And you're so right, David. It goes to a property. It goes to people. It can really just vary. Yeah.

Well, you've done a great job of that. So I want to commend you. This is a really good example of what it looks like when it works. Yeah. By the way, on that note before we move on, I'm reading this book right now. I'm right in the middle of it, the un-f yourself. by Gary John Bishop. Have you guys read that at all?

It's like a personal book. Anyway, it's pretty good. I'm like halfway through it right now. But it's kind of like, yeah, just how to like, how to stop like the inner dialogue of like negativity in your head and like how to like, you know, it's just like very, I don't know, good book. Anyway, so one thing he makes a statement in there is that we are all winners at every area of our life. Now, they say I can make this make sense. We're all winners at every area of our life based on our goals. And what he means by that is if you like had a.

a bad relationship, but it failed. That subconsciously, you wanted that relationship to fail. And so you won with your goal of destroying that relationship. So you win at everything that you try subconsciously to do, right? So if you're, you know, I don't know, super out of shape and you just never run, it's because you're succeeding at not being a runner. And so he goes to it, basically going to identity. There are things that we identify ourselves. Like, this is my identity as somebody who doesn't run, therefore you don't run. So you're winning at your identity. We always line up our actions to our identity is basically what he's saying here, right? So in that, I started talking about like you have positive and negative identity.

So where I'm going with this is I realized that this was the key to like almost all the success I've had in hiring people the last few years is that you have to hire people. And he didn't say this in the book necessarily, but this time I'm like translating it. Like you have to hire people whose identity is that they are a rock star at that thing. Not that they want to be good at that thing or that they, they're hoping to be good at the like they literally are just amazing at that. So case and point. So I hired this guy, uh, Mike Williams.

Mike is awesome and he's my investor relations guy. He knows if I ask him like, Mike, what are you good at? that, he's like, I am a people person. I love people. I love talking with people. He just knows that. Like, it's not like I'm trying to be good at that. Walker, who's my underwriter guy, like, Walker, like, knows he's a human calculator.

He just loves underwriting. Like, his identity, right? So hire people whose identity is that they are awesome at that thing, not that they want to be that they truly are. So you are, you said earlier like as like, you are awesome at networking. You just know that. Do you remember that the Maui mastermind last year? I had everyone to actually say that out loud as, what are you awesome at?

Yes. That's kind of like plays into that, right? It's like, what are you just really good at? Because that's your identity. And that's what you should be doing more of. And that's what your team should be doing of, whatever their identity is. Yeah.

And then when you start to recognize it and they start to feel good about it, then you're empowering that even more. You're bringing that out even more. Yeah. Yeah. It's just kind of a cool thing. I'm just kind of working through publicly in front of a quarter million people right now. So, yeah.

Yeah. Figure out what your team's identities are and explore that. David, anything on that before I move on? I know you're bigger of that stuff too. But just that if you've ever had a hard time looking at and accepting your own flaws, look at Laca as the perfect example of how the more humble you can be and the quicker you can say, I am bad at, fill in the blank, the quicker you can be successful. It seems counterintuitive. It's 100% correct. Yeah. Yeah. Cool. All right. Well, Lakeo, what do you think is next for you? I mean, like the,

like, where do you see yourself had in the future? More flips, burr, rentals. Where do you see yourself going? I love burrs. David Green. So, you know, and thank you for your book because that really got the wheels turning for me. And I did my first burr in 2017. And I've basically grown my rental portfolio because I was able to do cash out refinances on my flips. So I think more adding just more rentals to my portfolio. But also I'm getting really excited about other asset classes. Self storage is like I mentioned one of them.

I want to dig into that more. I think also the next step is to go buy a commercial. building apartment investing. I'm excited about that. And hopefully, like, I can 1031 one of my deals into a massive apartment later this year. So lots of good stuff, lots of learning. You know, you just have to keep learning. And I still, I love to do fix and flip. It's like my, my thing, you know, I'm good at it. And so that's always going to be part of my life. That's cool. That's cool. So a last question before we go on to the famous four, what do you need in your business right now that our users could maybe help and bring value to you.

If somebody wants to connect with you and bring value, how does somebody bring value to you right now? What do you need? Oh my God, I'm big on that. I'm also like happy to, you know, partner to motivate. For me, I think it's about constantly finding that next big idea, the next big deal, finding new exit strategies. Like I've just started to learn about creating adult family homes.

So like if any listener out there, you know, if you are good at it, if you're a provider, if you're in that space of creating adult family homes, I feel like it's a huge need in our country going into the next five years. Please reach out to me, tell me your experience, tell me what I could be doing in that space to be able to provide homes for these residents. I'd love to hear. Very cool.

All right, with that, let's get to the next segment of the show. The final segment is our... Famous for... All right, this is the famous for the final... Final four questions of today's show where we ask the same questions to every guest every week. Like in number one, do you have a current favorite real estate related book? Brandon, are you ready? I'm ready.

It is the book on rental property investing. Oh, thank you. And this has nothing to do with me being on the podcast. It is such a great book, especially if you're just starting out. Even if you're seasoned, for me, I sometimes just pick up this book because I'm like, you talk about such basic principles and techniques that I'm like, oh, shoot, I forgot. I could be finding rentals on Craigslist. But when I go back and look at your book, it just gives me all these aha moments that I am like so thankful for this book.

You know, it also like when I first read it and I read it quite a few times, like I just opened up a chapter and I'm like, okay, let me go through this again. But when I first read it, what it made me think about is how I could optimize the money that I make on my flips. to actually create long-term wealth. And that for me was powerful. But here's another super interesting story. There was a time in 2017 when I just thought everything was falling apart around me. I was doing a couple bad deals.

I had a horrible general contractor that I was dealing with. You know, there was just like so many issues in my business that I was ready to put my hands up in the air and just be like, I admit defeat. I'm going back to corporate America. And it was like, there was one night. My friends were over. we ordered some Chinese takeout, and I opened my fortune cookie, and it said, you will do well in the

field of real estate. And you guys, if you don't believe me, go to my Instagram page and scroll down my photos and there's a picture of this fortune cookie. And that just changed my life. I was like, okay, I got to stick with this, right? And then it just gave me second wind. I'm like, okay, I just got to find more solutions to more problems. What's the big deal? Like, I can do this again. So when I read your book, I was like, no, that is such a big coincidence. Yeah. Yeah, because I had the opening in my book starts with the story of a fortune cookie that I had opened. So if you want to know more about that, check out the book.

But thank you. Like that, that's awesome. Yes. I don't know how I'm supposed to follow that with my question. What's your favorite business book? Okay. So I am from Seattle, Washington, home of two of the world's greatest companies, Microsoft and Amazon. So it should come as no surprise to you, but my book that I picked is called the Bezos letters.

Have you guys read the book? I have not, no. It's a phenomenal book. So every year, Jeff Bezos writes an open letter to his shareholders. And what the author did was he compiled all these letters for the last, like, I want to say, 14, 15 years. And then he created a book out of it. But what's really cool is that they talk about how some of the biggest successes comes from failure. right? And like how relevant is that to our businesses? Like they also talk about like they go through

these four steps which anyone can use whether you are a single entrepreneur or whether you run a big company. It's the same process. Jeff Bezos used it to create Amazon and make it what it is today. And those four steps are test, build, accelerate and scale. And I just feel like that is such a good parallel to any of our businesses, right? So highly recommend reading this book. And while we're on that note, right? On the note of Amazon, like I have to tell you, I just read this fact, 2% of the U.S. household income is spent on Amazon, you guys. That's really? That's crazy. That's insane. So they got 2% of every single U.S. citizens in general. Income. Yeah. So crazy. Crazy.

Okay. When you're not blowing our minds with awesome facts and inspiring stories, what are some of your hobbies? I love to travel. I love good food and I love football. So I will travel to a country to eat at one specific restaurant. I just love to travel. And the Seahawks, I'm a diehard fan of the Seahawks, go Hawks. But during the NFL season, I watch every game. It doesn't matter if it's not a Seahawks game.

I literally like I'm watching every single football game that is ever played. Wow. Yeah. Football nerd. Did you like it when you were in India or was that something that you picked up in America? covered this game like 10 years ago. Okay. And every year I learned something new about it and I'm like, oh my God, that's why that happened.

What do you think is the most appealing to football itself that draws you in? I'm very curious. I think it's that team camaraderie, like how every single person is so important. Yeah, football is 100% of every sport there is, that chemistry of the team is more important to the success than any other sport that's there. And that's how your brain works because you like to look at. at how to move all the pieces together. All the pieces.

That makes total sense. Yep. Yeah, you have to be good at offense and be good at defense. Mm-hmm. Yeah, and one person's success is dependent on another person doing their job well. You know, like everything has to line up in order for the play to be successful. That's really good. Yeah, that's good.

The analogy I use often, not that you were asking, but I'll say it anyway, is like what I love about football. I don't actually watch a lot of football. I like it. But what I like about the fact is if you consistently can get three yards, if you can just run the ball three yards, down the field, like you will be undefeated and you can never lose, right? If you always go three yards, because then you always start over every 10 yards, right? So you go three, six, nine, now you went 12, you got the new first down and then touchdown. And you just do that over and over and over. You'll always win. And that's such a good analogy and picture for life. If you, you don't need to run

Hail Mary's all day long, just consistently every single day, move the ball down the field three yards. Ask yourself every morning, how could I move the ball down the field three yards today? Just a little bit. I'm going to just carry it a little bit. And I will win at life if I just consistently move the ball down the field. People just, like, stop moving the ball. Or all they do is throw, like, Hail Mary's every single play, and they can't figure out why they're not winning in life. Just move the ball down the field.

Brandon, what I love about you is you can come up with an analogy with anything and just make it sound so cool. Look at that, David. No one's ever told me I was good at analogy. So thank you. Because I'm a new addition in your life. You couldn't do it before. I rubbed off on you.

You did. You inspire him. There you go. All right. Last question, Leika. What do you think sets apart successful real estate investors from all those who give up, fail, or never get started? I have to say that it goes back to identifying your strengths and your weaknesses. The minute you get rid of or outsource the things that you don't want to do and focus on the things that you're good at, then what happens is genius.

The road to success becomes easy. It becomes more joyful and you're going to get on that path because it's fun. Yeah. So true. So good. So good. All right. Well, I'm sure people's minds are going to be exploding just like Brandon's and

eyes are. For those who want to reach out, follow up, where can they find out more about you? Okay, so I'm on LinkedIn. So just find me, Leka, Deita, LinkedIn. I'm on Instagram. My handle is L-E-K, 4-A's, and an H. Oh, okay. Yeah.

L-E-K-K, 4-A's, and an H. Like, uh, okay. Yep. All right. Good deal. And I want to thank you guys so much for having me. This has been such a truly humbling experience because I have grown up listening to the Bigger Pockets podcast.

And then it's like life is coming a full circle. That's cool. You definitely brought some amazing value today. So I'm sure like you're going to be able to help, you know, tens of thousands of other people, hundreds of thousands of people listening to this. So thank you for just being so open and honest today. It's awesome. Thank you.

All right. Greenie, you want to take us out? Great job. Thank you very much for being here and sharing everything, Lika. I think that you have developed a couple fans. This is David Green for Brandon. Finally learned how to make an analogy, Turner. Signing off.

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