BiggerPockets Real Estate Podcast - I Said I'd Never Flip a House...Why I’m Starting in 2025

Episode Date: December 18, 2024

Dave said he’d never flip a house. He doesn’t have the handyman skills; he doesn’t like managing contractors, and he can’t design a floor plan. So why now, coming into 2025, has he decided to flip his first house? It’s simple—an opportunity was presented to him that he couldn’t pass up. Partnering with expert investor James Dainard, Dave is flipping this house with James acting as the operator and Dave as the investor. If you’ve ever wanted to get into house flipping but felt like Dave, this episode will show you how to start. If Dave isn’t managing contractors or handling permits, what role does he play? Today, Dave and James are walking through their unique house-flipping partnership, explaining why James made an offer on the property within hours of hearing about it, their rehab budget, renovation plan, potential profit, and some hiccups they could run into (asbestos!).  James is even sharing his expert tips on how to know a property is worth buying for a flip and questions you must ask a flipper or lender BEFORE you start working with them. We’ll keep you updated on this flip’s progress so you can see exactly what goes right, what goes wrong, and how much money this property will make!  In This Episode We Cover: How to invest in house flipping even if you have ZERO renovation/remodeling experience  Finding the deal and why you need to have relationships with wholesalers  How to spot a great potential house flip—and one HUGE red flag to avoid at all costs  Two ways to raise money for your house flips (debt vs. equity) and the pros and cons of both Picking a real estate investing partner and questions you must ask before you work together  And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums BiggerPockets YouTube Hear Dave and James on On the Market Grab James’ New Book, “The House Flipping Framework” Find Investor-Friendly Lenders Flipping Houses: How to Get Started and Everything You Should Know Connect with James Connect with Dave (00:00) Intro (02:23) Finding the Deal (03:30) Purchase Price, Rehab Costs, & Comps (08:16) Signs of a Good Flip (11:52) Permits, Plans, and...Asbestos! (13:50) How to Passively Invest in Flips (18:53) Picking a Partner (29:02) Ask THESE Questions (33:28) Follow the Flip Progress! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1058 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

I have never flipped a house. And if you've listened to this show for a while, you've probably heard me say that I will never flip a house. But it turned out that wasn't true because now I am flipping a house and I'm doing it with the guy who literally wrote the book on house flipping James Dainard. Today, James is joining me on the podcast to talk about our new flip project in Seattle, why I've decided now is the time to try this strategy I swore I would never do. And how lots of you listening to the show can replicate our partnership and become a flipper, even if heavy rehab projects seem super intimidating to you. So James, thanks for being here, man. I'm excited. And I get to walk you through your first flip. I feel like this is your dream.

You genuinely just love teaching people how to flip, and I really want to learn. So I feel like this is going to be a great partnership for us. Oh, and I love when I teach a long-term hold and a passive investor had a flip because they're like, why was I hating on this for so many years? I feel like I am going to have that revelation at the end of this. But actually, I should explain that we kind of already tease this out just to set this up. Like, James and I co-host work together on the on the market podcast. And on that show, we sort of did a bet earlier this year on who would have a more profitable flip, Henry Washington or James.

and Kathy Fecky bet on Henry. I bet on James. I wound up investing in that deal a little bit. Ashley Care from The Rookie Show got in on it. It was kind of this fun thing that we did. And James hit it out of the park. It was this massive success. And so it got me a little bit more interested in doing it again because I saw that I could be relatively passive.

And yes, I'm taking on risk. But I could get in on the big substantial upside of flipping, even though I'm not great at construction and value add, like, isn't my bread and butter. And so that's sort of the context for this. And then a few weeks ago, I told James I was, like, kind of interested in it. I got this text from him in the middle of the night being like, hey, I found a property for us to partner together and flip on. And he sends me this video.

I'm actually just going to play some of the audio and play the clip for you because it's really funny. All right, Dave, I'm late night creeping for you. I think this has. is a winner. I'm gonna lock it down because I think it's a buy no matter what, but it looks like there's two beds, main floor, bathroom, living, kitchen, eating nook off there. But we got 2,500 square feet. This thing should be worth 1.5 million good street. It'll probably be 250, 300, depending on how nice you want to do it. If you want to build to the cops, you're probably 250. All right, so up here, we got two beds and a bath.

And then you got a basement. Going in the basement. Creepy, creepy. This is what I do for you, Dave. Oh, not that creepy. There's lights on. And then we got space down here. Oh, dude, this is a winner.

That is. Pro bash jobs. There you go. Good ceiling height. Yeah, this is a buy. I'm going to lock it down. We can talk about it later. All right, so you heard James' opinion of this property.

But since everyone obviously couldn't see the whole thing or saw everything you saw, tell us a little bit, James, about this property. how you sourced it, where it is, all that. Well, and that is the thing, you guys, time kills deals. I got a phone call on this at like 7 o'clock at night, and I was not ready to go, and I dropped what I was doing, I bolted out there, it was dark, it was creepy, but because I did that, I told the guy, yes, we secured the deal, and I don't think we would have had it the next day.

Really? You know, when you have a good piece of property, you know, and this is why I got so excited about this one. As soon as I saw the address, you know, I was like, oh, this is in a prime Class A neighborhood of Seattle. Yeah. And then the price that was brought to me was really almost, it was dirt pricing. Builders were paying that much for that lot, roughly, right there, maybe a little bit less. And so I knew I had to rush out there right away. I knew the square footage, the price, the location, you can't wait on it. Give me just like a high level overview. We bought it for 825. How much do you think we're going to put into it and what can we sell it for? So we think we're going to be

putting in about $250,000 into the renovation. So we're going to do a pretty high quality renovation. And in our Seattle market, that's typically what I pay for something if we're taking it to studs. Wiring, plumbing, framing, it's about a hundred bucks a foot for me on that size house. And I actually think we might be a little bit below that. Bam. So we have $250,000. And what that $250,000 is going to take the house from a three-bedroom one-bath property into a four-bedroom three-bath with a formal primary. In addition to, it's going to rebuild the entire garage because the garage is caved in. It is busted and it needs a brand new one. By doing this, the comps then jumped up to, you know, when I sent you off those comparables, they were conservative too. Yeah. You know, as flippers,

this is a high-risk business. You don't want to go for that outlier comp. Like, don't chase the star go for the cluster. Oh, that's a good term. Did you make that up? You know, I think I just made that up right now. I like that. Yeah, you want to stick to like what's been proven time and again. You don't want like, oh, there was this one amazing sale. You don't know what the context of that one sale was. But if it's, if it's a comp gets repeated several times, it gives you some more confidence. Yes. And that's what we're looking for. Patterns. What is the averages? And, you know, so when we sent off the comparables, we had a range of them. They were any, where between one four for houses there were seven 800 square feet smaller all the way up to

1.6. Yeah. And maybe even a little bit higher. Yeah. This is when I got pretty excited about it because the first comp was a four to a little bit bigger 2,600 square feet, but sold for almost 1.6 in a similar neighborhood. We saw one at 1.4, 1.5. And this, you know, I went over there. and it's a really nice block, a really walkable neighborhood. It just seems like there's really good upside. So this got me very excited despite my, a little bit of sticker shock when you told me what we were going to have to pay for the acquisition cause. It's amazing what you get for a million bucks in Seattle nowadays.

But what it comes down to, is there the margin? That's what I'm always looking at. Is there the return? Within your buy box, is this what you consider a good deal, standard deal, thin deal? This is, I would say, higher than average deal. So for my buy-box is a flipper in Seattle, and it changes with the market. You know, when the market's really hot, I will look at deals. If I can make a 30% return in six months, I will look at buying that deal.

And when the market's more normal, it's 35%. And when I'm a little worried about the market, it goes anywhere between 40 and 50% cash on cash returns. And so I don't really move numbers. I don't think about, like, is it going to be worth less? Is it going to be worth more? I just go in with a smaller or bigger margin based on what I think the market's doing. And, you know, that kind of trains me as an investor to go, okay, is this a buy or not? Is it worth the risk is always the question we're asking?

Because flipping is a very, very risky business. That's actually one of the things that made me feel a little bit better about this deal because I see some of the deals you do. James once posted on Instagram this video of him throwing a rock. with his arm through the roof of a house he was about to buy. That's how dilapidated the house was. And that's the thing for me, as someone who doesn't have a lot of experience with construction. I've done burs.

I've done rental renovations. But I haven't really done like a full house makeover. I was really worried about it. You know, this is what has kept me out of flipping. But like this house, like what do you look for that makes you feel like, this is lower risk or like worth that considerable investment and signals to you that this construction plan isn't going to be overly complicated or costly. What makes the house good or not or what makes it complicated? It's does it have a foundation or not? That's really my biggest concern.

Because if I have to do structural foundation work, it takes time. It can be six to nine months as you're waiting for permits. Yeah. So I'm always looking at what's going to slow the project down. And so when I went out to look at the house for us, you know, one of my concerns was it was an old house, nearly 100 years old. Do we have to reframe the entire structure? Because sometimes your bottom, they're really bad layouts and to maximize the value. So we pulled the comps. We looked at those. What do we need to create?

I ran out there to go look at it. And what I was pleasantly surprised with, this is why I called a 6 out of 10. There's a lot of good walls and spots they should already be. Yeah, right. So you don't have to shift things around. Not very much. You know, we're going to open up some. some spaces create a primary, and there's not a lot of structural framing in the house,

and that is important for speed and cost. Even when I went over there, and I don't have as much experience, you could tell, like, the bones and the layout were solid. Like, you weren't going to have to do some crazy stuff in there. And that personally made me feel a lot better about this deal. Yeah, and when you walked in the front door, it was straight. That's a big indicator for me. Is it sagging?

Is it sinking? And the house actually has really good bones. I love to hear it. That's great. All right, it is time for a break. But first, if you're enjoying this conversation, you may want to check out James's new book. It's called The House Flipping Framework. James, as you've heard, has flipped thousands of houses in his career. And this book is his tactical playbook for scaling your portfolio and reinvesting your profits. Even if you can't invest directly with James like I'm doing, you can get almost all of the same insights by reading the House Flipping Framework, which is available at BiggerPockets. We'll be right back. What if I told you you could forget everything you know about investment property loans? Because host financial is rewriting the rulebook, tossing out those pesky DTI restrictions. They focus on your property's income potential. No tax returns or personal income statements needed.

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James and I will update everyone about this deal as we're sort of going through. We're going to make some YouTube videos about it. So we're not going to get too far into that much about the house itself right now. I want to talk about the partnership structure because I think this is something that's going to be really applicable to everyone here. But before we do, just what's the update? Where are we in the process right now? Okay. So we closed on this property about a month ago, roughly. Yes. And right now we've had an architect go through create our after plan. We've submitted that to the city for permits. We also did an asbestos test on the property because when we're taking that much out of the house,

we want to make sure that we're not going to trigger some environmental. It did test hot. Dave, your first house is covered with asbestos. Oh, I've done this for rentals. I'd, I'm used to the abatement. I know this game. That usually will freak people out too. They're asbestos, and I'm like, just don't eat it and everything's fine. It's scary that stuff. If you look into it, I don't want to mess with that.

You hire pros. That's what I would do, but I understand people. It's very expensive. It can be, but you got to price it right. So we got a fairly, we probably have the cheapest asbestos removal guys in the state doing our abate. Oh, nice. And so because it tested hot, we had to do a 10-day notification to clean air. We had to wait 10 days, and then they could start abating.

So we did have, and this is the thing about these older houses with bigger margins, there's little hiccups that you don't expect, even with the asbestos delays in scheduling and engineering, because you're really dependent on that part just to get your site planned and prepped. And then we've had the roof quoted out. That's being installed this week. And the garage is going to start getting reconstructed before the permits rolled out for the house starting next week. And I think you said when we were talking the other day, you think from permits it will be four months to completion, right? Yeah, four months.

And that's an aggressive schedule, but we have a general that has loosened up a lot of work. He doesn't have a lot of workflow. So typically it would take them five, five and a half months. And, you know, four months is going to be the goal. And that's something I will talk to you about once we are locked into a day because I also like to throw bonuses at the contractor if they hit that day. For sure. I do want to turn to sort of the partnership side of this because, like I said, I've sort of never thought I would participate in a flip in any way.

And then I realized sort of this through this game we were playing on on the market and just like being in this industry long enough, realized that like there is a role for passive investors in flipping for certain people, not all operators want to do this, but you created a structure that was sort of like a really good win-win opportunity I felt for both of us. And I think would be really helpful for you to explain it to the audience because there There are probably, I'm guessing, there are other people sort of like me who are more passive, rental property investors who would be interested in investing in a flip if the right partnership came around.

So tell everyone a little bit about how you structured our deal. We bring on partners to give us more purchasing power. Yeah. Because we have the teams. We can execute the plan. There's no reason for us not to go buy the deal. Typically, when we do this, there's two ways that we raise capital. And most flippers do it this way as well, is you're either going to raise it with debt,

where you're going to be taking on a hard money loan and then maybe a secondary private money investor loan or even a private investor for the whole thing and then will give you high leverage where you can get your entire deal funded with leverage for the most part. And that's going to cost you usually rates, you know, anywhere between 10 and 15%, two points depending how much leverage it is. But then as the operator, I'm stuck paying debt that whole time.

And this is a game of cash flow too, because when you have 30, 40 projects going on at a time, you know, I think our average monthly payment for hard money right now is probably like, we probably pay $250,000 a month. Wow. And in interest payments. 250, damn. It's,

and so we have to pay attention to that. That's a wave, right? And so when you bring in a partner, so instead of bringing in debt, a lot of times bringing an equity partner, this is where you're not going to be paying them interest or points, and you can bring in a partner, and in our partnership, you know, I'm responsible for sourcing the deal, running the project,

taking it through the execution, being the operator, and your job is to wire me the money that we need. Yep. And it works out really well because we don't have to worry about cash flow because our investor is the person bringing in the capital. The negative thing is, as an operator, we're paying out more. You're giving up upside. We're giving up upside. And also the cash on cash returns that we get on our flips are, lot higher than what we can borrow money for at 10 to 12 percent.

Right, right. Yeah, because you could leverage it more and earn a higher cash on cash return. Yes. But I guess the counterside is that when you take on a partner like me, you are taking less risk. Because when you take on debt, right, if the deal goes sideways, the bank eats first. And so the equity partner gets, you know, you would get left hold in the bad. Whereas this time, if something went bad, we would split the downside. and it would probably hurt less, right?

Correct. So, Dave, we've done some lending stuff together too. And, you know, you make 10 to 12% on the money. And that's a guarantee with a personal guarantee behind that. So whatever happens on that project, you are getting paid, your rate, and your points. With equity, like you said, if the deal goes bad, the return can go down or go into the red. And so that's why there's more profit in the beginnings. You know, like on this deal, when I sent you over, you know, we looked at the comps, we looked at the purchase price, we look at the budget, when we were looking at the return, it's a high return. It's like 60%

in there. And a 60% return is a lot more than 12 to borrow. But you're also taking out risk. If we hit, let's say the market crashes tomorrow, you're going to be in the red too. Yeah, for sure. And so it's, that's why there's that upside. And as an operator, balancing your partners is actually really key because you don't want to be all in in leverage and be paying those payments all the time. You want to kind of balance it out. And then for us, too, because we do a lot of projects, we like to have long-term partners and have them in multiple different types of revenue streams. So they do well in the long run. That makes a lot of sense. And I mean, for my perspective, it's great. Like, I understand that this type of deal is risky for me. It also has great upside.

But for you, doing as many deals as you want, I can see why you wouldn't want to do. all max leverage, that's really risky. And you wouldn't want to do all equity partnerships because you'd be given up a lot of upside. So coming up with a blend of financing options and different approaches to financing your deals makes a lot of sense to you. We've got to pause for some ads, but stick with us because after the break, we'll talk about how almost anyone listening can replicate this partnership that James and I have formed and learned how to flip firsthand. Did you know, you can go on vacation and actually earn money. Because while you're out exploring new horizons,

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conversation with James Dainer. You know, we could talk maybe at length. It's probably a whole other show. about how someone like me should vet an operator. Obviously, this is a unique situation. You and I know each other. And so, like, I trust you. But I think the other side of this is less talked about and maybe even more interesting to some of our audience, which is, like, what do you look for in a partner? Because you have done a million deals.

You can probably, you know, you have banks that you can use. Like, what is the ideal equity partner for you? Because I would imagine there are other people. people like me who want to invest passively in these types of high upside value-ad projects, but don't really know how to structure and strike a partnership with an operator. In the Pacific Northwest, we run eight different businesses, and they take a lot of time in management. And the thing that I've learned in our 20 years of doing this is too many cooks in the kitchen

is a bad thing. Too many pinions on a deal is a bad thing. And so we don't take money from everybody. We actually turn it down pretty regularly. it's a matter of we have to have the right partner and the partner needs to be a of like mind they need to also understand risk we do not sell fairy tales like i mean dave me and you have talked about like yeah everything can go bad you can lose all your money yeah i know that part of the game and that's important in this agreement and partnership yeah like i would say never take money from

someone that doesn't fully understand what they're they're getting themselves into yeah and so we don't want someone in the background trying to you know talk to my team regularly they can get updates, but they cannot direct. And if they ever have a question, say, hey, I'd just like to know about this to learn. Oh, by all means, I'll sit there and chat with them all day long about it. But at the end of the day, it's my plan. Yeah. And if they don't want to do my plan, that's okay, they can do their own plan. And so that's important because it's not because I just think I know everything. It's because it provides clarity to everybody working on the job site. When there's more people involved, the telephone game happens and mistakes happen. Yeah. And everyone has

to have a different job, whether it's a flip or business, right? Like, you should specialize in what you're good at. My specialty here is just wiring you money and then never directing anything, just asking questions about what to learn. The way I think about it is like, you're sort of going on a ride. I don't know. Have you ever been skydiving? Like, with like a tandem person?

No, I was supposed to go four times in a row and it got canceled for weather four times in a row. Oh, my God. And then I took that as a sign that I should not be going to. Does not do it. Okay. Well, it's like the reason I always think of. about this way because like you're going and unless you have your license you basically just get

strapped to the instructor and they jump out and they do everything and you're just basically saying like I'm trusting this person with my life their experience I'm not going to say anything I'm just going to go along for the ride and like obviously real estate has different risk and reward than skydiving but it's kind of the same thing where it's just like you have to put your trust in this person and what will be will be you being like wanting to know every detail or put your opinion is not going to help the situation. And so you have to recognize that in this type of deal, you are passive. You are quiet. You are silent. You are backing an operator that you believe in. And then you got to let them do their job. You can't sort of try and micromanage these situations. No, it just gets, you know,

like I've invested with Kara Beckman that you know on some projects. And she's like, wow, you're the easiest partner. I'm like, well, I'm the operator usually. And she's like, well, don't you have an opinion? I'm like, I have an opinion, but you're in charge. If you want, my opinion, call me and ask for and I'll give it to you. But I was like, whatever you think we need to do, let's just do it. But I do want to know if you're going over budget, we're going over timeline. Yeah. And why? Because as an investor, like, Dave, I may not want you to participate, but you still need reporting. You still need progress updates. And that's, clarity is so important in any real estate partnership. And especially when you're dealing with operators and funding.

Yep. And picking the right people to who you partner. with is essential. Totally. Yeah, the way I sort of think about it is when you invest passively, whether this particular deal or when I invest in like a fund or in a syndication, you're agreeing with the operator to a business plan. Like there's a lot of conversation up front about like, here's the structure of the deal, here's the asset that we're buying, here is the thing that we're trying to accomplish from this deal. And after, the agreement is made, what I want to know is like, are we on track or are there deviations to that agreement? And if everything's on track, I don't really care. You have to trust your partner.

Like me and Will, my business partner, he runs his set of books, I run my set of books, and we fully trust each other that we're doing the right thing. And if you don't have that trust, don't do the partnership. You always have to have trust. You always have to have clarity. And that's why the documents are also so important because it does outline everybody's responsibility when you're putting together these partnerships. You know, like when we decided to partner on this house, I had already closed on the house. So I funded it. You backed, filled in with the partnership.

And then we did that through a joint venture agreement. And the joint venture agreement is the contract. And it's how it protects me as the operator, protects you as the investor. And it spells out the thing about a joint venture agreement is you can go as detailed as you want. who is doing what and who is responsible for what. And then where is the accountability? You know, like in a joint venture agreement, you could write in that you could ask accounting for a forensic audit every week if you wanted.

Yeah. And you would have never taken my money if I asked for that. No, I'm going to send you my accounting bill too. But that's why it's so important with the clarity. Like, you know, because you can know the people really well and the deal can still go really bad. Of course. I mean, I've done some deals with buddies.

and I don't blame them. It's just the deal went bad. That's hard, right? Because you're trusting that process. You're trusting the market. But the clarity in the paperwork, that's why you always have to have, don't Jerry rig the thing.

Like, you have to have the right paperwork because that's what's protecting your money. Yeah. I mean, even if deals go well, you need to have that, right? Like, you need to have everything laid out on every one of these partnerships. And, you know,

luckily for me, in this deal, like you have a structure that works for you. And I was happy to sort of slot into. But I've done other partnerships. And that is the work to, in my opinion, is like making sure that everyone has not just mutual agreement, but incentive alignment that like we both win when there's upside and we both lose like sort of at a proportionate rate if there's a downside. And that that way, no matter what happens, win or lose, like everyone feels like they're treated fairly, you know, and that they got a fair shake. And like, that's how I feel this structure works for me.

Even if the deal goes poorly, I feel like we're both taking on an appropriate amount of risk to earn a potential for an appropriate amount of a reward. We don't look at per deals. We look at people as long-term partnerships. And it's just, we're okay doing that because, yeah, we're also making a return. And, you know, and that is the benefit of an operator and bringing an equity. You don't have as much risk in the deal. because I see a lot of investors, they rush in.

And like, I just partner with this person. And I'm like, oh, cool, how'd you meet them? I just met him a meetup group. What deal do you buy? I don't know. Yeah. They had good numbers. I was like, what, so where did you look at the number?

And then I get curious, like, how did you bet the numbers? And they're like, oh, well, he's just done this a lot. And I'm like, oh, no. Like it's, and maybe they have, but you have to understand what you're sending money on. Oh, totally. Yeah, that's scary. Because numbers, I mean, investing is about assumptions, right? It's like the calculations are easy.

It's about what you assume is going to happen. And you could be way off on that and you can make your assumptions look great, but they could be completely wrong. Yeah, and that's getting to know your operator before you fund them. Like, how do they look at investments? You know, I mean, you have talked to a lot of operators in your career. I know that. Some, they like to put some juice in their performance.

Yes. And you'll look at like three deals from them. You're like, yeah, the numbers are everything's at the best case scenario. I like the pessimist. people. I want to hear people who are like, yeah, this probably won't go well. And as an operator for me, I like to be pessimistic because it's easy to underpromise and over-delivered. That's the easiest conversation you can have. When you over-promise and under-deliver, it sucks the life out of you, too, as the operator. Oh, yeah. And it is not worth it. And so, like,

all these operators out there, be conservative. If you're conservative, you're protecting your investor. And I'd rather go to you, Dave, and go, hey, look, I got this deal. and you can make 16% on it. It's a quick deal. It's easy. There's lots of upside because, like, our flip-off house and can. Yeah. It doubled.

Like, and I knew I was being a little conservative, but not that conservative. Yeah. And as long as you do that, it makes everybody's lives easier and you prevent issues and you prevent legal issues as well. Personally, this is how I operate my investing business, regardless of whether it's a partnership or not. I always want to look at the world. Like, not the worst case scenario, not like a 2008 scenario.

But I want to, I underwrite for low growth, low, lowest possible outcome. And usually I'm wrong. And something better happens, like the flip house, the game house that we invested in. That's a good example. Like, you set my expectations lower than you thought. And then I was delighted. I do the same thing when I underwrite a rental property, right? Like, I underwrite for low growth, for high expenses, for low appreciation, for low rent growth.

And I'm usually wrong on the upside, right? Like, there's usually more upside in a deal than the way I underwrite it. But I like only executing deals where if things go, like, pretty badly, I'm still comfortable with the deal. Yeah. And then it's like, how do you find that on your operator? And so that's where you can ask those questions. Like, if an investor that we're talking about doing a deal, and they want to ask me, like, hey, you're projecting this to take seven months, eight months.

Can you show me the last five deals similar? and how long they took? And what if they say no? Or I think they probably wouldn't say no, but how would you evaluate their response? You know, like, what would a good response look to you for that? Like, what kind of documentation? What kind of evidence should they bring to you? Well, on the operator side, if they're asking me for a million things about that,

I'm going to be like, okay, you don't trust me at all. But, I mean, if someone can show me on a tax record, when they bought it, when they sold it. You know, typically, as I get to know an operator too, or I'm even getting to know an investor, I'm trying to set those expectations. I send them over pictures of what we do as well. Like here, here's an example house because I want them to know too, like what is our talents, what is our skill sets? Because everybody flips properties different depending on the market. There's some houses that the way they do it in a different part of the country, that we can't do that in Seattle.

Right. And the way we do in Seattle won't make any money in those other parts of the country. Yeah, it's a pretty unique place. And so asking for those things, There's nothing wrong with asking for proof. And if an operator won't get that to you, that's a red flag. But the same red flag is if you're going, hey, thanks for those dates. Can you send me your PNLs?

Can you send me every invoice you spent? Yeah. Like, if you're getting too deep on me, I just don't want to deal with it. It's not that I won't show my books. It's just like, I don't have time to answer this many questions all day long. We got things to do. But to your point, like when you were starting out, you would have done that. For sure, because, you know, when we're new,

you know, and we all start from the same place, right? Like it's, I got in this business as a wholesaler, less than 15 grand in my bank, didn't know what I was doing, but I wanted to learn, right? And so I was willing to give away a lot just to learn and get, and that was the best thing I ever did. Yeah,

but I would have done whatever it took to get that money. And when I invest with people, I always let them know the vetting process is the most gnarly after that. They won't hear from me much. Yeah, exactly. And because you really have to see, Because people can say a story, but you've got to know the story. Right.

And, you know, if it's a newer operator and they're on project number six, project number, maybe even project number one, I don't want a budget. I want a construction bid. I want to know what the actual costs are that are going in this house because they don't have the experience to kind of narrow that cost down. Whereas at our company, we've been now, as we've done this for a long time, we make the bid, give it to our contractors and negotiate, and we make that bid based on the pricing we know that they'll do it for. Oh, that's, dude, that's such a flex to be able to be like,

I know, I know what this costs. I'm going to give you your own bid. Well, that was that budget we sent off to. Yeah, amazing. And I think you have to verify those numbers, right? Like, I know, I know you don't vet my deals probably as thoroughly as maybe someone, but you love looking at the numbers. Oh, it's the best. And as a past investor, more you understand those numbers, you have to see what's the break and mortar. The budget of 250 is, well, what's going into it? What if that operators spending 250, but they're not even adding a bathroom. Right. Exactly. And so you have to know what they're doing and not doing.

And that's the cool thing about what you're going to do on this project right now is the more you know, the more returns you're going to be making because you know who to invest with than not to. Yeah, absolutely. I'm way far behind, but I'm so impressed by your ability to just like name off what anything should cost. You're like, oh, like adding a bathroom should cost this amount, you know, a new, a new kitchen X amount per square foot, that doesn't come easily. I'm so impressed that you can do it,

but I want to get at least closer. That's one of my main goals for this is to really just be able to sort of benchmark expenses for construction and get better at that because it allows you to vet deals, vet operate it so much better, even if you're not doing it yourself. You have to have at least like a little bit of a baseline here. And that's what I'm hoping to learn from you on this project. Yeah, I mean, the construction is the brick and mortar to all this lending, partnerships, that's the component that tells it whether it's going to be profit or not. Well, I could talk to you about this all day. But we are meeting up on Monday to talk about this more.

So I think we should get out of here. But this is a great conversation. Thank you for including me on this deal. I'm super excited about it. I'm going to think I'm going to learn a lot. And we'll take you all along for this ride because I imagine that there are a lot of people out there. Like I said, like me, who don't necessarily have the construction chops or the time to run a flip, but are eager to get in. and have a chance at some of the huge upside that is available from these value-ad projects.

So we'll take you along for the ride. And James, thanks for being the teacher on this one. I better look good. So that's extra pressure for you. We've got to hit this deal right, or this is not going to be good for me. Yeah, it's a good thing we're recording this before we know what happens. So it puts a little bit of pressure on both of us to make this thing happen. But I have full confidence.

And either way, we'll learn something. Yeah. All right. Let's go walk this site. All right. Well, we'll put that up on YouTube. So make sure to check that out if you're curious about this house. And that's what we got for you today.

So thanks so much for listening. And we'll see again soon for another episode of the Bigger Pockets Podcast. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. On the host and executive producer of the show, Dave Meyer, the show is produced by Ian K. Copywriting is by Calicoe Content and editing is by Exodus Media.

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