BiggerPockets Real Estate Podcast - 782: Unbelievable Returns from Flipping This New Type of Real Estate w/Jessie Rodriguez

Episode Date: June 22, 2023

The real estate market is crumbling…or is it? According to experienced investors like Jessie Rodriguez, now is one of the best times in recent memory to start building wealth. As a multi-decade house-flipping veteran, Jessie understands how the housing market works. He lost his business, his home, and the majority of his wealth in 2007 but has made it out not only surviving but thriving with a house-flipping business that prints cash. And he knows something that you probably don’t. The past few years have been a bloodbath for flippers. With home prices correcting and buyers fleeing the market, many flippers from years back aren’t around today. But, the tide has started to turn, and buyers are getting back into bidding wars, willing to spend good money on homes that fit their remote-first lifestyle. Jessie and his team are HEAVILY capitalizing on this, and more good news may be on the way. In this episode, Jessie talks about rebuilding his business after losing it all in 2007, why now may be one of the BEST times to start house flipping, key indicators of a market shift that most investors miss, the biggest myth in today’s real estate space, and how Jessie’s team is redeveloping a historic building and turning it into a passive income stream that offers millions in profits. The best part? You can copy Jessie’s strategy to build your own wealth in 2023, so don’t skip this! In This Episode We Cover: Rebuilding your wealth after losing EVERYTHING in a financial crash  The biggest myth of 2023 real estate and why most investors are wasting time  Signs of a housing market shift and the metrics that predict where we’re headed  Finding a mentor and how the right one can put you decades beyond the competition  Redeveloping historic real estate and the unusual deals that are making Jessie a fortune  Building a seven-figure passive income stream, EVEN if you’re new to rentals  And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Watch James on the “On The Market” YouTube Channel Hear James on The “On The Market” Podcast Wherever You Listen to Podcasts: Spotify Apple Podcasts BiggerPockets James' BiggerPockets James' Instagram James' Website Books Mentioned in the Show SOLD by David Greene SKILL by David Greene SCALE by David Greene Connect with Jesse Jesse's Instagram   Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-782 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show, 782. What's the biggest myth that you want to debunk that's going on out there in the market today? I keep hearing over and over again about how bad the market is, how hard it is. It's not that hard. Opportunity right now is better than it has been the last three years. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast. Not only the biggest, the baddest, and the best real estate podcasts in the world,

but also the most relevant. every week we are bringing you guests, how-toes, and answers that you need to make smart real estate decisions now in the current market conditions, because this market is changing faster than I've ever seen in my life. Today I am joined by my co-host James Dainard, also known as Jimmy D, also known as ABC, a line that will make more sense if you listen all the way to the end of today's episode. And if you want to hear where James made his first cameo appearance, kind of like in a Marvel comic, right? Wolverine first appeared in episode 48. It was on Bigger Pockets Real Estate Podcasts episode 338. That's when I first met you, James. I believe it was Brandon and I that interviewed you.

And you brought in one of your friends today, Jesse Rodriguez. Jesse's an incredible guy. What are some of your favorite parts of today's show? I mean, Jesse is an incredible guy. And, you know, as an operator and a flipper, we've been really active investors for last 20 years. And when you get to meet someone that's been doing the same thing, it's just a special thing. And as soon as I met Jesse like a couple of years ago or a year ago, we clicked right away. And just him walking through the ups and downs of this business is a huge thing.

Just never quit. Keep rebuilding. And then just those everyday nuances of flipping, like changing your business around and keeping it going forward and not being afraid of that business. I mean, he just touched on the points that matter, right? If you want to be in this for the long haul, you have to push through the good times and the bad times. Yeah. If you want to learn how to make a 40% return on your.

your real estate. If you want to talk about systems, if you want to develop something that your acquisition manager can literally quit, you can replace them and be up and running in record timing. This is a show for you. Before we bring in Jesse, today's quick tip is simple. According to Jesse, every flip works as a burr. And if it doesn't, you didn't get enough of a discount on the flip. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast, Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer.

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Let's get to today's show and bring in Jesse. Today's guest is Jesse Rodriguez. is. He is an agent, an investor, and has a 75-year-old mentor. You may recognize him from HGTV, where he did two seasons of vintage flip with his wife Tina. He's also done Burrs and is getting into the commercial real estate game. And later in today's show, you're going to hear about a repurposing of real estate that you may have never thought of before, but I think it's an awesome idea. He's done over 350 flips for over $200 million, but is currently diversifying away from flips. He has seven doors, but it's growing. Today's guest, Jesse Rodriguez. Jesse, what's going on,

man? What's up, David? Thank you so much for having me, man. I'm so excited. Like, this is literally a dream to be on the Bigger Pockets podcast. Like, I've been so nervous the last three weeks trying to get ready for this. James has that effect on people, I will say. Sometimes you're just heartbeats a little too fast when James is in the room. So you and me will get through this together, my man. Before we get into your story, let's get your take on the state of the industry, which we've kind of been getting into a little bit. In your view, what's going on with flipping over the last six months? So flipping over the last six months. So the last four or five months, well, we're in May, right? So it's been good again. It feels like a strong, strong market. Take it back a little bit farther. I'd say a year, nine months, 10 months.

It was terrifying. Like, I would list a property, look at my performa and say, I don't even know if I'm going to hit this. Like, I'm going to lose 100 grand. And I did, you know, lost 100 plus thousand on a flip. And I just kind of worked through the, it is what it is. I've had a lot of great years and I need to push through this. I'm not someone that's going to say, well, I'm going to convert it. I'm going to carry it. That wasn't the exit strategy when I bought it. So I'm going to approach this that I need to push that inventory. If I lose 100 grand, I lose 100 grand. And I started working down my pipeline, right? And I had a bunch of properties that I was forcing equity on doing 80Us and luckily I had these two 300,000 our spreads built in that condensed down to 30s and 50s and

70s, but I survived it. Like I was in just recoup capital mode. And I'll say now it feels great again. Like it feels almost too good to be true. I listed a home. You know, so I just, I bought a house for 250 grand in SoCal, which is crazy great deal. I invested 60 or 70,000 into it. And I listed it for 410. I have multiple offers. I'm all. all the way at $450, $460 now. I mean, we're talking a deal that I'm going to make $90,000 on, $80,000. It's like, what a great, you know, cash on cash return. And I was happy with that deal when I underwrote it to make $40.

Like that was a great deal. So to see that, like, right now I'm like, hurry, hurry, get everything on the market right now because I don't know if this is going to last two, three, four months. I think we're back to a real estate cycle, David and James, that we should see a slowdown again in the winter months like we used to see. We haven't seen that the last three or four years. It's like spring, you get your best return.

Summer it starts to level a little bit. You start hitting what you were performing. You know, you had on your, you were guessing your numbers were to be. And then you probably make a little less in the winter months. So I think it's a phenomenal time to keep investing. I started when the market was dropping and I made money. So I know it can be done even if this market were to continue to drop. James, what about you?

What have you seen over the last six months? So the last six months, I mean, what we've seen on a lot of these expectations, tech cities. You know, and Jesse's in a lot of the same markets that I'm in the West Coast, more expensive pricing. But we saw this like kind of rapid deflation last spring. As soon as the Fed started stepping on rates, we saw this adjustment off peak value because I know, David, you saw this in San Francisco too. Like Seattle, San Francisco, Austin, they hit these accelerators in March of last year that were like, I know in some neighborhoods I saw 20% appreciation in one month. It was unreal.

And then so what we saw is this sudden dip down when the rates, you know, when rates, the cost of money goes up 40, 50 percent in a very short amount of time, the market froze for a minute. And with the cost of money, we've seen about a 15 to 20 percent drop off that peak value, but now it's stabilized out. And then because we're in more of the expensive cities, because a lot of the other cities nationwide actually have done fairly well. Like, you know, the Midwest, the South has been doing well to where flippers are still turning their deal. and they haven't seen the same deflation. But I think because we're in the West Coast,

there's a lot more technical thinkers, too, and the people that we're selling to, they think things through. A lot of tech buyers, a lot of people with money. And so when you have these sudden market corrections, because everyone was waiting for the shoe to drop for this last two years,

like at some point, this money's going to blow up and things are going to go bad. And then they thought the cost of money was going to do that. And it was every buyer got locked up, and it wasn't that we weren't even getting honest, offers, we weren't even getting showings. And that showed you what was happening. And over the last, but what we've seen is now that the market, as things start to sell, there's more confidence in the market. We're selling all of our product out right now. We're seeing a sudden uptick in showings

to where we were getting two to three showings a week, 15 to 20 again. We're seeing home pricing. This is a good example. One of our clients built a cottage in Seattle. They sold it three months ago, exact same cottage within a tenth of a mile for what we just sold. They listed their site for 610, ended up selling them all for 575, 585, 585, and 595. We just listed the model match unit for 699 and just sold it for 720. And so the market, that's a huge rebound in a very short amount of time,

and that's all within walking distance. So we're seeing that as things transact, the confidence is coming back, and that's why the markets on the West Coast are kind of rebounding up. What are some key indicators that you look for, James, that indicate the market's starting to shift? One of the most important key indicators that I'm always tracking is actually days on market. And the reason being is that tells me how to perform out my debt cost, like how much time am I going to have this project? Because if the market's slow, I come where Jesse's from, right?

2007 and 8, I got wiped out too. And we had to flip our way out of that debt. And so during those times, the market was terrible. market conditions were 180 days, but as long as you factor for that all in your deal, it doesn't really matter. And so days on market telling me how long I'm going to hold the property. Also, it shows me the trend of the buyer activity. So seeing days on market go in Washington, for the last two years, days on market have averaged seven to eight days. Then during this interest rate hike, it jumped all the way up to like 35 to 40 days. In the last 30 days,

that dropping down to an average of 19 is telling me that the market's moving. And another key indicator that I do, and it's a hard stat to get, is as brokers, or if you're an investor, have your broker call every listing in your area and find out how much activity is coming through. I don't really care about too many things. I want to know how many bodies are coming through that price point because that tells me the absorption rate in housing. And so those are all things that we're looking at. And I also like another key indicator that I'm always looking at is what is going on with, I'm always tracking the price points that are moving best based on affordability. So like right now, the sweet spots in Seattle is if you're selling anything from

750 to 950, it is gone in half the time of the average days on market. Or the other price point is one, two to one five. And that's because the tech buyers, that's what they can afford that works inside their income brackets. And so we're always tracking what also velocity is going on in the price points because that tells me what to do as a fix and flip operator to what areas I should be buying in. Jesse, what about you, anything you would add to that? Definitely days on market, inventory levels are huge. You know, and I think what are the, like, it's, so, like, I think about it when I'm comping a house, right, you know, depending on where we are in the cycle of the market, am I looking

at my sold comps? Well, I'll look at sole comps, but I'm now looking at all the actives too, because I'm looking at, like, what's my competition going to look like? It's like, all right, well, all of a sudden there's only five active that I'm going to compete with on this three, two that I'm going to list. And that, it's all about the supply right now. Because the supply is so low, I can take into consideration. Like, I know that I'm going to sell it fast. I know that I don't have to carry the debt for six months like I typically would. And it's the biggest. So inventory, days on market, and then the other indicators, consumer confidence.

Like, it seems like the emotional buyer in California. Rates spike up half a percent. And all of a sudden we see a pause for two weeks. It comes back down. There's some sort of good news. The market gets flooded. So it's writing that little kind of these microwaves that are happening with your timing is so key. And I think it's.

just like, it's like, let's ride the emotions all day long in either direction and be able to pivot and adjust. And they just have to underwrite the deal is just so much better than before. There's no guessing now. It's all got to be science. I call it the flock of birds effect. Ed Milet has called it the collective psychology of the market. But it is true, especially in the coastal markets like California, Pacific Northwest. People tend to move like when one bird moves, the whole flock moves with them. So buyers like, oh, rates went up from four and a half to six and a half percent. I'm waiting for the crash and nobody wants to buy. And then rates drop from six and a half to six and a quarter.

And like 10 offers come in on that same house that was sitting without getting an offer for 21 days. It's very much a feast or famine. And you sort of have to steal your emotions to understand that's going to happen. You guys also made a really good point for every real estate agent who's listening to this, every house flipper. Anyone with access to the MLS, you both describe the process that I use as a real estate agent when I'm taking a listing. So when someone brings their house to me, to sell. I'll run a comparative market analysis and I'll see all the active houses, the pending

and the sold. And the first thing I'm looking at is the actual architecture of that. What I want to see is a lot of solds, a lot of pendings, and only a handful of actives. That's a very strong market. That means the days on market's going to be low when there's not much available for sale. And there's a lot of pending transactions that have already taken place. It means there's a strong thirst for that. What you don't want to see is like the reverse, like an upside down pyramid, where there's a ton of active houses for sale, not very much pending, not very much sold.

That's usually indicative of a market where houses are going to sit for a lot longer. And then I'll call the pending listings and talk to the agent and say, how many showings did you get? How many offers did you get to? Do you think you should have listed higher? Do you think you should have listed lower?

I'll do the same thing for the actives. I'll ask them, how many showings are you getting? What's your interest level like? What kind of feedback are you getting from the buyers? And if they're like, yeah, we're getting a handful of showings, but no offers, they're price too high. Or, oh my gosh, we're getting four showings a day and I'm having to hold them off because I have so much interest in this thing.

I know that's now going to be a pending that's at a higher price point than you were. Totally. Real estate agents, if they're using the tools that they have for them or brokers, oh, man, you can take the mystery out of what to expect on this house flip. Is that a similar process that you guys use? Yes. I mean, and it's always, like, I've been doing that for 10 years. It doesn't matter.

Like, when the market gets good, you start to, like, not do those little basic things. but you're 100% right. Like I've got a great comp on a house that I'm about to flip. And it's like their list price is great. And my gut is saying they're under market. I mean, they're in escrow at a hundred thousand higher. Like I just,

so I've been calling the agent and he won't give me the number. You know, he's like, I'm sorry, I can't tell you. It's going to close soon. And I'm like, dude,

I really need to know this comp because like it's so important to me on my pricing. If he didn't get above, like then I need to come in a little bit lower. And I've been doing that for so long on just communicating. I mean, my whole business is built around networking and relationships with realtors. I mean, I've been a realtor almost 20 years now. I'm on my 19th year. So it's like, it's how I started flipping was being a realtor. And like the value of the real estate relationship is so huge to have

success in this business. Yeah, calling that broker and getting that number out of them is always like the game of tell me if I'm hot or cold when they won't do it. That's what I'm like, well, are my hotter or colder? Did you have it's like, and then you get in this, I'm like so, and then you can kind of narrow it in. As long as you can get them to laugh, typically, they'll give you enough hints. But what Jesse just talked about is so important, that's the key to underwriting, right? Finding that missing piece of information that people blow past. There's been hundreds of deals we've done over the years that we absolutely crushed because

we picked up that phone and found out that that comp was 100 grand higher. Like those key data points, the pendings in today's market, and any market is, is so, so important to underwriting your deal correctly because that tells you the current market when you're buying that day, what it's doing. But in addition to, it's going to tell you how you should be buying if you have competition and you're writing offers too. Like if I have good product that isn't getting a lot of action and they only had one pending, I might go a little bit lower on my offer price. If it's got a ton of activity and it got bid up, then yes, we can adjust or it can be that hidden, like that hidden deal. We closed on a deal yesterday. And if we would have bought

it by not verifying the pending comps, it would have looked like a $15,000 profit deal, which would not have been good for the price point. But all three comps were all pending 5 to 8% above list, which was $60,000 to $70,000 more. And it went from a no deal to a home run really quick. So calling those pennings is important. And just be polite, too. No one wants to be the broker going, like, hey, how much you pending for? Click on it. Like, hey, man, I have some questions. Or I'm doing, I'm getting ready to sell property. Can you help me out here? And then always offer to give them the information back if they ever need it. There's two hacks on it that I do, right?

So if I'm calling the agent and they're a local kind of, it's their market, it's their farm, then I'm like, hey, I have this listing coming up. I'll give you first crack at it. Do you want to see it now, but I need feedback from you as to what yours is in escrow. Like, you know, it's like I give, you give. Like help me out here. I'll let you market it because I want it to go to the database, right? I'm not double ending anything.

I'm almost never double it. I'm not that good. Like I'm a good flipper, not a great agent. And so that helps. The second hack. is the hey I'm doing a broker priced opinion and I'm trying to figure out the value of your house for my for my CMA or my BPO. Could you give me any information on it?

It's like less threatening than the hey, I'm a realtor because sometimes it comes off like, oh my, you're my competition. Why are you getting that listing? And so people like the guard goes down. They, you know, and they typically give the info. I mean, think about every time you've had a call from an appraiser that's doing that to you. So I don't say I'm an appraiser because I'm not licensed, but I do.

lots of BPOs for the hedge funds that I sell for. And I'm just like, hey, I need to get value on this. So that's worked a lot to bring the guard down and get that number. Yeah. And I go over this process in if you're a real estate agent, want to learn how to do this or if you're a person who wants to teach your real estate agent how to do it, because Lord knows, most of them don't. You can check out the top producer series, sold skill and scale where I literally go through scripts you can use when you're calling another agent to get them to be more likely to open up. Jesse, what's the biggest myth that you want to debunk that's going on out there in the market today? All right. Don't get mad at me, David.

It's not that hard right now. Like, I think I keep hearing over and over again about how bad the market is, how hard it is. Like, I think the opportunity right now is better than it has been the last three years. Like, I found it hard to flip three years ago when I had to overpay for everything. When I was competing with everybody that really didn't have skill, but they raised a little bit of country club money from their friends and family. Like, right now, picking up the phone to a wholesaler. to pass realtors that I bought deals from,

like to just be able to say like, hey, I don't know if you know, I'm buying. I'm constantly buying. Like, what deals do you have? You know I'm going to perform.

I performed for the last 10 years. And I've heard it over and over again. Like, oh, I'm so glad to hear that, Jesse, because I had this one person I was selling to. And now all of a sudden,

they canceled two deals on me. They left me hanging. My client's upset. And it's like, I think for everybody that started flipping five years ago, they've only seen the up. And because so much of my, flipping. I mean, 200 of my deals came from 2010 to 2015. And it was, you had to buy and you had to

underwrite with a sliding scale. You had to know that your days on market was going to be longer, that your debt was going to be higher. And it was easier to get in the door. And I find like right now, I'm getting in the door with top agents that I've seen passing on deals to big wholesalers forever that even I couldn't get an appointment with because they didn't want to expand their buyers. and I think if it's ever been a time to be deeper in your networking relationships is right now, pick up the phone and start calling agents. And you will be able to rebuild a pipeline of someone feeding deals where you don't have to go to wholesalers. So I think I just want everybody to know like you can do it now easier than ever.

And there's like there people are hurting. Like some flippers out there are carrying 30 or 40 in their pipeline. And they'll take a haircut just to get it off off their table. because they're like, you know what, I want to get some capital to come back in. Not everything needs to be a home run. Not everybody can carry it for that long. So, I mean, there's a lot of opportunity. Yeah, always be buying as a flipper.

Like, if you stop buying in the market, you lose such graphs of what's going on, construction processes, deal flow. And like Jesse said, a lot of people exited the market, which is great for big flippers or people that stay in the game because you can own your turf. You can really establish those relationships again that maybe got jeopardized over the craziness of the market the last couple years and you're able to corner in a lot better deals. The only thing I want to kind of add on to that is just you have to make sure your processes are dialed in for whatever market that you're in.

Because whatever we were flipping in the last three years, that's a different process, a different game, and we are in a different market now. Appreciation is not going to bail you out. And so you have to execute your plans. So reset, get your business right, restructure your teams, and then keep buying, and make sure that you're looking at what don't, you know, for me as a flipper, I had to look at how well I did the last 24 to 36 months and then really audit. Was it a really good system or was I just lucky by the market? And then I have to go, where was I inefficient?

I need to fix those problems now because the inefficiencies might have been good. If my project went a month longer, that would be bad in a normal market. And the last three years, that was just getting me 2% more on the price. and so it worked out fine. So you have to audit what you weren't doing well, fix the issues, but always be buying because if you're buying when no one else is, the deal margins are substantially better. To touch on, you know, I want the listeners to know that just because I've been doing a long time doesn't mean I'm perfect.

Like I had so many inefficiencies the last three years because of volume. Like letting detached ADUs, not pushing the permits through, waiting six months because I wasn't getting back to revisions or calling the architect back because there were so many projects. And the last eight months of seeing the market shift. was so good for my business to reset and to like go back to like things that I forgot about that I used to do. You know, I mean, I went through my like my contractors, the costs like all of a sudden, you know, I told my team, I'm like, hey, go call five different cabinet manufacturers. Like,

like we got, it's easy to send it to this one company and we're being lazy. So I'm paying a thousand bucks more. Like, and it's like I've been finding hundreds of thousands of dollars of savings now that I know that I left on the table the last few years that I'm gaining back right now. Like all of a sudden, five grand more times 25, 30 flips a year. That's a lot of money that comes back to the house. Right. So I think for everybody to know, like, it's okay if you're a flipper and you were struggling and, you know, you made some mistakes.

Like you can, like, dial it down so that you can go twice as big. You know, Jesse, you're an industry expert and you're really savvy now, but it hasn't always been that way. Tell us about what you were going through in 2007. You kind of briefly touched that earlier, but we didn't get a lot of the details. Yeah. So, you know, I was a real estate. agent, you know, loan officer in 2007, market adjusted like it did for everybody, right?

We had the great mortgage implosion. And I just got married in 2007. Wife and I bought our first house. And we bought it in July of 2007. And by February of 2008, I lost everything. My company went under. We short sold our house. I mean, I might have been the first short sell in the city.

I mean, maybe that's my claim to fame is that I thought I was the first guy to be able to push through the most, you know, difficult thing. But like, we had to move in with my, my, my, wife's mom and dad, I felt like a failure. I ended up getting a job working for a bank trying to do regular loans. Like I was like maybe being an entrepreneur is not for me. Like I failed, you know, and there was this pivotal moment that happened with my family. My mom and dad gave me a car. My wife's parents, you know, let us move into the house. They sat me down and like at that moment, I thought to sit down was going to be like, you're a loser. We're going to annul this marriage. Get the heck out of

here, right? And they were like, Jesse, we support you. We love you. We know it wasn't you. It the market. So you need to get fired up again and you need to go figure this out. And within six months, I said, okay, what's what's going on in this market? Okay, there's short sales and there's foreclosures. I need to go pivot and I need to go do that. And that launched me into my REO career where I started cold calling banks. Like the same way we would call a client to try to get a listing. I called Fannie Mae. I called Bank of America. I found out there was a conference called Rio Mac and I showed up in Palm Springs. And I'm just like, you know, shaking hands and smiling like a dummy, you know, trying to tell people, they're like, how many homes have you sold

as a foreclosure? And I'm like, none, but I'm willing to learn. And someone took a chance on me. I got my first listing. It turned into 10. It turned into 20. You know, by 2011 or 12, I was at 500 listings. Like, I mean, I was crushing it. And that's what gave me the inventory to learn how to be an investor because all these investors were calling me. Like, hey, will you double end this deal? I want you to represent me. And I was just happy to make a 2% or 2.5% buyside commission. for, I mean, God, at least 50 deals until I started realizing like, hey, how are you buying that from me for cheap fixing it up and selling it for more? Right. And I think that's like the big thing. It's like now today, it's like, oh, I know what I'm doing. Dude, for years, I was like every other

agent that couldn't grasp like, why? Because you fix up the kitchen, can you sell it for 50,000 more? And after doing that and learning that, I was like, I need to learn to get in this game. So it went from rock bottom to like getting fired up and motivated and seeing light at the end of tunnel that I could bounce back. And that was huge. And that came from family support. Yeah, that's what I was about to ask. The bounce back's not normal. Most people, when they get rock like that, it's kind of like when you get hit in the face, you're like, I don't want to fight. This sucks. I don't like that feeling. Their response is to stop fighting. Handful of people get hit in the face and they go, all right, so this is a fight. And then they get in the fight.

They get engaged. What was it about your upbringing that influenced you to bounce back hard after taking that shot. So I'm Cuban, 100% Cuban. My mom and dad were both born in Cuba, came to America in 62, you know, Bay of Pigs, all that kind of stuff. So I was definitely raised in a household of the story of, you know, we came from nothing. We came from a communist country. Like, you know, hearing my parents say that and coming to America and having this like passion for the American dream and being able to say like my, like, I just always remember my dad being like, you can't do this in Cuba. You can't do that. Like so appreciate it. And, you know, my dad ended up becoming an entrepreneur. He learned the trade of being a meat cutter. Well, from working at the

big, you know, union, um, teamster type of supermarkets like Ralphs and Hughes and Safeway and all those kinds of things, he eventually said, I'm going to open up my own market. So I have three older brothers. And our life consisted of, you go to school, you walk home, you go to our meat market and we would work as employees at, you know, in my dad's market. Like I would stock shelves. And it was just this childhood of, you know, I didn't play baseball as a kid in Little League. Like I did it later on in high school, but that just wasn't part of my reality, nor for my brothers. We had like that immigrant mentality, which you still see today. I think that instilled a work ethic. Yeah. That was very deep. And then just kind of just learning from my dad over and over again. And he was a tough

man. Like he, by no means was he this loving, caring person. It was like, get your butt to work. This is what you have to do. And he had a. little bit of real estate. He was smart enough to know that, okay, I own this market. Can I buy the building that it's in? And he never had a lot of money. So he was like the original creative finance guy. I like to say he would somehow talk these, you know, you know, building owners into like, I'll buy it. I'm going to give you zero dollars, but I'm going to pay you a high interest rate forever. So kind of like your price, my terms. And what was interesting is he did that three times over his 50 year career.

Now today he's retired. He's 85 years old. He doesn't have a 401k, but he owns a couple buildings and a couple rentals paid off in that model. And it creates 12 to 15,000 a month of income, which is more than enough. And I think the message on that is you don't need 400 units

or 4,000 or 4 million like we try to aspire for. You could buy one house a year for the next 10 years and put yourself in a really good situation. And like that, like that was cool to be able to have that guidance, you know, from a family that just always, always wanted us to do better and knew what bad looked like to know that, to put it like, okay, you went under in 2007, who cares? You're not at war. Like, pick your butt up. Like, let's go, you know. Well, that's the difference between being in a fight where you don't think

you're going to be punched and being in a fight where you expect to be punched, right? Like, if you're told the way life is supposed to work is you never fail, you never have a bad time. You don't lose on a deal. You never feel bad. When that happens, you think there's something wrong with me. I'm doing this wrong. Right. I got punched in the eye. This doesn't feel right. I guess it must not be for me. I must not be a fighter versus if you're told it's a fight, you're going to get hit. My jujitsu instructor says that all the time. Don't be surprised when that happens. You got into fight. You're going to get hit. When it happens, this is what you do. But for your parents, they're like, hey, if nine things go wrong, but one goes right out of the 10,

that's better than if none went right. And they had that mentality that was passed on. to you. And I just want to highlight that because in the world of real estate, nobody wins every time. But when you listen to podcasts about real estate, we're only usually talking about the wins. And so it creates this impression that you're supposed to make a hundred grand on your first deal or your second deal. And you're supposed to make a hundred grand on every deal. And it's more like a fight than it is like the highlight reel that you're watching, you know, John Wick. It doesn't feel like that when you're doing it. So when did you start to diversify beyond flips? who helped you with that gut check?

So I had a mentor, you know, my whole time doing this. I still have this mentor to this day. It was the guy that was buying most of my flips. One day I came to him and I said, hey, I want to do this. I don't want to just be the realtor. And he was like, then do it. You know, and I was so scared to talk to him because I thought this is going to be the end of this friendship and this relationship.

He only wants to work with me because I'm making him money. And he was like, he actually laughed. He chuckled and said, man, that took you so much longer than I expected. I thought you would have started flipping two years ago, you know? And so then he says, well, I still want to be part of it. So how about I give you the money? How about I teach you? And there was just so many life experiences that came from somebody that's already

been flipping 30 years in up down and up down markets that things that were like ninja level. Like I would send him an address, you know, and he'd say, like he knew Southern California so well. He's like, oh, it's on that street. Hey, is it a flat roof or is it a pitch roof? And I'm like, what the hell? how do you know there's two different roofs? He's like, oh, I flipped on that street.

I think it was like 87, you know, or something. And I'd be like, oh, it's a flat roof. He's like, I don't like flat roofs. More issues. I think the request for repairs is going to be higher. You're not actually going to get the value you think. You know, and I'm like, no, no, no, no. I can make it.

I can force it, right? I can work harder. And he's like, this isn't about work harder. It's about be smart. He's like, and those numbers aren't going to pencil. And I don't think you should do it. And the relationship I still have to this day with him, where he actually just lends me money.

We're not partners on anything. He's just one of my private capital partners. And he, every time I pitch him a deal, right, the answer is no. Now I don't like it. And then I'm like pulling my, do you see the grays? You know, like, it's, it's, I'm like, Richard, why do you not like this deal? You know? And then he'll tell me why.

And then I'll say, you're wrong. Like, if I really believe in it, I'm like, you're wrong. You're crazy. Like, I'm getting mad. I'm getting angry. I'm why am I still doing this with you? Blah, blah, blah, blah. And after a.

fight of a couple days of him telling me why, me telling him yes, he goes, okay, I'll fund the deal. And I'm like, why didn't you just say that sooner? And he's like, because if you weren't willing to tell me every reason why, he goes, it wasn't for me to hear it. It was for you to hear it. For you to believe in this deal. He goes, because when it starts to get rocky, which they all do, he goes, that you're going to fight through it and not just bail and try to like say, you know, I'm going to sell it for less. Let's walk away from it or not walk away, right, but not finish the flip to its full potential. And I think that was one of the biggest lessons that's come from having a mentor and why it's so important. Like you guys are so many people's mentor on this podcast, right?

Like people look at you for your constant guidance. And I would never do this business without somebody that I could bounce ideas off of. I loved what your mentor just what put you through because that is the reality of flipping homes, right? Like you've heard like, oh, flipping got too hard. Construction's too hard. The market's not good because rates are high. When you're looking that flipping a home, you are looking at 40, 30, 40, 50, 60% returns. That is an ungodly return in a short amount of time if you look at any other investment platform. So that is a very high risk business. With that high risk and high reward, there comes problems. And as a flipper, you have to remember, like, I'm trying to make this huge potential profit. I got to put out

these fires. I got to put out these problems. And you have to expect them. And there's so many third parties that come into each one of your deals inspectors neighbors contractors all these things come in that can really jeopardize your deal and as an operator what your mentor is telling you is you have to push through those things and it there's many times in a project and we've been doing this for 20 years flipping in all different markets and to this day like we just had our project manager meeting before this podcast and it's like of course that happened but we have to fix that and move on you want to throw in the towel right like you're like this is so frustrating i don't want to do this anymore And that's what we've seen the last nine months, which is great for bigger flippers.

But if you hang in there, you make your adjustments and you can push through, those returns are real. But they're not easy. And if people think flipping is easy, it's not. But the money's worth it. 100% worth it every single time. Like, it's nothing scares me anymore. I don't get down on it anymore. It's like, oh, what happened?

The city came in. They said that I don't have a footing. And now I got to do this. Well, I didn't expect that. Okay. It just like, I have some. such a nice spread built into this deal, okay. Means I make a little less.

I'm not buying stuff tight, right? Like in the beginning, you know, I was buying stuff probably a little tighter because I wanted this so bad. Like now, it's like you get to this level of just confidence to be able to say, I'm only going to buy a good deal. If I have to tell you no, hopefully you know that I will perform when that next good deal comes. People love to call real estate passive income, which is interesting because most of the

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I think one of the biggest things is having a good crew, right? Like the biggest issue you're going to have is once you get the money, you get the deal, now it's like, how do I push this through the end? Well, it's the rehab crew. You go the GC model, right, which is fine. You pay a little bit more, but you should get proper timelines, a lot of experience. Or you go the smaller route. It's the two-man crew, the three-man, you're there, you're on the job site, you're the

superintendent. And I've done both models. I still do both models to the state, depending on the level of the rehab. And the key is a crew. I've had crews walk off the job. I've had crews that tell me they're going to be done in six weeks and ends up taking three, four months. And that's the difference in the profitability.

I've learned a long time ago that you teach your crew, you treat them right and you get a lot out of them. I have three or four crews that have worked with me for eight years now that don't take on another job. Now that comes with pressure, right? I got to make sure I have another job for them at all times because I don't want to lose them. Luckily, the scale that I'm at that seems to happen. So big crews, you know, you end up going through issues where maybe you lose a key person on your team, you know, and having the proper systems that you can plug someone in. I lost one of my key acquisition guys about eight months ago. That was part of like the rocking me of, you know,

looking at this business and saying, I need to scale down because that was one that kicked me in the teeth. It was somebody that I had for a long time, someone that I taught the business. Now they went on their own. Now they took my money relationships. Right. And do I resent them or do I just go, you know what? That was part of what I was to him as a mentor, that he's now on that next venture. And I think that's key.

And that is where I'm at mentally now, not where I was eight months ago. But being able to replace that person was key. And it's like I had the systems in place that I dropped someone else in like easily. And they knew what to do. A little bit of handholding from me. And bam, they're running with it. We're buying houses. our crews are being treated well again.

So that and then I think the biggest thing that came to me in the last three years, guys, is to be able to say no to a deal. The fear of saying no to someone and thinking that you're going to lose that relationship and they're never going to bring you a deal scared me to death for almost my whole career. And in the last 15 months, 12 months, I had to say no. And I didn't care how good of a deal. I needed to reset my pipeline. And that was the best thing I've ever done.

I realize they will come back to me, right? You pick up the phone and you tell them you're ready and they're like, great, they're going to add you to their list because at all times, someone is not buying or buying. James may be buying today. I may not. Next month, I may be buying and James may not. Right. Like that is part of this business.

No one can always buy. But I'm always staying in contact so they know I'm around, right? Too many people left this business already in the last eight months. You need to know that I'm still here. I'm still producing. My social media is showing all my houses that I'm working on because I need to make sure that you still have me top of mind that I'm doing the activities of a flipper. James? Yeah, I think it's what he just talked about is so important.

Now, I'm under the mindset that I am always buying no matter what. Like that was the approach we took in 2008 when the walls were coming in. It was like, keep buying, buy your way out of it. Just tighten your underwriting. But it comes down to clarity of your buy box. You can do that if you really know what you're good at. Like the resources and crews in your construction teams actually, we don't buy based on liquidity. We have liquidity.

We have access to funding. We can fund almost any deal because of the long relationships we have with their lenders. We only buy, I don't buy on location. I don't buy on liquidity. I buy on where are my construction teams that can execute, where are they loosened up, whether it's a first-time home buyer, starter house that we're flipping or high in luxury. I'm going to buy based on those, by the skill sets and what the guys are available. Like for the last two years, the cheaper labor guys got consumed by all the new flippers entering the market and they were overpaying them.

And so we lost a lot of resources. That's actually why we went into luxury flipping the last two years. It wasn't because I had this artistic design of going like, I want to do this really cool project. It was just what we could do with the teams that we had. So knowing your resources, motivating them and understanding them will help you get through the flipping cycle. And then also, if you have those guys that have been with you a long time like Jesse, eight years is a long time. We have the same guys. We recently started tying them to the profitability of the deal, not bonusing them,

like a percentage of the profit with these generals. And it has exponentially helped our projects move forward quicker so we can get the velocity or money working. Everything's moving faster. And bringing those partners in that you've had for eight years and tying them to you, that allows you to scale for the long term. And so really value your resources, reward them, but always be looking for new ones too because eventually they do blow up.

So we're constantly also pounded in the phones. People talk about dialing dollars for deals. We're dialing dollars for contractors every day. Someone in our office is coal-calling contractors. And so finding those resources, the resources can make it to where you can execute on any type of deal. And that's why we call him ABC. James thinks it stands for Always Be Closing, because he always buys real estate, but it's actually because he always brings cleavage.

And if you want to know what I mean by that, check us out on YouTube today and see James's Deep V. and let us know in the comments what you think about his pectoral muscles. We want to know from you. All right, Jesse, getting back to you, we know that you're working on a major redevelopment project these days. Can you tell us a little bit about that? Yeah, so we're working on an adaptive reuse of a historic packing house out in Redlands, California. You know, some partners that I have have done a few of these already. We're creating a food hall inside of this.

So it's like there's a couple levels right here. We're like, we're going to become operators of a business. we're actually doing the development of a historic building or redevelopment of a historic building. And it's so, it's kind of what I needed for my creative juices. You know, like, it's like, I look at everything that I've done over the years and it's been stepping stone. Like, where some people get in the business, they do two flips and they go, I'm a syndicator now. Like, I'm going to go raise $50 million.

Like, I'm the opposite. I'm like, I'm 10 years in, wholesale. I flipped. Like I did minor cosmetic. Then I did additions and ADUs. Now I'm ready for that next level, which is. development. So we've got a, you know, 150-year-old building that is completely dilapidated. So we're going through, we had to go through all the historical requirements to bring it back to the way it looked.

What's cool about that, you know, if you're familiar with redevelopment of adaptive reuse and historical buildings is there's a tax credit that we actually get. And it's one of those incentives that helps us to be able to make the deal pencil out even more. So it's a 35,000 square foot packing house that we're putting a food hall inside. So it's about a 650 square feet per stall. You know, it's the food court of the 80s and 90s, but at this

much more creative version with all these other mixed use buildings around it. And it's just, it's this gorgeous project. It's extensive though. I mean, we bought the building for crazy cheap, under $400,000 but bought it five years ago.

The total construction costs on this is going to be between 11 and 12 million. So we already have construction financing at $8 million. We've got a couple million of our own money. So we were doing it all on our own. And now we're like, okay, we probably need to do a GPLP. Like we want to bring in some actual, some people to help us with like sponsor equity. Because it's all our money in there right now.

We've got a great underridden perform on it. You know, our NOI is like almost 600,000. It's like it, but it's, it is such a cool project for like the, you know, put it on like, you know, on your wall and be able to say like, I did that. I saved that building. I transformed it. But then we have this element that we're actually going to be operators of a business. So we're collecting rent from the stalls, but we're also profit sharing in the revenue that they make in their sales.

So it becomes this like, it's like the short term vacation rental, you know, where you're making 30 or 40% on like it's like, it's like, but we're doing that in the commercial space because it's such a unique product. that we already have one, so we have proof of model. And it's just been this exciting thing, you know, typically on development deals. If we were to come and ask you to, like, you know, pop in some capital, you'd be writing this with us for four years. We've carried all that. We're already in construction. So now we're going to raise the capital. So everybody's going to see the return so much faster.

And it's cool. I mean, we're going to keep doing these. We have another one in the books down the street in the city of Claremont. And it's kind of becoming a cool niche for us. Yeah, the historical buildings, That's a big project when you're remodeling in the historical districts. Can you talk about that a little bit? Walk us through that process of what kind of planning, what kind of approvals you have to do,

and then what does that do to your cost of construction? Because a lot of times you'll get the tax credits, but the cost that you have to put in the building might be 2x, what you would, a normal building. So how did you guys evaluate those things? Because the last time I had to do a historical building, I was like, I'm never doing this again. So the cost is more, right? Like probably to build this building from scratch and do what we're doing. probably costs $8 million instead of 12.

Like, I don't know the exact number, but it's substantial. But the difference is when you're willing to work with historic buildings and you're willing to bring them back, the city is your ally, right? This becomes a private public partnership, essentially. They want it to work. I mean, how many times have you looked into development deals and you're fighting, right? You're having to do an environmental impact report. You're having to change the zoning, right?

And you've got everybody in the community coming and saying they don't want that. You don't see a lot of that when you're like, this is a vacant building for 80 years. and we want to actually bring it back to the way it looked like and we want to bring value that there's going to be retail or restaurant dining and things like that. You end up becoming kind of the hero in the community, which is really cool. And when you run into an issue,

the city's like, hey, we want to fix that for you. We want this to get this done. And then you get the benefit, right? So in the tax credit, you get 20% of total cost.

So, you know, we're going to get $2.2 million. Right? And that actually gets passed through to investors as well. So it's like you come in with a million bucks and then whatever that equity share is, we might be giving you back 500,000 on tax credit that you can use this year, right? Or at year of completion.

So there's like this just like communal win. Like you're like you're pulling on the heartstrings of the community. You feel good about what you're doing. You're a developer that's loved. And it's like it's exciting. But the headaches are, I mean, do the construction. The like the unreinforced masonry. Like it is way more involved.

I mean, we're talking to a packing house that's two store. We have a basement level that's part of that 35,000 square feet. It's like 15,000, 16,000 per level. Like the amount of foundation work and steel reinforcement is crazy. And that's where that extra $3, 4, 5 million to do this versus just building it from scratch. But, you know, we're also saving like the historicalness of these cities, which I think is so important. And you think of California, we don't have. We're not as historic as like the Midwest or the East Coast.

But adaptive reuse. Like think about it right now in commercial real estate. the conversation about office space and what's everybody going to do and all the office space debt. Adaptive reuse is what needs to happen. Instead of having these vacant office buildings that might happen, it's like, let's get those into live work loss. You know, my partnership group, we've been doing live work loss in downtown Pomona for 25 years because it was a downtown that was literally vacant like a ghost town. And they had these five story buildings. And it was like, you know, change that 20 years ago to say, hey, if you want bodies here, we need to bring people before.

before we can bring goods and services. So the city got on board with it. Like as this starts to happen in all these other suburban areas, like it's going to be really, really cool. So I think it's a niche that's very difficult, but very needed to keep America the way it is. You know,

on that note, I mean, this is a difficult market to find any kind of cash flow right now. People have to be creative if you're a buy and hold investor. I understand that there's opportunities in flipping. You guys are coming across. In fact, I think this is probably all things considered a safer market to flip in compared to trying to go out there and force a round peg into a square hole to buy property with where interest rates are today.

But the price of the properties is not coming down. What opportunities do you see for creative reuse right now similar to what you're doing with this food court, but maybe a newbie could consider? You know, I mean, probably on the smaller scale. So, you know, you see these little shopping centers all over the country. are vacant. There may be eight unit, five, six thousand square foot, eight thousand square foot. And just going in there, refacing them, right? And then creating the burr concept with that. And then you can also, a lot of the cities are starting to allow turning those into live work. I love the concept of live work loss. You can bypass a lot of the zoning restrictions by having

a certain percentage of the frontage still be work. But then now you're getting, you know, with everybody going to this home environment of working, I don't know if I could work from home full time, but if I had a little thousand square foot space that I had 200 square feet where it's my office or my studio or something like that and then I can live there, imagine the cost savings. Here in Southern California, you're paying $3,000 for a one bedroom, right? If you wanted to have office space, it's going to cost you a couple thousand. I think there's this creative, you know, digital nomad, podcast studio, digital person that you can create with a lot of the vacancy.

I mean, I drive up and down Southern California and you see dilapidated shopping centers. They might be occupied, but there is a better use for those. And that's the thing is we have to figure out the, I mean, these giant shopping centers, you guys have seen these, you know, million square foot shopping centers that back in the 90s, that was the way to go, you know, and it's like, what are we going to do with those? Do you tear down all those buildings? I mean, maybe, but you could probably reuse a lot of those buildings and save a lot of cost. Oh, yeah, that's the thing on these massive office buildings and retail centers is they've been,

everyone's trying to figure out how to convert them, but the cost to convert. It's just, you just can't get it done. It's like they keep coming back to, we have to tear these down. And so it's going to be very interesting to see. I am almost thinking, are they going to start prefabbing pod type things and then bringing them into the buildings rather than actually doing the construction, like building them offsite, like with these, like, you know, these modular homes, they build off site and then they drop them in.

Are they going to have to do that for like little sweets inside these buildings? Because it's like this weird magical formula that people cannot figure out. These buildings are made out concrete. They need a lot of utility work. and it ends up just being a lot more cost effective to scrap it than it is to build off it. But you know, James, why can't, like we have, right, we have four walls, we have a roof. Why can't there just be wall insertion into a building like that to reformat it, right? Like you can reface the outside so they look a little nicer.

They look different. We see that all the time with shopping centers when the high end boutiques come in and they make the facade look completely different. It's like, why can't there? We just start inserting walls. Insert a second level. Yeah, you have to like reinforce it. But I mean, like I want, what we need is city support and we need like financial support on that.

Why historic buildings make sense is because of the federal tax credits that you can get. Right. That's really that kicker and how you can pass that through to investors. It's figuring out how the cities can say, you know what? We'll take you don't have to pay taxes on this for 10 years or something because then you, you know, pencil that into your perform. And you go, this might actually work. This might work really well. Like I'm wondering if they make it into almost like it, what they're.

did with the opportunity zones where they're like, okay, we got these buildings, we got to get something with it. Here you go. If you do this, roll it this way. But, you know, right now, the problem is, you know, houses where four walls are a lot easier to rip through than huge steel buildings with concrete. And we're talking thick concrete. And so it's the demo and removal. But we will see what happens. I hope they figure it out because I do think we're going to have a lot of vacant buildings in 10 years. And it'd be like, what do we do with those? Yeah, totally. You also had me thinking about areas like Southern California, which is where this is, where traffic is horrendous.

And if you can get somebody who's working and living in the same place or very close to it, not only are they saving on their housing expense, which is expensive, they could be saving an hour to two and a half hours out of their day, sitting in commute traffic being completely impproductive and not even having fun. I mean, you're not working, you're not enjoying the time, it drains your soul, you finally get to work, you're in a bad mood because you've been in commute traffic. Same thing. Like, if you can figure out ways in these highly congested areas to keep housing expenses low,

and get rid of commute, you're going to have an insane amount of demand for people that are going to want to be in those situations. So I think that that's a brilliant perspective to take. And that's how we have to be thinking. You cannot just do the color by numbers. I bought a course on flipping 15 years ago. And they said, here's the seven steps that you take. And I'm going to become a millionaire. You have to think creatively. You have to see an angle other people aren't seeing. You have to make a deal, not just find a deal. And these are great examples of that. What are your goals for after this project is done? Where do you see Jesse going? So I'm a flipper, right? Die hard, die hard flipper, which means I have this sickness where I can't hold on to anything.

Like every time I buy rentals, I mean, you know, a fourplex, a nine unit. Like, as soon as I'm done with that rehab and it's like, okay,

here comes the cash flow. I'm like, ooh, that went up $300,000. Like, and I was never been able to justify making 10% in rents, right,

versus flip, it and making 40%. So for the last 10 years, it's been flip, create more capital, create more capital. And now that I'm 40, I turned 40 last year, I realized, okay, my son's 12, they're going to be out of the house, then I have two more behind them. I need to do something for by the time I'm 50, I have the freedom to be able to visit them in college and do all those fun things. So big goal right now is to just start buying doors, start creative passive income. You know, the Redlands project is one way to do it. Buying traditional multifamily is going to be one way to do it.

I mean, and I have like this crazy goal. Like I just, I'm always a person that's like, throw out some ridiculous number because if you even hit half that number, you've like hit it out of the park. So the goal for me in the next 10, next five years is to get to like 150 to 200,000 a month in cash flow, right?

And then 10 years, get it to 350 to 400 because I do believe the snowball starts to roll down the mountain and it becomes easier and easier. And here in California, where we have huge equity upside and we have high rents. Like I think I should go to get $750 to $1,000 cash flow per unit. Like it is possible with what we do and the skill we have. You take the building blocks of everything we do as wholesalers and flippers is the art of that

is finding a great deal. Every flip works as a burr. Like that's just what I've seen. And if it doesn't work as a burr, we need everybody on this call to realize you're not really buying a good enough flip. And so when you do that, at some point, it's like, okay, well, flip three, burr this one. Flip three, burr that one. start looking at multifamily here in California and adding detached ADUs, right, doing the garage

conversions. You could take a fourplex to a six unit. There's just all these ways. So my mind now is basically realizing like you have to start keeping. I have to be okay with only making a couple thousand on that deal because over the next 10 or 20 years, right, 10 years, actually for me is my goal. It turns into hundreds of thousands of dollars. So David, I need your help, man. I need to get to $400,000 a month. Yeah, that's not bad. I will say this before we wrap. James, you said something, I think I heard it on an Instagram clip. It might have been from the On the Market podcast that really caught my attention.

You were bringing up a different way of looking at the return in real estate. So one of my pet peeves is that we have taken the cash on cash return and made that synonymous with ROI. So whenever someone says, what's the ROI? What they're usually meaning is, what's my cash on cash return for this investment property? So like you said, Jesse, it's 10%, it's 12%, it's 6%. But real estate makes you money in so many ways that are not just that cash on cash return. ROI is actually like a, or sorry, cash on cash return is a simplified way of measuring the efficiency of your investment. The internal rate of return is actually a much more accurate way of looking at it.

And you were saying, James, that in today's market, you can get X return on your money on a flip. And that simple statement just reframed the way that I had looked at it because I'd always looked like flipping is a business. Investing is completely different. It's supposed to be passive. The money that I make flipping doesn't count as a return on my money. It's just a business. But, Jesse, to your point, you were saying, if you can get a 5% return buying and holding versus you can get a 40% return flipping and there's not a lot of buy and hold opportunities, why would you not increase your capital? by 40% over and over and over until those opportunities dry up and then take a 5% return as a buy and hold deal or do a burr with a value add component where you're keeping a lot of equity in that property to take out of it later. There is a way to incorporate flipping into a portfolio of properties a person has as a way of increasing your capital that you then convert into real estate. You want to expand on that, James? Yeah, we set up our whole purpose of flipping when we really got got good like in 2008 we got level we it was to build capital backup it was to build capital back up

to pay for life but it was also to rebuild our portfolio because just like jesse i had to short sale most of the stuff i had bought prior to that 2005 to seven went bunk and and so what we did as flippers is we would take 20% of our net profit throughout 2008 to 2015 and every one of those deals 20% went over to buying a rental property it was like that was what we're doing it was like a way to pay it down. But the thing is, like, Jesse wants to get to $400,000 a month in income or $200,000, whatever your number is, that requires liquidity. You can only do that so fast with bank financing. The purpose of flipping or anything that's high income developing, something that can get you that sudden burst of capital is to grow that so you can get that pot of money and gold and work that backwards to where,

you know, if I can grow my pot of gold, like if I'm Jesse and I'm trying to get to, to, to, $200,000 a month, and I want to make 10% of my money, that means I need $2 million in the bank to get that passive income at that point. And so that's what flipping in these things do is it gives you a tangible goal. Like, okay, I got to get to $2 million. I'm going to keep flipping until I hit there. But at the same time, you can start allocating cash over now because you're still going to get that growth. Some of the best deals we ever did was by taking that 20% buying this cheap rental that didn't pencil that well, but the appreciation play we saw from 2009 to 14 smoked our flips. And so it's about balancing your portfolio and balancing your income stream. But remember what your

end goal is, work backwards. And then that will give you tangible things to work towards. What I love about that is if you contrast that to the way that it's traditionally been taught, buy a rental, get $200 a month in cash flow. When you get 700 of these things, You'll finally have enough cash flow that you can quick your job. And if we all live to be 900 years old, that would actually be an attainable goal. Or if it was 2011 still, that might be an attainable goal. But it's not. And so people start on that journey and then they quickly realize, oh, I'm going to be doing this for my entire life.

I'm not ever going to get there versus something like flipping a house, creating capital, building equity. You have a lot more control over that. You can do an addition. You can finish a basement. Like you said, Jesse, you could redo a kitchen and add $50,000 of value to a property. How long does it take to get $50,000 of cash flow? Very long time. It's ridiculous to even try to compare those two things, right?

Now, of course, one of them is recurring, and the other one's not. I do understand that. But the point is, if you have more control over building equity, you're going to get a better return on your time focusing on what you can control and then convert that into cash flow, like you said, James. I've frequently said this, and that's, I think what I loved about your, take on it, James, as you solidified the way that I look at it, but it's often taught the opposite to the people listening to the podcast. They're told just chase cash flow, accumulate units,

keep buying these $80,000 duplexes in these rough areas because you can get started and you get enough of them, you can quit. My opinion is it's told that because the guru selling courses need you to want cash flow so that they can get your money. Because if people believe that they can get cash flow and quit their job, they'll throw money at whatever programs out there, even though I don't know any wealthy people that are using that method. I mean, I got to having 50 single family rentals and was begging to get out of it. This is like paper cuts every single day that just make you hate your life. It was terrible.

And I'm like, I got rid of them and I turned 50 of them or turned 30 of them into 10. It's like, this is so much better. So thank you for sharing that perspective, Jesse. Thank you for the way you're looking at. And James, same for you for taking the non-traditional approach to helping people build wealth. Jesse, for people that want to find out more about you, where can they go? So on Instagram at Jesse Rodriguez, J-E-S-S-I-E-Rodriguez, or jessie-rodriguez.com, I mean, send me a DM, ask questions. I love helping the way I had a mentor.

I'm passing that along as much as I can. Awesome. James, how about you? Where can people find out more about you? Similar to Jesse. So Instagram is J. Dane flips, or you can check us out on Jamesdainer.com. You can also check out James's cartoon. If you guys didn't know, he is in a cartoon.

He goes by the name of Jimmy Neutron in said cartoon. And if you're curious why we're saying that, again, tune into YouTube and you'll know exactly what I'm getting it. You can follow me at David Green24.com or David Green 24 on social media. Reach out to me too. And then let us know in YouTube in the comments what you think about today's show. We'd love that. And I'll see if I can get Jesse and James in there to respond to the comments.

Also, just realize that. Have you guys ever done like a duo of Jesse James? Has that occurred to you that you could partner up like that? That's the next bigger pocket show. All right, Jesse, thanks so much for being on our show. This was awesome. I mean, we sort of had a casual tone, but this was some of the best information that we've ever got on the show.

We'd love to have you back again, whether it comes to taking a shot and bouncing back, starting as a real estate agent and a loan officer, getting out of that, getting into investing, becoming a badass flipper, and now moving that into different types of investing. This is an awesome story, and people would be incredibly blessed

to have half of the success you've had. So thanks so much for being here. I'm going to let you get out of here. This is David Green for James Always Bring Cleavage, Dainard. Signing off. Do you ever notice how every passive investment somehow turns into a very active lifestyle,

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