“I know exactly what to say how to negotiate because I want the highest and best for the seller. And I’ve been in their shoes way too often.”

Leka Devatha obtained her broker’s license in 2017 and became one of the Top Producing real estate agents in her office. She also serves as an advisor on the board of certain lending, a FinTech company based in San Francisco, San Francisco, she enjoys inspiring and motivating other entrepreneurs to build successful businesses.

 

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Flipping Homes In Real Estate Investing with Leka Devatha

 

Brett: 

I’m excited about our next guest. She moved from the US to US from India 13 years ago. She quit her corporate job at Nordstrom in 2014 and started re habitat homes. We have it homes, rehabbing homes apologize, a company focused on residential development redevelopment. After a string of successful flips. She obtained her broker’s license in 2017 and became one of the Top Producing real estate agents in her office. She has now flipped over 40 homes and has expanded her focus to include land development additions, acquiring long-term rentals both in state and out of state. Her strength is in finding creative exit strategies on every deal. She also serves as an advisor on the board of certain lending, a FinTech company based in San Francisco, San Francisco, she enjoys inspiring and motivating other entrepreneurs to build successful businesses. And for this reason, host a monthly meetup real estate at work to bring new and seasoned investors together. Please welcome Leka to the show. Hey, Leka please pronounce your last name because I’m not gonna miss that one up again.

Leka:

It’s like Leka. Thank you for having me, Brett.

Brett:

Excellent. Welcome to the show such a pleasure. Would you give our listeners a little bit of your background in your current focus?

Leka:

Yes. So I moved back, you said I moved here from India back in 2006. And I had a pretty successful career in fashion merchandising at Nordstrom, corporate. And then in 2014, you know, I’ve always been an entrepreneur my entire life, and just working for someone else was not satisfying at all, in the least bit. And so I said, Okay, let’s take on this big bad world of, you know, finding a new career path. And doing something that really excites me, motivates me inspires me. And that’s kind of how real estate fell in my lap. And then as I started researching it, I really want to do new construction. But then I wanted to keep it simple when I first started. And that’s how the whole fix and flip strategy, was discovered. And I started flipping homes in 2014. And since then, I’ve flipped over 40 homes. I’ve done land subdivisions, additions. And I’m on the board of a lending company. I did get my broker’s license sold over 10 to 14 million in real estate transactions in three years. And I host a Meetup group, which is where I met you, Brett.

Brett:

Awesome. Exactly. Thanks for that overview. And before we dive into some of the strategies in the way you do the fix and flips and, and work with private lenders and such, I want to back up I want to go back to maybe the days before you moved to the US. And I believe we’ve all been given certain God-given gifts and these gifts are used to be able to be used to be able to bless other people. So I’m curious, what was the gift that you believe you were given? And how does that help how you help people today?

Leka:

Ooh, deep question. Okay, so I think from very early on like I was 10 or 12, I came up with my first business idea. And so I and I had, I started my first company, actually, when I was 18 years old. And since then, I’ve just been hustling. And I feel like one of my biggest strengths is, you know, my ability to network and find the right people for the job that I want to get done. And that really honestly has helped me too. My career in real estate investing and even today, when I host a meetup group, you know, I’m happy to help people kind of recognize their own strengths to be able to put forward the best foot and you know, achieve their own, like financial goals or whatever that may be. I do a lot of zoom calls with people these days. And it’s really exciting to see, you know, what, what plans people have and how I can help them achieve it.

Brett:

Excellent. So yeah, networking, connecting and then helping to inspire, identify strengths for people, so they can take the next level up and whatever, whatever endeavor they’re going into. Fair summary?

Leka:

Fair summary.

Brett:

Excellent. Awesome. I love that. That’s an amazing gift. And I can tell you’re using that so well, because exactly, right? I don’t go to many meetups, but for whatever reason, I was like, I want to be on this meetup. You know what I mean, and the people you had, and it was fantastic. And so I highly recommend those meetups. Now let’s dive in a little bit about strategy now. And what you’re seeing, we’re in, we’re in the middle of you. So maybe the later innings of COVID, in some ways, the stock market has recovered the economy remains to be seen what’s going to happen here with real estate values, election coming up. But all that being said, walk us through what you’re seeing on the ground, especially, I think you’re doing a lot of your deals in the Seattle market. What are you seeing for fix and flips and opportunities and walk us through a kind of like an average deal right now?

Leka:

Yeah, so basically, like what I’m seeing in my market, which is, you know, the greater Seattle area, is that we are starved for inventory. We have 3000 fewer listings this year than we did last year. And, you know, it’s because people want to live in their homes, they don’t want to move to condos, or like townhomes or apartments. So they’re just hanging on to their homes. And so we just don’t have the inventory to sell anymore, which makes what we do have extremely popular, and we can’t keep it on the market like I put a house on the market. And within five days, we have a solid above asking offer. If you’re doing fix and flip in this area, I think you’re in very good shape. Going into the fall-winter timeframe. And you know, with elections and just a slower market, we’re going to see a massive shortage, because of a supply shortage. So honestly, it’s all about the listings and trying to find those deals that you can put back on the market in the short term. Also, having said that we’re expecting a pretty hot spring market. And I mean, in this area too, through COVID, our markets went up 35% because we’re a stock, heavy sea stock heavy state. So you know, it just hasn’t slowed for us. And that’s what’s like, really surprising is that our stock market has been hot. And our real estate market has also been pretty hot.

Brett:

I’m curious about two different angles here. So one of the things like real estate investing and finding deals, the other one is, I presume, and maybe correct me wrong, but you’re still a realtor, you’re still helping, if clients or friends or family want to sell, you’re going to sell. But this low inventory on both sides of things probably makes it more challenging to not only find a deal, which makes sense to be able to fix and flip and or even list properties because there are just fewer deals to sell because people aren’t selling.

Leka:

Yeah. So I would say I’m pretty fortunate in both areas. I do have some solid wholesalers that I’ve networked with that I bought deals from like for the last six years, that I still can find incredible deals, I’m actually just closing on a four Plex, in the sub-market of Seattle in the next couple of weeks. And I bought that off-market for a killer price. So I am still able to find really good deals, they are fewer now for sure. But they are still out there. The second piece is me being a broker, I have like I don’t market myself as a real estate broker by any means. Because what I do is focus on investing and helping people invest. So I do although through word of mouth, have a lot of friends and family that come to me that want to list their properties or their secondary, like their investment properties. And so I do have a full plate. In fact, today we had our Keller Williams sales meeting and I’m like the top listing broker in my office. So yeah, that’s totally surprising, but I do have a lot of people that come to me and you know, I’m able to produce results. So I think that helps.

Brett:

Absolutely and I love that right because I think you bring a unique perspective. In that, you’re investing and you’re buying deals and you fix and flipping, right? And so you’re on the front lines. And so and it’s also second when you don’t need the listing, listings tend to be attracted to you, right? Because of your value and your expertise and your attention to detail. And everything else that you’re doing. I absolutely love that. By the way, I’m a commercial real estate broker myself as well. And this is how I got started the business that Marcus and Millichap and then learned about capital gains tax deferral strategies and such. And likewise, I see as one business grows mine for capital gains tax deferral. It’s like my value proposition grows, right? I’m more of a leader. And then, therefore, this grows as well. And so this is similar with you as well.

Leka:

Yeah. Oh, my God, I used like, literally hit the nail on the head, cuz I don’t think many brokers and this is sad, but a lot of brokers don’t understand the essence of the home. As I can, I mean, through my investing journey, right. I know everything from the foundation up, what’s behind the walls, insulation, drywall, plumbing, electrical. And I think people don’t understand that as real estate brokers, we all need to know, just how the home’s built to be to better educate our clients. All when you’re listing, right?  What are some of the important things, you know, sewer roof, water lines, those are what make the house anything cosmetic that can be fixed easily? But it’s like the foundation, everything under it. So I just feel like I do bring on a massive value proposition where I can educate like, another broker that is not necessarily investing themselves can. So yeah, you’re absolutely right.

Brett: 

Yep. And you only get that through to the experience of buying the stuff yourself rehabbing the stuff, you’re going behind the walls, right, growing up on the construction site with my dad in the Bay Area, we have built house houses from the ground up, right? And you get to learn the sticks in the bricks and everything that goes into it. And as for you, it’s like learning the language, right? I imagine if I went to India today, and I didn’t know how to speak the language. Good luck on trying to do you know, so in the same sense, if you don’t know the language of real estate, and what is it that makes up a deal or not? Are the things to look out for? You’re going to be, you’re going to be one step behind if that’s a fair summary.

Leka:

Yeah, I mean, and then also like, just as a real estate investor, I have sold a lot of my homes with other real estate brokers. And oftentimes, I’m frustrated that they don’t know what I want, as the seller, but they’re not going to bat for me. And so when I take on someone else’s listing, I know exactly what to say how to negotiate because I want the highest and best for the seller. And I’ve been in their shoes way too often. So I go to bat for them.

Brett:

I’d hire you tomorrow, if I’m selling my property in Seattle as I know, you’d be tough and smart and on it. So I love that. Okay, so now let’s shift back to some more deals now. So maybe give us the last deal you’ve done or an upcoming deal that you’re doing and walk us through some of the average returns.

Leka:

Okay, the last deal I’ve done, in fact, I’m getting my building permit this week. So this is a crazy deal. I bought this house in 2018. It was a 3200 square foot home. And it was weirdly shaped in the sense that it used to be an adult family home. And so when I bought it, I didn’t know anything about assisted living, or Dell family homes, or anything. And so I bought it and I was like, I’m going to convert this back to a single-family home. So that’s what I did, I converted it back to a single-family home. Just as I was about to list the property. Now that whole rehab process should have taken four months. But it ended up taking a year because permits just got caught in the city. And we know, the city is a tough city, the city of shoreline, this is a submarket of Seattle. So it just kept getting, you know, delayed and we ended up spending a year just in the remodeling phase. So in 2019, I’m about to list this house and then I find that the highest and best value is really to convert it to an adult family home. So, you know, convert the garage, add two bedrooms, put on an addition. So add a couple more bedrooms, and then I could rent it to a provider, you know for an adult family home situation, and rent out the addition to senior living. Now, this property has three kitchens, 10 bathrooms, six bedrooms. So fast forward to today. I did get a permit to add an addition, early this year. That was another process because another eight months to get that permit and I finally unfinished construction, then realized that the addition had not enough storage capacity. So I had to put in a brand new sewer line. And I am having to asphalt the entire property. So unites a lot of challenges. But here are the numbers, I bought this deal for 575 I have since put in about 300 grand into it, the property is now worth about 1.4 the rental income on this property is about $10,000 a month. So, you know, just in positive cash flow, that’s like four grand a month, plus all the equity, you know, that you know the building now can sell for? So was it challenging? Very, it took up two years of my life trying to figure this deal out. Is it worth it in the end? Very. So that’s just one of the deals that’s just you asked what my last deal was? That’s my last deal. You know, and do five of those. And that’s enough to lose your mind.

I just feel like nobody's dispensable and that's why I still work really hard. I don't take anything for granted. Click To Tweet

Brett: 

Great. So thanks. Make sure I captured it here. So is a 3200 square foot house, adult senior living, right. And so this is where folks come in, and they help take care of folks. It could be I don’t know if it’s memory care, or if it’s assisted, or what level of services. And I said, Okay, great. And then 575 is what you bought it for? You put 300 into it. So you’re in it for about 875. It’s worth about 1.4 million now. But the cool thing is it’s producing 10,000 a month and rent and then you say after expenses, is that about 4000? Is that what you were saying? Okay, so 4000 is kind of like the net cash flow that’s coming in, took up two years of your life, but it’s worth it, and here’s why. Because now that knowledge you have that expertise that people don’t have or are willing to go through that pain or the challenge and the perseverance. Now you can take that perhaps even scale. I know personally, I’m invested in a senior housing member here memory care assisted living facility in Elk Grove ground-up development, it’s actually a group out of Washington. Wonder if you know him. And they’ve done about 39 projects in about eight states to catch senior living, if you heard of them. But yeah, so maybe I’ll make some connections there. But regardless, I love the business model, because the incomes are so high, right? And you’re providing such a service for seniors who need the service, and a fantastic way of producing massive amounts of cash flow for the low downpayment, I’m curious how much of a down payment you put into it.

Leka:

Um, I think by the time I’m done with this, I’m gonna have like 150 k into the project, and I’m gonna keep it there.

Brett: 

Love it, beautiful. I love it.

Leka:

I mean, you raise another important topic, which is assisted living and senior care, and memory care, I just feel like going into the next 10 years, five, even five to 10 years. We like I know, a lot of people have heard of the silver tsunami, I feel like we’re gonna get hit with it pretty hard. We are going to have an aging population and not enough people to take care of them. So and then through COVID, we’ve seen that hospitals are not the best situation for someone that’s older. So assisted living, like smaller group homes, is so much a need in our country that I just encourage everybody to think about it to do something about it. You know, if you’re going to flip a home anyway, make sure it’s assisted living friendly. If you’re going to buy a multi-family anyway, make sure it’s senior living care.

Brett:

Yeah. Love that. Absolutely. Yeah. Do your part and give back especially for all of our parents. Right. And yeah, and this huge amount of need. There. Love that. Okay, awesome. Appreciate that. Um, what’s the biggest mistake you or a client or partner has made when it comes to capital gains tax deferral?

Leka:

You know, I think flipping as many homes as I did, and not doing anything about it for so long. I wish I had known about the capital gains tax deferral, like way back, when am I clear? Brett, I met you about five years too late. So I just feel like you work so hard, it’s important to kind of safeguard your money and do something about it.

Brett: 

Absolutely, yeah. And that’s what she’s referring to is the deferred sales trust. And I learned about it in 2009. And it was about three years too late, four years too late for like my clients who had done the 1031 exchanges and overpaid for the property had too much debt, the market crashes, and then they got a lot of them either lost everything or lost half and have a note about the deferred sales trust, they wouldn’t have to have done, you know, overpaid for the property. And so the good news is that we know about it now and after 1000s of closes 25-year track record with the tax attorneys that we work with, you can now do it right and you can help your clients do that. By the way, it works for high-end primary homes too. So as you’re a realtor, a Keller Williams selling houses, it works for primary homes, which 1031 does not work for, right? So we just did a deal in Cupertino, California, it’s next to the Apple headquarters. And she sold it for 3.1 million. And she deferred about $380,000 above and beyond her 121 exclusion, which essentially is if you live there to last five years, and you’re single, you get a 250 exclusion on the game, or 500 if you’re married, and so she learned about the deferred sales trust, she’s on multifamily properties for 20 plus years, and she used it for the first time. And so it really is an amazing way not only for you to help your clients but also for getting more listings as well, for real estate who are listening. That being said, What’s, after building your net worth and buying this real estate, right and doing these fix and flips? What’s maybe the best-kept secret that most people don’t think about when considering getting into the fix and flip business.

Leka:

I would say really evaluate two exit strategies. Don’t go into a fix and flip thinking that it just needs to be a fix and flip like, look at the land around it. See if you can subdivide that. See if you can add on square footage, you know, see if you’re just going to fix and flip back what is the best like me recreate a mother-in-law in the basement or additional income-producing strategies and you can add to this or this home. That’s just going to open it up for that many more people to be able to afford it.

Brett:

Excellent. So be a little more creative in your exit strategy, not just come in there and just fix the bones or put some lipstick on it right but actually look at additions. Look at Yeah, repurposing it to like an adult senior care facility, something elsewhere you can get more bang for your buck, as you’re saying?

Leka:

Yes, absolutely.

Brett: 

Awesome. With that being said, Are you ready for the lightning round?

Leka:

Okay, didn’t know that was coming.

Brett:

It’s coming fast. And it’s coming right now. Are you ready? 

Leka:

I’m ready.

Brett:

All right. So knowing what you know now if you could go back to your 25-year-old self? What’s the one Golden Nugget that you would make sure you would do?

Leka:

Oh, I would say just be confident. You’ve got it, you’re going to be able to deliver and all those times when I said oh my god like I don’t know what I’m going to do when I’m you know, 30 or 40 whatever it is, right? I just know, be confident you got this.

Brett:

Absolutely right. And you’ve got to start, you gotta go, right? You can’t just think right about it and rethinking about it. So I love that. What’s the one book you’ve recommended in the past year or gifted the most in the past year?

Leka:

It’s The rental property investing book by Brandon Turner. That’s the one book that I give the most that I’ve I highly recommend for anybody, especially if you’re just getting started. 

Brett:

What’s it called again? One more time.

Leka:

It’s a great book. It’s The book on rental property investing.

Brett:

Got it. The book on rental property investing, beautiful. Brandon Turner is fantastic and BiggerPockets is fantastic. For those who don’t know about it. Check it out, biggerpockets.com. Give me mobile or digital resources you recommend for your business?

Leka:

I would say Dropbox.

Brett:

Yeah, pretty simple, right?  And that’s, you can store it.

Leka:

Yeah. keep yourself organized.

Brett:  

Beautiful, favorite leadership quote or theme that you strive to live by?

Leka:

Oh, it’s the MLK quote. And it goes like, if you can’t run, then walk if you can’t walk, then crawl. But by all means, keep moving.

Brett:  

Love it. Speaks for itself. What are you curious about right now?

Leka:

Self Storage. Just because of the potential. I have some awesome friends that have done it over the last few years. And they just did their business models and then the profit comes out of creating a self-storage facility. It’s incredible to see what they’ve done with it. And I’m just curious. I want to learn about it. And it’s an exciting space for me.

Brett: 

I’m gonna send you a deal after this call. Okay.

Leka:

Oh, sweet. In fact, this is like the gift that keeps on giving.

Brett: 

Hopefully, it is right. Yeah, I’m gonna save you on your taxes on your fix and flips hundreds of 1000s of dollars. I’m gonna give you some storage facility and then we’ll help you grow your Keller Williams business by getting more listings for high-end primary homes.

Leka:

Oh my god. There you go.

Brett:

Come on now. All right, so last question here and then we’ll remind listeners where they could find you. So after all your success and all the people you’ve helped and all the deals you’re doing, absolutely love it. How do you stay centered in your values? And then how do you stay urged to reach for new heights.

Leka:

I just feel like nobody’s dispensable and that’s why I still work really hard. I don’t take anything for granted. And I totally spaced. What was the second part of the question?

Brett:

That is great. How do you stay challenged? Or how do you stay encouraged to charge forward for new goals after all your success, why you like, you climb this hill and you achieve success, you achieve more success, and what keeps you going for that next mountain to climb?

Leka:

Okay, so that’s a big, big, big part of my life is I’m never satisfied, which is really sad. But it’s also beautiful in a way because I’m always looking for that next big opportunity. Like assisted living, for me was a huge opportunity. And I learned so much about it over the last year. So to be able to do something in that space is amazing. But now I’m talking Self Storage, apartment investing. So there’s all of these like different asset classes have steep learning curves. But for me, that’s what’s exciting is not the challenge that it possesses but more, the exciting factor that, hey, this is another piece of investing or whatever it is that I can learn abroad. I think that’s what’s super fun, and super exciting for me.

Brett:  

Absolutely love it. Thank you so much for sharing. And I want to give you the last word here, and then would you also remind the listeners where they can find you?

Leka:

Yes, you can find me on LinkedIn or Instagram. My handle is like a data my first and last name. Happy to connect, happy to motivate you. And I can tell you about all the horror stories that I’ve gone through in my investing career. And hopefully, that will help you not make the same mistakes, but also just empower you to know, network, and connect and really take this on, because it’s so fun.

Brett:

Love it. Well, thank you so much. And thank you for using the gifts to bless others that you’ve been given. And it’s such fun this is I love the conversation we had and I’m sure our listeners did too. So please keep using those gifts to bless other people. And with that, I also want to thank our listeners for listening to another episode of the capital gains tax solutions podcast. As always, we believe the highest net worth individuals and those who help them struggle with clarifying their capital gains tax deferral options, not having a clear plan is the enemy, and using a proven tax referral strategy such as the deferred sales trust is the best way for you to grow your wealth. Please share the review rate, this shows we so appreciate you. Please go bless others today and we’ll talk to you real soon. Thank you so much.

 

Important Links:

• Leka Devatha
• FinTech
• Keller Williams
• The rental property investing book
• Brandon Turner
• BiggerPockets
• MLK quote

 

About Leka Devatha

Leka is a real estate developer and broker based in Seattle, WA. She moved to the US from India 14 years ago. In 2014, Leka left a corporate strategy role at Nordstrom to start Rehabit Homes, Inc. a company focused on residential redevelopment. She has since spearheaded hundreds of transactions, developing over $50M in real estate.

Leka has been featured on numerous podcasts and other media including Business Insider and BiggerPockets. She was also a chapter contributor in the newly published book ‘The Only Women in The Room’. In an effort to give back to the community, she hosts a popular virtual networking mixer – ‘Real Estate At Work’.

 

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