Dave:
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.

James:
I’m excited and I get to walk you through your first

Dave:
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.

James:
And I love when I teach a long-term hold and a passive investor how to flip. Like why was I hating on this for so many years?

Dave:
I feel like I’m going to have that revelation at the end of this. But actually I should explain that we kind of already teased this out. Just to set this up, James and I co-host work together 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 Ecky 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 yeah, 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 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 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.

James:
All right Dave, I’m late night creeping for you. I think this house is a winner. I’m going to lock it down. 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 2 50, 300 depending on how nice you want to do it. If you want to build to the coughs, you’re probably two 50. Alright, so up here we’ve got two beds and a bath and then you got a basement going in the basement. Creepy. Creepy. That’s 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 chops. There you go. Good ceiling height. Yeah, this is a buy. I’m going to lock it down. We can talk about it later.

Dave:
Alright, so you heard James’s 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.

James:
Well, and that is the thing you guys time kills deals. I got a phone call on this at seven 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’ve had it the next day.

Dave:
Really

James:
When you have a good piece of property, and this is why I got so excited about this one. Soon as I saw the address I was like, oh, this is in a prime class, a neighborhood of Seattle. 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.

Dave:
Give me just a high level overview. We bought it for 8 25. How much do you think we’re going to put into it and what can we sell it for?

James:
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 when I sent you off those comparables, they were conservative too as flippers. This is a high risk business. You don’t want to go for that outlier comp, don’t chase the star, go for the cluster.

Dave:
Oh that’s a good term. Did you make that up?

James:
I think I just made that up right now.

Dave:
I like that. Yeah, you want to stick to 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 a comp gets repeated several times, it gives you some more confidence.

James:
And that’s what we’re looking for is patterns. What is the averages? And so when we sent off the comparables, we had a range of ’em. They were anywhere between one four for houses that were seven, 800 square feet smaller all the way up to 1.6 and maybe even a little bit higher.

Dave:
Yeah, this is when I got pretty excited about it. The first comp was a four two, 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 I went over there and it’s a really nice block, a really walkable neighborhood. 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

James:
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

Dave:
Within your buy box? Is this what you would consider a good deal, standard deal, thin deal?

James:
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. 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 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 that 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.

Dave:
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 burrs, I’ve done rental renovations, but I haven’t really done a full house makeover. I was really worried about it. This is what has kept me out of flipping, but this house, what do you look for that makes you feel like this is lower risk or worth that considerable investment and signals to you that this construction plan isn’t going to be overly complicated or costly?

James:
What makes the house good or not? Or what makes it complicated? 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.

James:
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, one of my concerns was it was an old house, nearly a hundred years old, do we have to reframe the entire structure because sometimes your bottoms, 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 call a six out of 10. There’s a lot of good walls and spots they should already be.

Dave:
So you don’t have to shift things around,

James:
Not very much. We are going to open up 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.

Dave:
Even when I went over there and I don’t have as much experience, you could tell the bones and the layout were solid. 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.

James:
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.

Dave:
I love to hear it. That’s great. Alright, 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.com/house flipping yt. We’ll be right back.

Dave:
All right, thanks for sticking with us. Let’s jump back into this conversation about me and James flipping a house together. 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. I think this is something that’s going to be really applicable to everyone here. But before we do it, just what’s the update? Where are we in the process right now?

James:
Okay, so we closed on this property about a month ago, roughly?

Dave:
Yes.

James:
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.

Dave:
Oh, I’ve done this for rentals. I am used to the abatement. I know this game

James:
That usually will freak people out too asbestos. And I’m like, just don’t eat it and everything’s fine.

Dave:
It’s scary that stuff if you look into it. I don’t want to mess with that. You hired the pros. That’s what I would do. But I understand people, it’s very

James:
Expensive. It can be, but you got to price it. So we probably have the cheapest asbestos removal guys in the state doing our baby.

Dave:
Oh, nice.

James:
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. Oh, nice. Starting next

Dave:
Week. And I think you said when we were talking the other day, you think from permits it’ll be four months to completion, right?

James:
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 ’em five and a half months and four months is going to be the goal. And that’s something I will talk to you about once we are locked into a date because I also like to throw bonuses at the contractor if they hit that day for sure.

Dave:
I do want to turn to 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 this through this game, we were playing on the market and just being in this industry long enough realized that 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 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 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.

James:
We bring on partners to give us more purchasing power

James:
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 they 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 anywhere between 10 and 15%, two points, depending on how much leverage it is. But then as the operator, I’m stuck paying debt that whole time. And this is a game of cashflow too, because when you have 30, 40 projects going on at a time, I think our average monthly payment for hard money right now is probably, we probably pay 250 grand a month in interest payments,

Dave:
250. Damn.

James:
And so we have to pay attention to that. That’s a wave. And so when you bring in a partner, so instead of bringing in debt, a lot of times bringing in 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, I’m responsible for sourcing the deal, running the project, taking it through the execution, the operator and your job is to wire me the money that we need and it works out really well because we don’t have to worry about cashflow because our investor is the person bringing in the capital. The negative thing is as an operator, we’re paying out more.

Dave:
You’re giving up upside.

James:
We’re giving up upside. And also the cash on cash returns that we get on our flips are a lot higher than what we can borrow money for at 10 to 12%.

Dave:
Right? Right. Yeah, you could leverage it more and earn a higher cash on cash return. Yes. But I guess the counter side 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 would get left holding in the bag, whereas this time if something went bad, we would split the downside and it would probably hurt less, right?

James:
Correct. So Dave, we’ve done some lending stuff together too, and 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 beginning on this deal, when I sent you over, we looked at the comps, we looked at the purchase spread, we looked 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 on a risk. If we hit, let’s say the market crashes tomorrow, you’re going to be in the red too

Dave:
For sure.

James:
And so 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 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 ’em in multiple different types of revenue streams. So they do well in the long run.

Dave:
That makes a lot of sense. And I mean from my perspective, it’s great. 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 giving 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 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 learn how to flip firsthand.

Dave:
We’re back. Here’s the rest of my conversation with James Dard. 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 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 have banks that you can use. What is the ideal equity partner for you? Because I would imagine there are other people like me who want to invest passively in these types of high upside value add projects, but don’t really know how to structure and strike a partnership with an operator.

James:
In the Pacific Northwest, we run eight different businesses and they take a lot of time and management. And the thing that I’ve learned in our 20 years of doing this is too many cooks in the kitchen’s a bad thing. Too many opinions 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 mind. They need to also understand risk. We do not sell fairytales. I mean Dave, me and you have talked about, I’m like, yeah, everything can go bad. You could lose all your money.

Dave:
Yeah, I know that part of the game.

James:
And that’s important in this agreement and partnership, I would say never take money from someone that doesn’t fully understand what they’re getting themselves into. And so we don’t want someone in the background trying to 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. 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

Dave:
And everyone has to have a different job. Whether it’s a flipper or business, you should specialize in what you’re good at. My specialty here is just why are you muddy that never directing anything, just asking questions about what to learn. The way I think about it is you’re sort of going on a ride. Have you ever been skydiving with a tandem person?

James:
No. I was supposed to go four times in a row and it got canceled for weather four times in a row.

Dave:
Oh my God.

James:
And then I took that as a sign that I should not be going, does

Dave:
Not do it. Okay.

Dave:
Well the reason I always think about it this way, because 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, 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 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 you 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.

James:
No, it just gets like I’ve invested with Kara Beckman that on some projects and she’s like, wow, you’re the easiest partner. I’m like, cool. Cause 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 it. 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 and why? Because as an investor like Dave, I may not want you to participate, but you still need reporting for sure. 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 and picking the right people who you partner with is essential.

Dave:
Totally. Yeah. The way I sort of think about it is when you invest passively, whether this particular deal or when I invest in a fund or in a syndication, you’re agreeing with the operator to a business plan. There’s a lot of conversation upfront about 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 are we on track or are there deviations to that agreement? And if everything’s on track, I don’t really care.

James:
You have to trust your partner, 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.

James:
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. When we decided to partner on this house, I had already closed on the house, so I funded it, you back 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 in a joint venture agreement, you could write in that you could ask accounting for a forensic audit every week if you wanted to.

Dave:
And you would’ve never taken my money if I asked for that.

James:
No, I’d be like, I’m going to send you my accounting bill too. But that’s why it’s so important with the clarity 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, it’s just the deal went bad. That’s hard, right? Because trusting that process, you’re trusting the market, but the clarity and the paperwork, that’s why you always have to have, don’t jerry break the thing. You have to have the right paperwork because that’s protecting your money.

Dave:
I mean, even if deals go well, you need to have that right? You need to have everything laid out on every one of these partnerships. And luckily for me in this deal, 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 in my opinion, is making sure that everyone has not just mutual agreement, but incentive alignment that we both win when there’s upside and we both lose sort of at a proportionate rate if there’s a downside. And that way, no matter what happens, win or lose, everyone feels like they’re treated fairly and that they got a fair shake. And 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.

James:
We don’t look at per deals, we look at people as long-term partnerships. Interesting. And it just, we’re okay doing that because yeah, we’re also making a return. And that is the benefit of an operator when bringing in equity. You don’t have as much risk in the deal. Because I see a lot of investors, they rush in and they’re like, I just partnered with this person. And I’m like, oh, cool, how’d you meet? I just met him a meetup group. What deal did you buy? I don’t know. They had good numbers. I was like, where did you look at the number? And then I get curious, how did you vet the numbers? And they’re like, oh, well he’s just done this a lot. And I’m like, oh no. And maybe they have, but you have to understand what you’re sending money on.

Dave:
Oh, totally. Yeah. That’s scary because numbers, I mean, investing is about assumptions. 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.

James:
And that’s getting to know your operator before you fund them. How do they look at investments? 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 performa and you’ll look at three deals from ’em and you’re like,

Dave:
Yeah,

James:
The numbers are, everything’s at the best case scenario.

Dave:
I like the pessimistic people. I want to hear people who are like, yeah, this probably won’t go well.

James:
And as an operator for me, I like to be pessimistic because it’s easy to under promise and overdeliver. That’s the easiest conversation you can have when you over promise. And it sucks the life out of you too as the operator.

Dave:
Oh yeah.

James:
And it is not worth it. 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 deal. It’s easy. There’s lots of upside because our flip off house in Kent, it doubled and I knew I was being a little conservative but not that conservative. And as long as you do that, it makes everybody’s lives easier and you prevent issues and you prevent legal issues as well.

Dave:
Personally, this is how I operate my investing business, regardless of whether it’s a partnership or not, I always want to look at not the worst case scenario, not like a 2008 scenario, but I underwrite for low growth, 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. You set my expectations lower than you thought, and then I was delighted. I do the same thing when I underwrite a rental property. I underwrite for low growth, for high expenses, for low appreciation, for low rent growth. And I’m usually wrong on the upside. There’s usually more upside in a deal than the way I underwrite it. But I like only executing deals where if things go pretty badly, I’m still comfortable with the deal.

James:
And then it’s like, how do you find that on your operator? And so that’s where you can ask those questions. If an investor that we’re talking about doing a deal and they want to ask me, 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?

Dave:
What if they say no or I think they probably wouldn’t say no, but how would you evaluate their response? What would a good response look to you for that? What kind of documentation? What kind of evidence should they bring to you?

James:
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, typically as I get to know an operator too, or even getting to know an investor, I’m trying to set those expectations. I send them over pictures of what we do as well. Here’s an example house because I want them to know too, what is our talents? What is our skillset 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, we can’t do that in Seattle, and the way we do it in Seattle won’t make any money in those other parts of the country.

Dave:
It’s a pretty unique place.

James:
And so asking for those things, there’s nothing wrong with asking for proof. And if an operator won’t give 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 p and ls? Can you send me every invoice you spent? 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.

Dave:
But to your point, when you were starting out, you would’ve done that

James:
For sure. Because when we’re new and we all start from the same place, 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. And so I was willing to give away a lot just to learn and get. And that was the best thing I ever

Dave:
Did.

James:
But I would’ve 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.

Dave:
Yeah, exactly.

James:
Because you really have to see, because people can say a story, but you got to know the story. And 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

Dave:
For, oh, 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.

James:
Well, that was that budget we sent off to you. Yeah, it’s amazing. And I think you have to verify those numbers. I know you don’t vet my deals probably as thoroughly as maybe someone, but you love looking at the numbers.

Dave:
Oh, it’s the best.

James:
And as a passive investor more you understand those numbers. You have to see what’s the brick and mortar budget of two 50 is? Well, what’s going into it? What if that operator’s spending two 50, but they’re not even adding a bathroom.

Dave:
Right, exactly.

James:
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 returns you’re going to be making. You know who to invest with and not to.

Dave:
Yeah, absolutely. I am way far behind, but I’m so impressed by your ability to just name off what anything should cost. You’re like, oh, adding a bathroom should cost this amount, a new kitchen X amount per square foot. That doesn’t come easily. I’m so impressed that you could 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 a little bit of a baseline here. And that’s what I’m hoping to learn from you on this project.

James:
Yeah, I mean the construction of the brick and mortar to all this lending partnerships, that’s the component that tells it whether it’s going to be profitable or not.

Dave:
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’d 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 add projects. So we’ll take you along for the ride. And James, thanks for being the teacher on this one.

James:
I better look good. So that’s extra pressure for you. We got to hit this deal, right? Or this is not going to be good for me.

Dave:
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.

James:
Yeah. All right. Let’s go walk this site.

Dave:
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 you again soon for another episode of the BiggerPockets podcast.