It’s Never Too Late to Succeed in Real Estate Investing – Jake Knight

Hey everyone and welcome to another episode of the everything real estate investing show with Sean Pan. Today, we have Jake Knight. Jake is real estate investor in the Bay Area and started seriously investing in 2016. And despite having a full-time job and a newborn baby, he still made effort to take action and succeed. He considers himself a sophomore in real estate investing and I think it’s interesting to hear the stories of people who are in the middle of the real estate investing journey. And if you’re just starting your real estate investing journey, be sure to stick to the end. Jake is offering a few people the opportunity to get some hands-on experience with a few of his deals. Enjoy!

Sean: [00:00:34] Yeah. I’m so excited to have you on our show today. Go ahead and introduce yourself and let us know who you are and how you got into real estate investing.

Jake: [00:00:40] Cool. Thanks Sean. My name is Jake night. I’m a real estate investor out of San Jose emergently from the East Bay and my company, Sky Homes, which includes my wife and myself. We buy houses all over the Bay Area and Northern California, and we have one property out of state. I come from a professional background in mortgage and commercial lending. I’ve also done tech sales, retail management, and I’ve only been investing for about two to three years so I’m pretty new, maybe like a sophomore, if this were like a high school setting, like a sophomore not a freshman anymore. I’ve gone up a grade. I know my way around campus a little bit. So yeah, so that’s where I’m at now.

Sean: [00:01:20] That’s perfect. And I remember actually did we start around the same time?

Jake: [00:01:23] Yeah. I remember meeting you at Johnson’s meet up. Shout out to Johnson Hong.

Sean: [00:01:28] Shout out to Johnson.

Jake: [00:01:29] In Milpitas, that was probably 2016.

Jake: [00:01:31] So yeah.

Sean: [00:01:31] That’s right.

Jake: [00:01:32] We’ve come a little bit of a ways since then.

Sean: [00:01:35] And was that like your first meet up that you went to?

Jake: [00:01:37] One of the first, yeah.

Sean: [00:01:39] Cool. So go ahead and walk us through your story from there. Like actually, why did you even decide to do real estate investing in the first place?

Jake: [00:01:45] That goes back, probably, I guess it’s been 20 years since I got out of high school and I had heard about Robert Kiyosaki and Rich Dad, Poor Dad. That’s like when around when it came out. My mom and I went to one of the seminars and wanted to get into real estate. I knew that’s what I wanted to do, but his kind of pre-internet and there weren’t a lot of other resources out there like practical information that you could really apply and she introduced me to somebody she knew that was flipping and he was going to be somewhat of a mentor. He told me just to go by this Carlton sheets program which came in a binder and CDs and I studied that, had no idea what to do with it. It was just like seller carry back stuff ended up moving out of town and kind of lost touch with them, but I just didn’t have a lot of confidence back then because I didn’t know, you know how to apply that information.

So it actually led to me getting a job in the mortgage business in 2003, where I thought if I can learn how to do real estate then I can go apply it into investing. So out of high school, that was like my only plan and goal in life was to be a real estate investor. It just took me a really, really long time, you know till 2016 when the light bulb went off again to kind of take the next steps and I stumbled upon BiggerPockets to be honest. I was like the first thing that happened to get this part of it going but it all goes back, you know way, way, way long time ago.

Sean: [00:03:17] So basically like 20 years ago, you first heard about Rich Dad, Poor Dad, Robert Kiyosaki, real estate investing to financial freedom. You learn about Carlton sheets, but then you had no way to apply the information because it’s just so much to do and as someone who has like no network, no friends doing it, it’s kind of hard to even start, right?

Jake: [00:03:37] Yeah. I didn’t know besides that one guy. I mean, I didn’t know there was like Ria’s, you know, or there’s some things you just don’t know. You don’t know what you don’t know. But I also had a lot of limiting beliefs and like was afraid of rejection. I was shy, social anxiety, so I wasn’t that type of person just to go out and figure it out. For me, knowledge is confidence and if I’m not confident in something, it’s harder for me to just to go do it. I’m not like that fearless person who will just do anything, say anything, ask anything. For me, I need to have a solid, you know educational background in some topic for me to be confident and execute the way I need to.

Sean: [00:04:16] So for like 1999 all the way till 2016 is like 17 years, what finally made you even look at BiggerPockets to begin with?

Jake: [00:04:25] I wonder about that sometimes I think what was that little thing I did that day that one day that had me go to that website and I just I can’t remember what it was. It’ll plague me for a while, but BiggerPockets basically changed my life. I mean that’s not an understatement at all. It taught me that I needed to go networking and I just basically started the path of education when I’m interested in a subject and this subject particularly, because it was something that I always wanted to do. But when I find a subject that I’m really interested in, I immerse myself in it completely and I just consume every piece of knowledge and information that’s out there, like relentlessly. I mean I was working full-time and every commute I was listening to a podcast episode or reading books at night BiggerPockets when I should have been underwriting loans at my job and you know, just consuming all day, all night, you know, and then I learned that I had to go network. And being a very kind of introverted person, I mean you probably wouldn’t know that because I’m very open and comfortable around you and other people that we socialize with now, but I was terrified to go to my first event, you know. Like the second time, I was trying to think of excuses, oh, my stomach hurts a little bit, maybe I shouldn’t go. But I realized I started to meet people and the books and BiggerPockets said I need to go network and I did and that was a game changer too.

Sean: [00:05:52] Okay, so then how many meetups you decided to go to once you decided to start going to meet ups and then what did you do after that?

Jake: [00:05:58] I tried to go to as many different meetups and it really, you know I had a baby around the same time. I was working full-time. So time was a concern but I went to everything that was local and then also some like in Oakland for example, I probably went to like five different meetups, but then they have monthly events so I would kind of pick and choose and just go listen to speakers, you know, different meetups offer different content and have different purposes. So some of them are just more open networking where you can talk to, you know, 10 different people over a few hour period, some have speakers where you can take notes and you know also do networking. I highly recommend for anybody even if you’re just super terrified of doing that and asking people questions or having small talk like you just have to do it. It’s transformative, basically.

Sean: [00:06:52] Yeah. Was there any one particular meetup group or meet up event that actually made a huge difference for you?

Jake: [00:06:58] Probably Jeff Pollack because he was very consistent with the delivery having great speakers, you know, I saw you there countless times and I met other people through his meet up like Jason Buzi for example, who have developed a good relationship with and we’ve worked on deals together. He’s been a bit of a mentor for me. I can name a lot of other people. So that one particularly stands out as one that has just added so much value to me getting started.

Sean: [00:07:31] Yeah, absolutely. I feel the exact same way. Thank you. Shout out to Jeff again. Like I mentioned in previous episodes, that was how I got my first deal. It was by helping Jeff’s meet up just by volunteering and showing up to those networking groups.

Jake: [00:07:43] Yep. Exactly.

Sean: [00:07:44] So okay. Another thing is when I go to meet up groups and sometimes there’s always like a speaker doing seven figures a year and I feel like how you felt, you know, 20 years ago when you’re taking these Carlton sheets video training classes. It’s like okay, I understand how they’re doing it but I don’t know anyone who’s actually doing it. So what actually made it so that you know, you hear Jason Buzi making seven figures a year to you’re actually doing deals?

Jake: [00:08:09] It’s a great question and a lot of it for me too. I handicap myself a lot when I was going to those meetings before I had done a deal. I just thought, all these people have a head start or they have money or they’ve been doing it since it was super easy to do and they have momentum. And so I just had to keep applying what everybody kept saying like just take action, you know, so I already talked about education and the networking, those are two big components of it but the third piece of the taking action, you know, you can’t get deals and you can’t buy houses without putting in the work to find those deal. So I did everything I could within my limited budget and time. I had very budgeted time as well. So I had my teenage daughter handwrite envelopes and we were doing Direct Mail which had come from my Saturday and Sunday morning drives when I was driving for dollars and writing addresses down and I also cold called at lunchtime, and I got a deal from you know, a street that we used to live on from cold calling.

I also in the evenings, a couple days a week, I would door knock on pre foreclosures and I also built my website. I saw it as an opportunity, a long-term play to build a website, get ranked, get leads organically and I thought especially when this market turns that I’ll have this website that people will go to you know, because a couple years ago or recently if you had a house in the Bay Area and you want to sell it regardless of the condition, like you could put it on the market and sell it no time, right? But that will eventually change and I wanted to be in a position where people could go online and they wanted to sell it quickly or have you know, some other needs that they need help with and they would see me, right? And I would be ranked. So I was putting in all this effort and taking action and just being relentless, you know knowing that this is always what I wanted to do. I’m not going to fail this time. I’m not going to make any excuses, even though I would have doubts and everything, but I just applied myself.

Sean: [00:10:17] So what was the timeframe between you deciding, I want to do it for real this time? 2016 you started BiggerPockets, you started to go to meet up groups to actually landing your first deal.

Jake: [00:10:26] It took me about eight months from when I saw BiggerPockets and the light bulb went off to getting my first deal and during that time, I wasn’t sure if I could flip right, if it would work out. So I was also studying Airbnb and short-term rentals and I’d actually went to J Martin Summit in Oakland and heard Al Williamson who you had on the show recently, that was a great episode, and Kimberly Smith of corporate housing by owner spoke. And that completely resonated with me like having a rental property but furnishing it and doing corporate stay. So I was just immersing myself learning that model too. And I thought even if I can’t flip like I have a path to you know, real estate investing in building wealth.

So I studied maybe four markets. I think tertiary and secondary markets out of state. I called everybody I could in those markets, Realtors, property managers; I called people who had listings on corporate housing by owner and pretending I was a guest to ask them a ton of information, right? And just get Intel and I didn’t just started trying to find a deal, I found the deal in Knoxville, Tennessee and that I really consider my first deal. I went out there and furnish that one but then about a month later, I got my first flip here in the Bay Area. So it took me about a good eight months, you know of working at it and finally landing one, but then it kind of snowballed from there, you know, you just get started and you get momentum.

Sean: [00:11:55] Yeah. You just get started, keep going, keep going, and then all that work is compiled at the same time.

Jake: [00:12:01] That’s right.

Sean: [00:12:01] I also wanted to ask you, you know, why did you get into flipping? BiggerPockets mostly talks about buying holds.

Jake: [00:12:07] When I first learned about real estate investing and you know, the cash flow thing and building wealth is obviously very important and it’s not that I didn’t want to do that but I saw flipping as a means of building capital to then invest in rental properties. And I realized that we are kind of a gold rush in this Bay Area market, where depreciation is just going like crazy and I wanted to take advantage of that. I also thought it was a good time to flip to because it’s a forgiving market, right? When it’s going up like that. You can make mistakes and learn, you know, shake off kick off the training wheels during this time. And then when it gets, you know, when the market changes, you’re better at it, you know, you’re more experienced. So buying rental property is still part of the plan. It always has been. It’s just I wanted to build capital first and I saw flipping as the vehicle to do that.

Sean: [00:13:02] Yeah. I think we’re in the exact same boat, you know, you flip to build that chunk of money and you take that chunk of money to buy and holds whether they be a single family or apartments or yada, yada, yada, yada.

Jake: [00:13:12] Completely.

Sean: [00:13:13] Okay. Cool. Now, I remember a couple years ago, you were actually working with Jason Buzi and doing what you were saying how you were doing that like online lead generation and you’re actually selling zip codes at the time?

Jake: [00:13:25] Yep.

Sean: [00:13:25] Can you talk a little bit more about how that was working and what is your idea?

Jake: [00:13:29] Sure. Jason had the idea of doing an SEO company. I had approached him before actually with some ideas that he could implement in his business. So I’m always coming at marketing or coming at investing from a marketing mindset and how can we improve our marketing because that’s what will give us the advantage. So he understood that where my mindset was and what experience. I was gaining in digital marketing specifically with SEO, which is in layman’s terms, just getting your website ranked and organically as opposed to paying for ads to be highly ranked on a Google page. So we put our heads together and my role was to kind of put the company together more operationally and from a text stand point. And he was going to kind of build a promotion side of it. So it worked out. We had a great start, but eventually, it was kind of like a focus thing, right? Like I was still getting started my investing career and that was what my dream was and you know, he never had the expectation of running the day-to-day and so we realized that it could be successful and we are just at that point where leads were starting to come in and we were growing but we knew that we couldn’t give our all to it.

So I definitely don’t look at it like a failure but we decided it was best just to you know, kind of move on and go back to investing. And it’s kind of the thing too, it’s like there’s so many shiny objects in what we do and you’ll see a lot of investors who also come up with other ancillary businesses that support real estate investing because there’s definitely money to be made where as investors, we are always looking for the next best tool to help us grow and we wanted to offer that for other investors, but for just the reason I mentioned it, you know, it didn’t work out.

Sean: [00:15:22] Right. Actually what I thought was really cool about that was that you were approaching Jason with some like way to add value to his life, to his business, which made is with that he would talk to you and you know have lunches and stuff and discuss and even maybe help you with your own investing career.

Jake: [00:15:37] Yeah. I look at it like everybody says get a mentor but it’s so hard just to ask somebody to be a mentor, right? I look at it and not in a selfish way, but I think I try to look at like who you know, I can help in their business and maybe I’ll benefit from it and maybe I can learn from them. And so I really didn’t have any kind of other motive when I approached him to share what I thought. It was stuff I was brainstorming for myself, but thought here’s somebody who has some brand equity because of other ventures he’s done where he’s gone viral and I thought, man, he could leverage this in a way that I’m thinking of and be much more successful than I would be because I don’t have that brand equity that he had. So that was just me sharing what I had and thinking maybe he can use it, you know, and it worked out. That helped us build a relationship and then one of my first few deals; I invited him to joint venture with me on it. So then that started another step of our relationship and we’ve done a lot of things together now, kind of stemming from [00:16:39] just off me trying to offer him value.

Sean: [00:16:41] Yeah, that’s amazing. So you started 2016. 8 months later, you got your first two deals. So I’m guessing this is a like early 2017?

Jake: [00:16:49] Yep.

Sean: [00:16:50] How long until you decide I’m going in full time and what was that conversation like with your wife?

Jake: [00:16:55] Good question. It was summer of 2017 and I had switched jobs. I hated the place I was at like I will admit it now, but I mean I was spending probably six out of eight hours of the day, you know and working on my investing business versus underwriting for the bank. So we had a couple deals going at that point. We just sold one. And I said look, I would love to be able to do this full-time. Something’s got to give. I think we’re you know, we’re really onto something here. Can you give me like six months and if I can’t make it work, I’ll go find another job and she said okay, if you can well it wasn’t like an instant yes. It was a little more prodding, but she basically said if you can hit a certain number, I don’t remember the number was but if you can hit a certain number by the end of the year, then you know you can stay self-employed. So I hit that number probably, you know halfway into that maybe by like October of 2017 I think and I just you know, as soon as she gave me that green light like I was not going to look back. I mean, you know coming from that whole 20 year plan I had where I knew this is what I wanted to do, man, I was not going to give up. I was not going to stop. I may be shy and introverted and not the most talented or smartest guy in any room, but I can be pretty relentless and this is what I wanted so I made it happen.

Sean: [00:18:27] You got a lot of guts. I can definitely tell you that.

Jake: [00:18:30] Thanks.

Sean: [00:18:31] Yeah. Was your wife working at the same time?

Jake: [00:18:33] Yeah. She still is to. She works full time. So she’s the next on the list to get out of her job.

Sean: [00:18:38] Awesome. So since then, what has your career look like?

Jake: [00:18:43] We’ve done probably I think 15 or 16 deals since then.

Sean: [00:18:50] Jeez, congratulations.

Jake: [00:18:51] Thank you. Thank you. I think we’ve got a couple more. After this show, I’m going to call some of the sellers back who were supposed to give me an answer today. So maybe another one or two yeses, but we actually just did our first local rental property. We’re doing the BRRRR strategy on a house just about an hour outside of San Jose. And then I’ve got another flip in Fremont. Just wholesaled the one in Santa Rosa, have another one in contract up there. So we kind of expanded outside the Bay Area to and that helped out a little bit because I wanted to, as soon as I got this one that I just did the BRRRR strategy on, I thought you know what? I want to get more rentals. We’re comfortable enough now with the flipping business that I can diversify a little bit it geographically, but also strategy-wise, I’ve also learned how to incorporate some other creative acquisition strategies that I factor into my offers. So we’re just trying to grow and branch out a little bit. So I’m you know, I’m very happy with the way things are going right now.

Sean: [00:19:54] Yeah. Sounds like a pretty explosive growth cycle.

Jake: [00:19:56] Thanks. Yeah it is.

Sean: [00:19:58] So can you talk about your acquisition strategies?

Jake: [00:20:01] Yeah, so basically a lot of my business comes from agents. My problem is I’m kind of disorganized with marketing. I think my mind is a marketing mind, I say that humbly not like I’m some genius or anything, but that’s what I really like doing I guess, and I’m just a disorganized person. So all work really hard at gathering all this great data and then you know, I’ll market to it and then just not be consistent, you know, and that’s my downside. So I’m implementing strategies right now to fix that. I’ve got a developers working on making it kind of foolproof for me. So I’ve gotten deals from kind of all sources from cold calling from SMS text messaging, which I don’t really do a lot of but I’ve gotten deals from it. Agents, let me think here, yeah, and direct mail too, but my agent lead source is probably the most productive right now.

Sean: [00:20:56] So, how do you go about getting deals from agents?

Jake: [00:21:00] You talk to as many as you can and you build relationships with them. Some of the more specific strategy stuff is that’s like my only proprietary information because I’m still you know, newbie. I can’t give away that blueprint so to speak but it’s really not rocket science anyway, so I mean you can figure it out and kind of do things that work for you really because I mean we can’t all do the same thing, but there also are so many different ways you can do it that it doesn’t matter what I’m doing, right? I mean, I’m still a small fried. So I would say hopefully this year, it’s more from sellers directly and less from agents because I like working with sellers more so than with agents. I mean, there are pros and cons to both I’d say but I want to even it out a little more.

Sean: [00:21:51] Right. So let’s go through the agent scenario. Like why would they want to talk to you in the first place? I mean, I cold call agents myself and they’re like, yeah you’re like the type of guy that that says, oh, you’re a cash buyer and blah blah, blah. So what is your like script that you entice them to want to talk to you to further conversation?

Jake: [00:22:08] I try to pull them in more than push my way in and by doing that, I’m talking to people who want to hear from you already. So I think that’s a big piece too and that’s kind of my approach with sellers too. It’s like I like pulling them in because when they call me, I already know they want to talk to me, right? It’s easier than me cold calling them which is fine too. You can get deals that way but it’s a bigger uphill battle. So I don’t really have a pitch with agents, but I think that I drive them to my website and they see who I am. They see what we’re doing and they can call me or not. If they if they like what we’re doing and they want to talk to me then they will, and we’ll have a conversation and I’ll tell them what value I can bring them which is what I can offer their sellers. First of all, you know, all the different value propositions that we offer is investors and one of the big things they like is that their sellers can stay back after they sell for a while and their sellers don’t have to clean up the house.

So it takes a load off their back. When you sell a house you’ve lived in for 40 years or whatever, It’s you know, it’s stressful. You know, where am I going to go? Who’s going to clean up this house? So making sure that the agent understands what value I can bring to their sellers is good, it’s important, but for the agent a lot of times it’s important that they can release the property you know, that’s a big factor. You know some investors don’t guarantee that the agent will get the listing but I’m trying to build relationships with these people and if that’s important to them, then I’ll work around that. I mean, maybe not every agent is the greatest agent, but I know enough about selling houses to make sure if I’m working with the newer agent or somebody who, you know, isn’t working as hard, like I’m going to make sure that that house is still going to sell. I’m going to do some of my marketing, I’ll you know do whatever I can to pick up the slack but it still allows me to keep that relationship very healthy.

Sean: [00:24:13] Sounds like something very interesting career you’ve had so far. What kind of challenges have you had throughout your journey?

Jake: [00:24:19] I’ve had challenges from construction. I’ve had challenges from managing guests at our short-term rental. We just got sued from a guest at our short-term rental. Basically, she was just upset because our cleaner didn’t clean the house which trust me I get it, I would be upset too, but I wouldn’t sue somebody over it. So that’s just one of those things that if you’re in business, you’re going to get sued probably and we ended up settling for $2000. So, not the end of the world, but it was just a lot of stress over like a six-month period and dealing with being angry about it for something so petty and something that we tried to fix so hard, so that was interesting. And then last year, we had a contractor issue which I’m sure a lot of people can relate to and if you’re investing and you can’t relate to that then good for you, but we had a guy who was rehabbing our house and just basically kept doing shady stuff and just doing a really terrible job and making it look like things were going well. And then we had to fire him and get somebody else in there. So I felt like we basically paid double for the rehab and part of that was like having a lot more holding cost, selling into a different part of the market, dealing with, you know, engineers and architects to fix stuff that he screwed up while he was getting paid and part of that’s on me too for not managing it properly and learning but at the end of the day when we sold the house, we still came out above so, you know, I got to keep my job I guess but yeah, it was it was a nightmare though during that process. You know, it’s really stressful.

Sean: [00:26:02] Right. Oh well, at least you made a profit off of it. So it’s like free tuition.

Jake: [00:26:06] Trust me. I’m very grateful that it turned out okay in that regard.

Sean: [00:26:10] Are you allowed to go into more detail about that whole story about you getting sued, I think it’ll be very interesting to hear that.

Jake: [00:26:15] Yeah, of course, of course.

Sean: [00:26:16] All right. Let’s hear the story, what’s going on?

Jake: [00:26:18] Okay, she was a med student who was in town. She was going to stay for six months and a cleaner who we’d used a number of times just didn’t clean the house after the previous guests had checked out from being there for six months. So the house was dirty, you know, I’m remote so I don’t go there and check on it every once in a while, but there was like cobwebs I guess. They weren’t cleaning up; they were just kind of being you know, sloppy. So, this girl was about to check in and to her horror, It was not clean. And so I completely empathize with that, she called me and I was like, oh my God, like I will do everything I can to fix this, I’m so sorry. And she was empathetic to me and said don’t worry, my parents have short-term rentals too, I get it and I said okay, thank you for being understanding. So I said, I’ll pay for your hotel costs while we fix this. So two days later, I had it all clean, I had the Terminix come out and kill the spiders and blah blah, blah and she turned nasty. She was like this house isn’t clean enough and she came across as a really like spoiled and entitled person and kept saying, well as a med student, I don’t think this, another one, oh my God, and she started to get nasty and like threatening, my uncle’s a sheriff, blah blah, blah. I’m like, okay. I don’t know what that means but then the issue came.

She submitted hotel bills for like two weeks. And I said, I don’t think I owe you two weeks’ worth of hotel bills. So, you know, I don’t think that’s what I want to pay you and then my wife was like maybe just pay her. So I said, okay, I’ll pay you and she was like no you lost your chance. I’m like what do you mean? That’s what you wanted. And so she filed small claims, suit against me in LA, where she lives. So we had to fly to LA and fight this. And then we just settled in mediation and the guy was like if you don’t settle and the judge thinks you’re wrong by like 51%, then you get a judgment and I’m like, I don’t want to judgment. So I got to give her a couple grand to go away and eat other expenses that we had because of the cleaner.  All because the cleaner didn’t do her job, you know. It is what it is. I don’t know if I could have done a whole lot to prevent it because I didn’t know the cleaner wasn’t going to clean but it was like probably eight months of dealing with it until the final, you know day of it.

Sean: [00:28:45] That’s nuts man. Well, okay, what are the lessons learned from it?

Jake: [00:28:51] Great question. Make a decision, well, you know I think, I decided to do the right thing by just paying her but I guess it took me a few longer days, but I didn’t know that she would not be open to that and settling with the cleaning situation. You know, this cleaner had worked for us before number of times and was perfectly fine. And so I didn’t know that she wasn’t going to clean. I have a few cleaners on deck. So, you know, I always have somebody ready to go. But I’ve thought about this before and there’s only like, I don’t know what else I could have done differently to prevent it I guess.

Sean: [00:29:32] Okay.

Jake: [00:29:33] I was super nice to her the whole time like every text message I had was super accommodated and like, you know understanding, I was never nasty to her, never rude, anything like that. I treated her so good, but she just didn’t want to hear it.

Sean: [00:29:45] And you said this lasted eight months, right?

Jake: [00:29:47] Yeah eight months, from start to finish.

Sean: [00:29:50] I could only imagine eight months of like dealing with this like your stomach must have been like full of knots.

Jake: [00:29:55] It’s just like stress for like, you know like I said, it was such a small amount like $4,000 but it’s just a principle of things, you know, like I tried to do what was right and she just didn’t want to cooperate. She just wanted to be nasty about it. So luckily it wasn’t like a, you know large lawsuit. I would have been, I don’t know how stressed we would have been over it.

Sean: [00:30:12] Yeah. I totally understand man.

Jake: [00:30:15] Yeah.

Sean: [00:30:15] How about other challenges, like did you face any challenges because of the whole market softening in the end of 2018?

Jake: [00:30:22] I think I was lucky because just like timing-wise, our properties weren’t being listed for sale, kind of when the market had a hiccup, especially like in San Jose, where in the fall things got real tight. I know like four or five investors who broke even or lost money on deals in San Jose specifically, where I live, and we just had can coincidentally had properties out of that area or didn’t have anything for sale until the turn of the year. So I know that it’s going to change everywhere at some point and you know, I was in the mortgage business during the crash, the big crash and it impacted me a lot. You know, like I laid off a bunch of times. I had to let my condo go. So I felt that pain personally and I know that you know here we are flipping it can be much more ruinous if you don’t approach it the right way. So I’m being very cautious when I buy properties now, making sure that if the market does dip five or even ten percent like that’s not going to hurt me, you know, and I’m only doing short-term projects.

So I’ve really narrowed my criteria to be to mitigate risk as much as possible. I’m not immune to what can happen. I don’t have control of every little piece of it but I’m doing my part to make sure that I don’t turn out or have a property like a lot of these people experienced where all the sudden now everybody in the neighborhood is listing their property and you can’t sell yours, so…

Sean: [00:31:57] Damn, so how was that like? Losing you know, your condo, during the 2008 crash. Like was it hard going back up and rebuilding from scratch?

Jake: [00:32:09] See, this was my issue, was that I didn’t know how to buy investment property, even though I wanted to be a real estate investor. So I basically bought a condo, had a two-year fixed on it, two-year fixed mortgage. So it adjusted after two years and then I got laid off because all the mortgage companies were closing and I couldn’t get a job and I couldn’t pay my mortgage anymore. And then the rate adjusted to like $600 more every six months. And it was going to keep going up. And so this was really before the banks were doing loan modifications and my bank told me, you know, sorry, basically, we don’t do that. And so I said, well I’m going to cut my losses because I’m not going to just pay you if I don’t have a job. I didn’t have a job for a while. You know, I couldn’t just keep draining my savings.

So for me, it was more of a business decision, you know, I love that place but like I needed to cut my losses, so I had to move on and it also hurt me because when the crash really happened in like say 2010, when prices were super low, in my head I knew man, this is such a great buying opportunity, but I have [00:33:18] a foreclosure on my credit. I don’t make a lot of money. I don’t have a lot of money in the bank so I can’t buy something. I can’t buy this super low property that was worth, you know three times as much a few years ago, but had I known then what I know now, I could have been a millionaire, you know, just taking advantage of like wholesaling for example, right? Or raising private money, but you don’t know what you don’t know and that’s my big regret. So the condo foreclosure had effects not right away, but more so, you know, during that period when things were really easy to buy I guess.

Sean: [00:33:52] So if you could go back in time, you know, what would you tell yourself? I mean besides like obviously hey, here’s what the market trends are going to be.

Jake: [00:33:59] If I could tell myself in 2000, I would just be more resourceful. The things, the resources you need to get started are out there, you just have to look a little harder.  If I could talk myself in 2008, I’d probably say the same thing, you don’t need money or great credit to go buy a property and you know, it’s my path, it took me so long to get where I am now. This is where I always wanted to be and it’s kind of a fun process or I don’t know if it’s therapeutic, but to always do that what if game in your head. What if I had done this? What if I had done that? I think my biggest issue is just not being as resourceful about learning and asking questions or meeting people. I kind of thought that real estate investing would find me instead of going to find it and that that was my big downfall.

Sean: [00:34:59] And also I think a cool experiment would be instead of thinking like hey, you know, you’re older now and you know more than your younger self, what does your older self-know that you probably don’t know? Do you ever think like that? It’s like the Jake from 20 years from now is going to be a crazy baller, right? Amazing real estate investor, goes to all of these different talks and what not, people look up to you, but you know that future Jake know something that today Jake doesn’t know.

Jake: [00:35:23] It’s a great question.

Sean: [00:35:26] Yeah.

Jake: [00:35:26] I’d have to think about that more but I like that question.

Sean: [00:35:29] Yeah, that’s a crazy trippy thought experiment.

Jake: [00:35:31] Yep.

Sean: [00:35:31] I mean, I’m assuming that’s also your tips for newbies, right? Like what would you tell newbies who want to get to where you are?

Jake: [00:35:37] Yeah, I would say build a lead generation system and I have some sales background. I was a sales manager for a while. I sold technology for a little while and early on at Jeff Pollock’s meeting I heard Jason Buzi speak and he talked about how many leads it takes him to get a deal. It was like maybe a hundred leads, 10 qualified sellers and one deal and that resonated with me because I know it’s a numbers game. And I think anybody getting started just has to focus on leads and building a marketing machine and there’s a few reasons but it’s you know, it’s easy to get sidetracked and do stuff that’s urgent or fun like build a business card or website, right? But you need to focus on primary money-making activities which in our business are generating leads.

And the other part of that is if you don’t have enough leads, you’re going to do the wrong deal. If you get enough leads you can cherry-pick and do the best deals. Like I’ve seen my criteria get more and more focused over time because I can afford to be picky. I have enough leads and I know exactly what I will and won’t do now, so the bottom line is just figure out how to generate leads, you’ll over time build your business, which is essentially a sales business.

Sean: [00:37:05] Yep. Do you have like a lot of contractors in your pocket? Because you told me that you had a bad experience. You have to get a new one and you’re doing 15 deals so I can only assume you’re doing multiple deals at the same time. So how are you working with these different contractors?

Jake: [00:37:19] Well I have a few contractors that I like, but because I’ve been flipping all around the Bay Area, I haven’t had just like one crew or one guy, I’ve got a few now that I like but sometimes it may not be right away that I have another opportunity in that same area and maybe when I do they’re busy on another project for a while, right? So I have to find somebody new. So that’s been a bit of a challenge, not every deal that I’ve done has been a construction project. I really like the whole tail model. And to be honest, if every deal I had, I could just resell without renovating it, I would do that. I don’t have some ego thing about showing people nice properties that I remodeled. I mean, it looks good and it shows agents for example, what you’re doing, or sellers too, you know, it shows what your process is, but from a business standpoint and a personal preference, I don’t need to rehab. It’s just it takes longer than I’d like. I’m not super construction savvy. I know that it’s important for me to learn and I am learning but it’s not also what I love doing.

So I’m bringing on a part-time project manager that I’m going to train and he’s going to help me kind of, you know, do that day-to-day thing on each project to make sure that things are moving along. He’s going to become the expert. He doesn’t come from a construction background, but he’s super smart. He’s available and I know that he’d be willing to get his hands dirty and be tough on contractors or be accommodating and work with them to make sure that our business runs smoothly and I like that he would be on our side, you know, representing my company as opposed to the general contractor representing his company, right? Where at sometimes at odds.

Sean: [00:39:02] Yep. How are you even finding contractors to begin with?

Jake: [00:39:06] That’s a challenge. I’ve used Thumbtack, HomeAdvisor, BuildZoom, Craigslist, ThePhoneBook. I’ve got business cards from contractors I’ve met. If I’m doing a project and I don’t hire a general contractor and then like if I’m just subbing it out basically then I think Thumbtack and HomeAdvisor are great because you can get reviews on people. You can submit a job and they’ll call you back and bid on it. So, you know that they’re already available which is half the battle getting somebody who’s available for work. You know if I need a plumber or electrician or even just a carpenter, for example, I can piece those together through some of those sites and even it’s great that they have reviews there.

If you’re looking for a contractor, like a general contractor, it takes a little more work to call around and see who’s available and to see who would even be willing to work with you as an investor because some don’t. Some just want to work with homeowners just probably more money to be made there or maybe they have a lot of overhead in their business, which is the tip to don’t work with the contractors who have the really nice truck and a really nice website because they’re going to charge you more, they’ve got bills to pay. I like the guy who has a beat-up truck and I can see that he does quality work, he’s a great craftsman, but he’s not a great businessman so to speak. And those guys are harder to find, you know, you have to maybe burn through a couple of them or even fire a couple of them, you know until you find good ones and if you find good ones, you know, try to keep them happy.

Sean: [00:40:41] Yep, great advice. So what’s next for you?

Jake: [00:40:45] I’m just going to keep focusing on what we’re doing now. Like I’m not ready to, you know, graduate into other things yet, so to speak. I want to get better at marketing. I want to get more efficient with it. I want to have better processes with the construction like I mentioned with my project manager. I want to automate that more. I want to delegate more and a lot of what I’m going to be focusing on to is once I start having things more automated, I want to do more educational things. So I think that’s still a huge component of my growth is not doing different types of deals, so to speak, I mean that’s important to, like, but I don’t need to do a new construction home just to learn from that and say I did it right now or go buy a 30-unit apartment complex. Although if I found a great one, I would buy it, but I want to, like, I did Chris Porto’s developer academy, which I think is great. That helped me learn about zoning and code and all these other things that are important, and I’m doing a probate mastery course right now and I have a coach who I’m going to work with for a year who’s going to help me with public records and understanding how to find deals that way and I have another coach who is helping me with like subject 2 and owner financing. That way I can incorporate that in my business. And next, I want to do an appraisal course, I make it my appraiser’s license, I’m not sure, but that helps me understand how appraisers look at properties and I just want to continue that personal growth piece. Well, I guess it’s not personal business growth I guess personal development. So that along with automating my business is just continue getting educated.

Sean: [00:42:26] Yes, self-education is very important. All right, cool. That’s all the questions I have for you today. Do you have any last words for our listeners?

Jake: [00:42:34] Well, I just want to thank you for having me on the show first of all, but also if anybody wants to get started, I’m looking for I’m looking to raise additional capital at competitive rates and in exchange for basically getting mentored even though I’m not, you know, a 30-year vet in this business. I’ve done enough and learned enough that I can help you get started and take those first steps and kind of steer you away from doing the wrong things. So I’m looking for people who want to get started, have some capital to invest and I’ve already done this with a few of my private lenders and it’s worked out well for them and me. So if anybody’s looking to do that, please reach out to me, I’d love to talk to you about that.

Sean: [00:43:14] And how can people get in contact with you?

Jake: [00:43:16] The phone is the best way, text or call me. My number is 510 220-0712, please reach out.

Sean: [00:43:26] I think this is a pretty great opportunity. There are a lot of people who listen to the show who are relatively new in the business. They have, you know, full-time jobs and they have capital and they want to get into real estate investing but just like you said when you first got started and you saw these like cotton sheets videos, but you had no one else in your network who is doing it, it was like, okay I have all this information, but I’m not going to do it, but they work with you, now they get experience.

Jake: [00:43:50] It’s yeah, it’s hard to find a mentor, you know, somebody who’s like super busy, who’s been doing it for a long time. It’s hard to offer them value to mentor you. So I’m kind of in that state where I know enough to not kill myself in this business and to be able to pass on a lot of value and be willing to do it and actually share important things. There are some of the guys who are some of the people not guys, but they’re you know, they’ll open up but it’s not really like strategic content, you know, it’s kind of the same stuff you can find anywhere. So I want to be more strategic with anybody who wants to work with me.

Sean: [00:44:23] Yeah, like a one-on-one basis, kind of like boots-on-the-ground learning it on the site is very valuable. I hate it when people just have like a course and then you’re also just left to your own devices to figure out how it works.

Jake: [00:44:37] Yes. Exactly.

Sean: [00:44:38] And I mean even for your case, you’re not actually charging them for coaching right? You’re just saying, hey, invest in my deal and you can be you know, walking around to be a part of learning experience.

Jake: [00:44:46] Just yeah exactly. Just invest in my deal. I’ll give you, you know, a dedicated time. We’ll figure out what works, schedule-wise and you know, you can see exactly what we do and I’ll answer any questions you have, and show you what resources we have, what marketing systems do we have, what vendors we use, basically everything.

Sean: [00:45:06] Cool. I mean sounds like a great opportunity for someone who wants to get started.

Jake: [00:45:09] Yes.

Sean: [00:45:10] Awesome. All right. Well, that’s all I have for today. Thanks for being on the show Jake.

Jake: [00:45:14] Thank you for having me.

Here are some of the key takeaways I got from Jake. You need to take action. He knew he wanted to be an investor 20 years ago, but he didn’t commit until just a few years ago. No matter how time-constrained you might be, you can always dedicate a few hours a week into your business. So handwrite a few letters, drive for dollars, send text messages and cold call people. If you’re looking for a mentor or guidance, it’s hard to ask a person directly to be your mentor, so find some ways to add value to them.

And when it comes to finding deals, focus your marketing on ways that pull them in rather than you pushing your way in. Be more resourceful and focus on your lead generation system that will let you cherry pick the deals and if you’re looking at getting experience with real estate investing and you don’t know where to start, take up Jake on his offer. By investing his deals, he’ll help you get started and we’ll share his wealth of knowledge with you. I mean seems like a pretty good deal and one that I wished someone offered me when I was just starting. Hope you all learned a lot. Thanks, and have a great day.