Elisa is a real estate investor in the Bay Area who left her nine-to-five job to make seven figures house flipping. She started in 2017 and has been working in real estate full time for 2 years. In today’s episode, we’re going to catch up on what has changed in her business the last year and her tips for new investors on how to become successful in the business.
Elisa still did the same number of deals she did before, but she started to be more selective and looked for the best deals with the most profit. She prefers a 15% profit margin on all the money invested in the deal including hard money costs.
Her deals have also become more complicated and more complex. Before, she used to do shorter projects and did cosmetic renovations. Now, she’s doing renovations that needed plan approvals from the city and involved converting bedroom sizes and garage conversions.
Elisa likes to be conservative with her numbers when she’s entering new territory. She makes her computations based on the worst-case scenario to give herself more room should the project take longer or cost more.
She also does her comparisons with other properties located a quarter-mile radius from her project and looks back on the prices they sold for a couple of months back.
Elisa gets 100% of her deals from agent referrals. She thinks a lot of investors are not good at keeping the promises they made to agents. So she recommends proving that you’re trustworthy and don’t ask for kickbacks.
It’s important to plant the seeds and cultivate the relationship over time by always responding to their emails and giving them feedback. Little by little, they’ll trust you more, and you come upon their list.
At times, a listing agent brings a deal to Elisa exclusively. So how you handle the relationship really counts.
However, since Elisa is conservative with her numbers, she ends up turning down a lot of deals, which later affected her relationship with the broker who brought the deals.
As an investor, you still need to minimize your risk and keep your business running.
For the most part, an agent would bring her one or two deals a year. Since her pipeline is already full of four ongoing projects, she doesn’t need to expand her network.
In 2019, Elisa took over a house while the market was declining. On top of that, the house was across a school and the neighbor’s house was in bad shape. The neighbor was making demands from her, so she had to take the house off the market and remodel the neighbor’s house for free. It took 6-8 months of stress before she was able to sell the property at break even.
Going forward, she plans to be more careful of the surroundings and be more aware of where the market is, so she wouldn’t offer much rent back if the market is slowing down.
Elisa did her first garage conversion deal in San Bruno, California. She paid $1 million on it and made over $300,000 in margin because she underwrote her deals very conservatively.
She also enjoyed playing with the exterior colors, which the buyer ended up loving.
The whole permitting process got a bit complicated because the city commented on the plan drawn up by their architect and said that there was an encroachment in front of the house where there’s a small retaining wall. So they also needed to get a permit for that.
The project took 4 months to complete. She put in $180,000 in renovations. The garage conversion part cost only $40,000, but it added 300 square feet and over $100,000 in value.
The permit for the garage conversion took 3 months. But Elisa got a permit to remodel the kitchen and bathroom first, so they could work while waiting.
Elisa has been getting active on social media. She uses her Instagram to educate people to get started in real estate investing. She’s also in the process of building her YouTube page.
Elisa picked up a 1,400 square feet, 3-bedroom, 2-bathroom house in San Jose, California. She realized that it could be a good rental property and got an Airbnb expert to set it up. Even in winter, it has a 98% occupancy rate and brings in over $7,000 every month.
If she had put the property for lease, she thinks she would have made only $4,500-5,000 a month.
She’s planning on adding an accessory dwelling unit (ADU) to add a 2-bedroom stick-built home on the property since the lot is over 6,000 square feet. Each bedroom would have separate entrances, separate kitchens, and it’s own bathroom.
Installation costs range from $70,000-100,000 with upgrades adding another $100,000.
She estimates that the ADU could make her $6,000 a month.
Elisa believes the real estate market isn’t as volatile as the stock market. In previous epidemics, the prices were not affected a lot. The number of sales had dropped, but the prices were holding up.
Usually, when a buyer is looking to buy a home, they are not looking to wait for months or years because they have that need.
The pandemic isn’t affecting her business as she even closed on a deal two days ago and is closing another one next week. But it is slowing down the city process. Also, since construction is deemed essential, construction in her projects is still ongoing.
She thinks you just need to be more cautious when buying deals.
Consistency is a big thing. Real estate is a numbers game, so it takes a lot of effort. New investors should be sending out lots of mailers and talking to lots of agents.
The agent business is very personal. Elisa tells agents that she has the funds and wants to buy multiple houses. She also asks to meet with them and that impresses them.
Since we’re facing a tricky time due to the pandemic, it’s still better to not do a deal than to do a bad deal. Bringing in an experienced investor to look at the deals would be great if you’ve never done a deal before.
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