How Gabe Cole Built a $750M+ Real Estate Business

What does it take to build a real estate business that lasts for more than two decades?

In this episode of Convos With Legends, Stephen Christie welcomes Gabe Cole, founder of Realm Residential, Fair Property Buyer, and Realm Capital.

Over the course of 23 years, Gabe has completed more than 700 transactions totaling over $750 million in sales while expanding into brokerage, distressed property acquisitions, fix-and-flip projects, and private real estate investing.

Together, they discuss the lessons learned from building multiple companies, navigating changing markets, scaling a business, working with investors, and what separates successful real estate professionals from everyone else.

Whether you're an agent, investor, or entrepreneur, you'll come away with practical insights from someone who has built a career on consistency, discipline, and long-term thinking.

About Convos With Legends

Hosted by Stephen Christie, Convos With Legends features conversations with influential leaders in real estate, business, and entrepreneurship who share the stories and strategies behind their success.

Transcript

SPEAKER_01 0:00

So behind every legend is a story, behind every success is a decision, and today we're going to uncover both. Welcome to another episode of Conversation of Legends. I'm your host, Stephen Christie. The purpose of this product podcast is simple. We sit down with successful leaders such as Gabe, which I'm going to introduce to you, who's an entrepreneur, he's a real estate professional, he's an investor, and the way we do this, we learn from the experience of the journey of others. So today you have an opportunity to have a conversation, to be real, practical, and a lot of fun. So as we know, real estate investing always looks easy from the outside, right? You buy a house, you put some money into it, you sell it, and you make a big profit. Well, at least that's what you hear on television. So I'm glad to have Gabe on here because actually we're gonna give you real life experience. Um, but anyone who has actually invested in real estate knows there's a lot more to it. You know, how do you find a right property? How do you know what it's really worth? How much should you spend on renovations? What returns should you expect? What returns are important to you as your bottom line? And maybe most importantly, how do you know when to, and this is Gabe, walk away, right? So my guest today knows the business from every single angle. So Gabe Cole has spent, let's say, 23 years building a successful real estate business throughout Southern California. He has completed more than 700 plus transactions on way more now, probably. And he's completed pretty close to a billion dollars in sales volume, including more than 250. Now get this, because this is the real part, not the fake part you see on TV. He has completed more than 250 fix and flip projects, distressed investing, and private capital. Now think about that. These are investment opportunities. He's also founder of Realm Residential and also fair property buyer, which is pretty cool. You will talk about that. So today we're going to pull back the curtain and how Gabe finds deals, how he evaluates them, what his investment worksheet looks like, the returns he's looking for, and the lessons he has learned from both the great deals, right? And also the ones he have actually had exactly the experience through planning. Okay. So, Gabe, a lot about you. Welcome to the Conversation of Legends. I'm excited to have you here. I'm really looking forward to this conversation. Let's start at the beginning. How did your journey in real estate lead you from brokerage into flipping properties into building an investment business like you have?

SPEAKER_00 2:48

Awesome. Thank you, Stephen, for having me. We've known each other a very long time, probably close to two decades at this point. I think I first started back with Tom Ferry like in 2004, 2005. So that's where we first met. So it's really good to reconnect with you and uh happy to be part of the conversation. So um, you know, just a little bit of the backstory. Started out in real estate right out of college. So I graduated college, I went to USC, graduated in 2002, and uh got into real estate, got my license, actually, my senior year of college. Something I was always interested in. Knew that I wanted to uh get involved in real estate. It was either commercial or residential. Um, I just honestly like the residential appeal way more, uh, even though I really had even back then an interest in the investment side. Um, but you know, my career had to go through a path before I got there. Um, so started off as an agent, 21 years old, you know, young kid, door knocking, open house, doing all the traditional ways to meet people. Um, and then just fast forward, you know, probably about five years after I'd been in the business for a while on a successful agent, built up a really good farm where I had lived. Uh, that was a place called La Dera Ranch, California. And uh the market crashed, you know, everyone remembers 2008. Uh, or if you weren't in it, you've heard of it. Um, market really took a dive, and I was in a newer construction area where prices dropped like 40 to 50 percent. It was pretty crazy. Um, and so, you know, I think what I realized at that point, my traditional method of doing business had to shift, and so I had to pivot, is what I call it. Um, and I, you know, I think that there's a point in many people's careers where you've got to figure out how you're gonna pivot because the market is dynamic and it always changes, so it never stays constant. And so when I started having all these listings that turned into short sales because people didn't have equity anymore, it it could be if you remember, obviously remember back then, it could be a year before you'd see a paycheck because we'd be negotiating the short sale with the bank for a year. And so at that point, um, when I started getting short sales, and then those turned into also some REO listings, um, I started doing more business with real estate investors. And uh I ended up working with this one group of real estate investors that was buying at the courthouse steps. So they were trustee sales. You'd have to show up to the courthouse with cashier's checks, uh, buy the property, typically sight unseen. And I was running, because my experience at that time, um, I had you know a lot of sales under my belt five years in, successful agent. I was running all the valuations for them. So they would come to me, they would give me a long list of properties, I would then comp them for them, I'd tell them what they'd be worth once the property was would be fixed up and sold. And after a while of doing that, I think I did about 10 to 15 transactions with them. Um, you know, what I realized was I was doing all the components of it. I was selling the property for them, I was telling them what it was worth. The only thing I wasn't doing was buying it and managing the construction. So what I realized is look, I can do the other pieces of the puzzle as long as I can find the money and then find the construction team. So that's basically what I did. I went to a friend, um, friend invested with me, and I paid him a return on his investment, and then I started buying at the courthouse steps. And that was really back in 2009, was my first entry into fixing and flipping.

SPEAKER_01 6:24

So let's shift real quick. You got a lot of information right there, okay? And I need to kind of get back into a little bit about that point. So, first of all, you're the smart guy coming out of college, which you know, I took a little time after I got out of college to get into real estate and did all the jobs. What I wish I did is what you did, because that is coming from stepping into entrepreneurship right out of college, which is really cool. Okay. Because now you got to actually make yourself, you know, live and be, right?

SPEAKER_02 6:57

Yeah.

SPEAKER_01 6:58

Second phase of that is you shifted from an actually decent, pretty good real estate business. So here's a challenge of real estate agents, okay, Gabe. I'm making a lot of money, and I'm forgetting about my investments. My head's down, like the Mike Ferryway, and just keep going. But I'm forgetting why I'm doing this and making this money. You shifted in a time frame. I had two different, obviously, uh real estate changes back in the 90s. And what I learned from the 90s was not to miss the 2008. So why I got engaged in that time was I'm not missing this time around. I'm stepping in, I'm leaning in tight. Because in the 90s, I was about 50, 50 listings, let's get them all going. Let's, you know, I wasn't even paying attention, which you know, you were smart enough to go, I'm doing this work for somebody else. It's time to do it for myself.

SPEAKER_02 7:52

Yeah.

SPEAKER_01 7:53

So I'm gonna start with one, what does your first investment property look like to you?

SPEAKER_00 8:00

Do you remember it? I I remember it. I was uh I was thinking about it based uh up until this uh call. I don't remember the address, but I do have it in a spreadsheet somewhere in my uh my Google Drive. But I remember exactly, it was uh it was a condo I bought, um, entry-level condo. We we picked it up for you know 200 grand. Um, and my first renovation on that condo was like, you know, compared to what I do today, it was so simple and easy. It was new flooring. We didn't even rip out the kitchen, we put in new countertops. Back then it was granite, right? People aren't putting in granite, at least they're not in California anymore. Right. Um, you know, and new backsplash, new appliances, painted the cabinets white, you know, and put it back on the market. Um, you know, I think we put probably 20 grand, maybe it was even 15 grand back in the day into that property, and then we flipped it around and put it on the market right away for like 265. Um and then it sold pretty quickly. So, like back then, we were just it was lipstick on a pig for sure. Like, you know, just buy it right, get it back on the market as quickly as possible. And my average time back then was like 90 days term right. So from the time I bought it to the time I actually exited that property was 90 days.

SPEAKER_01 9:20

So I'm gonna take you back into say your first many or say 10 or so. You know, back in that time, what mistakes did you make early that also became your greatest lessons? Yeah, because you know, you're new, I was new, I know what those are. So talk to me about that.

SPEAKER_00 9:38

Yeah, no, I I think that there's only so much you can read in a book or listen to in a podcast. You know, what I've figured out, and and I'll share some stories with you, is you know, learning from you know, being younger to even more recently, even last year, I made some mistakes as I I was trying different things, right? And I think as an entrepreneur, you need to get out there and you need to just you know give it your best shot. And you and you can you don't start learning until you start going through some of these things. Um, so you know, back then, you know, I would say that we were buying properties in some cases, um, you know, where we weren't able to get inside of them. Um, and you know, you know you can take a calculator risk. We would drive by, I would drive by. I would start at like 6, 7 a.m. The sale would be at noon. I'm driving by my list of properties in the morning and I'm I'm literally walking around. I I feel like I'm trespassing, right? Like trying to see from the front door if it looks like it's occupied or vacant because you didn't want to buy uh an occupied property, you know, and have to deal with evictions or cash for keys. If the deal was good enough, we would. Um, but you couldn't see inside these properties. So I remember one I ended up buying one condo, we get inside, and there had been a leak in the wall for who knows how long how property was vacant. The entire living room wall was covered covered in mold. Um, you know, an expense that we didn't account for. We still made money on that deal, but like those are some of the type of things, right? Like, I'm not typically buying site unseen properties anymore, but back in the day we had to if we were buying them at the at the trustee sale. Um, so you know, you you don't you don't learn until you go through it and then you adapt and you adjust and you you know you make tweaks, right? Right.

SPEAKER_01 11:28

And you know, it's funny. Um I always say to people, not everyone's a home run. So if you're looking for only home runs, you're never gonna pivot in to opportunities.

SPEAKER_02 11:38

Correct.

SPEAKER_01 11:38

Um, so every investor eventually develops a system, and I know you, you're a system guy, right? So the way you develop your systems, you develop to create opportunities, right? So let's talk about how you find deals today, right? So where do you find your best opportunities in today's market?

SPEAKER_00 12:00

Yeah, I I think that's a super valuable question. Um, so I look being an agent myself, obviously I could buy them off the MLS. I haven't bought a property off the MLS and I don't even remember how long. Not that there aren't investors that that are able to do it and still make a margin, but I've found that those are the thinnest margin deals. Uh, you're competing with everyone else, unless for some reason, you know, it's a really overpriced property and you get an inside scoop on it, and you know that the seller got super motivated, hasn't dropped the price, but they're willing to take a big haircut on it. Um, most of all the properties that I buy are off-market and they are directly sourced. And I my typical sourcing of those is two methods. One, direct to agent. So agents will bring me off-market properties that they come across and they represent me in those in those purchases. Um, the other is a direct to seller marketing channel. We do a couple of different things. We do um Google Pay-Por-Click advertising, Facebook ads. That's my company, Fair Property Buyer. So we run ads that will buy your house cash, no commissions, no fees, no closing costs. Um, and we go direct to the consumer. So we'll go on appointments with the homeowner that's looking for an alternative sale as compared to the traditional method of hiring a realtor. Um, so though those are the two methods that I that I use today. Um, Steven, I'm sure you probably get, like I get, probably three, four, five texts a day from investors saying, Hey, do you have any off-market fixer properties, right?

SPEAKER_01 13:35

All the time. I'm saying, hey, I'm looking for myself too. You got me?

SPEAKER_00 13:39

Yeah, exactly. Exactly. So most agents don't even respond to those because we become, as agents, so numb to that message.

SPEAKER_02 13:48

Right.

SPEAKER_00 13:48

Um, so I knowing that, and knowing I've been in that shoe and I get, you know, literally 10 to 20 of those texts a week, right? Um, and I I just ignore them because there's no no relationship, there's no face behind that text message. And I know that you know, they may or may not be legitimate buyer, they may just be trying to wholesale the deal. Nothing wrong with that. But if I if I am gonna pass on a deal, I'm gonna pass it off to a real investor that's gonna fix and flip that property. Um, so I went the relationship method route. You know, I've I've been in the in the industry in my market in Orange County, California for 23 years. I know a lot of agents. Um, a lot of agents know me just because I've been in the marketplace and and sold at a high level. Um, and that's when I really shifted my social media. Um, you know, I no longer look on social media for a buyer or a seller in the traditional sense that wants to hire me as a realtor. I've shifted my social media strategy. If you think of, you know, you always hear who's your avatar, right? Who are you trying to appeal to? Well, I'm appealing to two different people. One, I'm appealing to agents, so they know I'm legitimate. They know that, yeah, I'm an agent, but I let agents represent me as well. Um, and uh the other, the other person that I'm appealing to is for capital raising. So anyone who may have money that's looking to invest, but doesn't want to do the daily operations of what I deal with on a daily basis of finding properties, making offers, managing contractors. So those are the two different um components that I currently have been really going hard on on my social media is one showing credibility, showing these properties that I'm flipping, showing the walkthroughs, showing the construction, showing what they look like after, and then giving some examples of what that looks like if someone were to come in and partner with me on a deal on the capital side.

SPEAKER_01 15:42

So that's cool. So let's let's recap on that because that's really cool. The idea that if you're listening to Gabe, um relationships are important, right? A little bit differently of strategy sometimes works and doesn't work, but we go after trust attorneys. We try to get people who have families who just don't want to deal with the properties anymore. So those are relationships that Gabe pulls in from people he knows. He's been a great agent, so he knows his lead generation sources, which makes him a little bit of a step above most people because he has access. Access is a connector, right? So some of the things I will throw into this is we don't use MLS as well that much anymore, but we do have a search in MLS that says any property that says fix or something on it, we want it to send an offer. Any property that's been on the market and it has three or four different price reductions that's been on the market over 90 days, we want to send an offer. In our offer strategy, we say, look, it this may not be working for your client. We're just looking for investments. Please don't take it wrong. If they're interested in moving forward today, we're happy to buy this home all cash within seven days. If they're not interested, just keep us in mind. That's the relationship I have with agents, and that's relationships that Gabe has all throughout Southern California. That people will see him engage and say, hey, when something comes up, call Gabe and actually actually do that commercial for you. But the idea of it is it's pretty cool at the same time. So let's go back. What I want to ask you three different ones out here. So we know that you and I get wholesalers, right? And let me just explain to everybody wholesalers are guys who are already buying through the MLS or already talking to these people who are not wanting to keep the property but wholesale it to us investors. I haven't had success in that because a wholesaler's already bought it too high for me to do my work. And they give me uh what we call, you know, ARB. They gave me this number that doesn't make doesn't exist in my world. So how's your luck with wholesalers?

SPEAKER_00 17:42

Yeah, I uh same thing. Um, same, same exact as you. I get the emails, um, you know, because they all call me because they they track who's actually buying properties in the county and then they they reach out. And a lot of them, they do a lot of business, right? I think you know, no, no hit to them whatsoever. They build really strong buyers lists, and some of those buyers will just take either very thin margin deals or potentially they're new to the business and don't know their numbers well enough, and they'll buy off a property that I look at and and you know, I'm at a break-even, or I'll make 10 grand on that deal after my cost of capital. Um, so it's a little bit of noise in my in my inbox. Their only reason why I stay on there is occasionally I see them put out a property that I know that neighborhood so well. And if there is something about that property, such as a great view or a big backyard, or it's a single story, or some hot buttons that I know I can really push the value of that. So maybe they think ARV is 2 million, but I know that neighborhood so well that I know if I dial that rehab in, I can get 2.2 for it. That's the only reason why I stay on those lists. The occasional property that might come across that that I look at and say, Yeah, I can do more with that than maybe most buyers might think they can do with it.

SPEAKER_01 19:02

Okay, so this uh some people probably going, why are they talking ARV? So ARV is after rehab value. Okay, so we we say ARV because that's the number one number things that we look at basically when we're making investments. But there's something you said, Gabe, and I and I totally want them to understand how this works. Gabe's agent relationships didn't start yesterday, okay? He actually sold all homes in the area, people were already knew of him, but he built on relationships as not another agent, but as a basically um working together to bring opportunities because he allows, and I do too, the agent to win as much as we do. That's the relationship you have to have. You can't turn around and expect agents to want to work with you that don't see an opportunity in themselves.

SPEAKER_00 19:53

Yeah.

SPEAKER_01 19:54

So I want to kind of hit that with that. And then investments. Gabe makes investments. Gabe says to you, he doesn't say, Oh, I just throw it on social media. He actually makes the investment to put a big web out to people to come back to him, right? But the thing why Gabe, and I know of Gabe, because I've seen him for a long time. I've been in all these uh conferences with him, he makes the investment and doesn't expect it the next day. He makes the investment, he holds to the investment, he stays to the plan, and he doesn't bail out in 60 days, 90 days, like most agents go, hey, I'm gonna try this. And they do it for 30 days, and they say, it failed. Well, if that's how you handle investment properties, you're gonna fail already. So I want to thank you for sharing those things, Gabe, because people don't really get they're like, oh, he just fails on social media. No, he doesn't. He pushes it around everywhere. He has a big list, he has a big web. Um, and his investors only invest in him because one, he's trustworthy, two, he shows results, and he has a track record. Those are the three things that if you want investors to invest with you, you have to prove those elements of your work. Okay. So, Gabe, I'm gonna hit the next part, okay? Find opportunities is only basically half the battle in this process. The real skill is knowing which one to buy and which one to walk away from. So I want to get in that segment of this discussion because from what I've watched, you I'm kind of going, okay, how'd he know this was the right choice? So I went into my thought process and said, um, how do you evaluate the investment? You know, like what is your what walk us through your investment worksheet? What does it look like? What do you do?

SPEAKER_00 21:42

Yeah. Um, so I think it's first really important to determine your buy box. Um, because if you don't really know what you're looking for, then everything that crosses your your plate could be or desk could be a potential deal. Um, so my buy box has definitely shifted over the years. I've done You know, just kind of give you an idea. Earlier on, and very entry level, and that was on purpose because I didn't have enough capital, right? So I could only do work with what I had. Um, and I'll take another step back and also say if you're just getting into this, you need to start probably with entry level, unless you have someone or a network of people that are very close to you, call it family, relatives, very close friends that trust you and believe in you in order to execute this business plan without the prior experience. So when I first started, yeah, I had real estate experience, I was an agent, but I, you know, only raised 50 to 100 grand to get my first deal, right? Because we were still using hard money loans when we were buying properties, and we still do today. Um, so with regards to as time has gone by, I've done everything from entry level. I've I've gone up to um multi-million, four and five million dollar exit value properties in Newport Beach and Corona Del Mar, adding square footage, doing all of this, that takes a much longer time horizon. And I would work on some of those deals for 18 months, and you know, uh the amount of time commitment not only on the project, but with design and managing that construction on that big project, I I found kind of a sweet spot. And so I pared down that higher end, really luxury level stuff, and now I'm more in the middle. And now my buy box is I want to buy properties in in Orange County that are too that are exit value or ARV of 2.5 million and under. So most of the properties I'm buying, I'm buying typically houses between one to 1.5 and sometimes a little bit higher, depending on uh on that project. And then I also have things that I won't buy. So anything that I come across that has something that would be a negative factor to it, no matter how good the price is. And when I talk about negative factors, I'll give you some examples. Anything that backs to a very busy road, anything that backs to, you know, you hear the freeway from it, high tension power lines overhead, train tracks behind or nearby. Anything that if that if the market shifts a little bit, environment demand gets a little bit more dried up, I don't want to be stuck holding a property that I just have, even no matter, even if it looks really nice on photos and the renovation is nice, buyers come in and they're like, Yeah, we like the condition, but I really can't stand those power lines up abovehead, or we love the condition and the looks of it, but I don't want to hear the freeway or that road noise behind there. So those are things that I put my buy box that I don't deviate from. If a property comes to me and it's near a busy street, next. I don't waste time. I don't try to see if we can make a deal work at a lower price. It's like we only have a limited number of time in a day. So I'm not gonna waste time like looking at the numbers on a deal I already know does not fit my buy box.

SPEAKER_01 24:59

Perfect. No, I'm all that actually the buy box. Um, this is where success comes in, and this is where failure promotes. I mean, out of his buy box and something sounds good, Gabe goes, No, I've already learned my lesson. Let's not stick, let's get out of that area. And I love that because most people get desperate and go, okay, I'm open to this. And then what happens, and Gabe and I both know we never can trend a market because something could happen outside of our world that changes our market within an instance. And we've seen that in the last few years. So I want to go back and begin from your first appointment, besides being your buy box itself. Do you look at purchase price after repair value, construction costs, holding costs? Is that all part of your worksheet? I mean, yeah, remember, you have financing sometimes, you got seller expenses. So there's a whole worksheet that you do, but how do you structure it yourself from the first get-go?

SPEAKER_00 26:05

Yeah, so I I absolutely work off of a off of a pro forma, um, but I can really easily give the back of the napkin method um of what I look for. So if I take I start with my after repair value. So let's just say I think that house is going to be worth a million bucks, round numbers, once it's done. I take 80% of that number, so that's 800 grand. Then I try to figure out what is going to be my rehab cost to fix up that property, and I will subtract that from that 80%. So it's a probably a pretty similar um formula that a lot of investors will use out there. Different states, different markets will get more um, I would say, aggressive with that number. They may go 75%, they may go 70%. And I've seen very low-end markets use 65%. I'm talking about like $100,000 houses. But for Southern California, it's not easy to even hit that 80% number. There's there's investors that are paying 85, 87, maybe even 90. So I look for between 80 to 82 percent of that after repair value, less the cost of repairs. So if it was 80, it's 800 minus 100 grand rehab costs, if that's what my projection is, I want to pick up that house at 700. Got it.

SPEAKER_01 27:25

Got it. You know, it's funny. Um, I think you remember those days in 2009 and 10, being at the court steps, bidding on something you knew the value was, and then looking across, and there's three other people working on big hedge funds and going higher and higher, and you're like, What? You haven't even seen the property. You remember those days? I used to sit there and go, Are you serious? And now we know why. But it was the funniest thing to be going, Why did I miss? And we didn't miss, it's just they didn't care. It was a really funny scenario. I just that came up in my head when I was thinking about that. Yeah, so is so your formula is pretty cool, it's pretty simple, pretty easy to track, and go, okay, this is where I can start to say I'm in. Um, so what causes you to immediately pass on a property, besides the chemistry of the property itself?

SPEAKER_00 28:13

Yeah, I mean, if if the numbers don't hit that formula, and the formula can shift a little bit depending on how quickly I think I can get in and out of that property.

SPEAKER_01 28:24

Got it.

SPEAKER_00 28:24

Um, so I just flipped one in Huntington Beach. I would have gone higher on the buy because I knew it was a quick cosmetic rehab. Um, and we got in and out of that property in actually less than 90 days. So if you think you can get in and out of a property in less time, I might go more aggressive on the purchase. If I think no, this is gonna be a larger rehab, it's gonna take us longer, it's a larger property, maybe it's gonna be five to six months before I exit, then I'm gonna stick to that formula a lot closer.

SPEAKER_01 28:54

Um, I can see that. So the idea though is uh have you ever gone out of your buy box and what happened to you?

SPEAKER_00 29:03

Yeah, I I mean I'll give you a quick example, right? Because I talked about earlier on pivoting and trying different things and not not being afraid to try. But when you try different things, there's always the possibility of failure, right? And so if you hit that failure, then you you you've only failed if you quit and stop. If you adapt and try something new, you know, you'll eventually find find the right path. So, you know, I uh last year I was um searching for a way to do more deals, and I had this idea because I'm in uh I've been in a couple of different real estate investor masterminds. I had a I had an idea of, hey, I know how to do all of this. Why don't I try a market where it's easier to find a deal? And so what did I do? I didn't go to you know one county away, I went like five states away and bought in Texas. Right. And uh that was a mistake I learned from very quickly because I know my market here in Southern California really well. I bought a house in uh in Texas, right in a suburb right outside of Dallas, and had thought had comps for my ARV. Market softened while we held the property. I got through the rehab just fine. I hired a big a bigger size contractor, one that you know was not not the cheapest, but one that could help me make sure I got got through that rehab in in a quick amount of time. And the market shifted, and I was dropping the price every two weeks thinking it was gonna do something, and there were still no buyers for it. Oh wow. And and I and then I looked at it, okay, do I just keep this as a rental? And there were a couple of reasons why I didn't keep it as a rental because there was way better cash-flowing properties in Texas than the one I bought. The one I bought was a little bit higher in price in the in the neighborhood that I bought, and I ended up losing like 40 grand on that deal. Wow. And then I realized, okay, I can make a hundred grand on a deal in Southern California. I was looking at maybe making 30, 35 on that one, but thinking, oh, if I build a machine, I can get through, you know, do four a month, right? Right. Um, so I learned from that mistake and moved on. Didn't decide not to do out of state and just focus really on continuing growing and building what I'm doing here in Southern California.

SPEAKER_01 31:25

So yeah, yeah, I think we well, I've done that. Um, I tried that too in Florida, so trust me, I know I know that pain. Yeah, sounds like a great deal, but yeah, I know the pain, not knowing the market. Um, so you know, obviously buying a property is one thing, but now max values and value is it another thing. Now I call that the renovation strategy, right? And you, you know, obviously have fortunate enough to see, you know, having so much experience in it. How do you determine where to invest renovation dollars? How do you determine that?

SPEAKER_00 32:02

Yeah, good question. Because I see a lot of uh, I would say newer investors make mistakes on picking the wrong upgrades that don't fit for that property. Maybe it'd be easiest if I started with an example of what I saw earlier on in my career. Um, Laguna Beach, California, very high end, Newport Beach, Laguna Beach, very high-end coastal communities in Orange County. And I got brought in as an agent on a deal from a private investor that I knew that had the second secondary financing on the on this on this property that they were working with a flipper. The flipper was not from our area, they were from another county. And they came in, and the upgrades that they chose for Laguna Beach would have been the same upgrades that you would put in maybe a $400,000, $500,000 house in the inland empire. Right. And what I'm saying is it was rental grade upgrades that they put in a property that was you know, maybe a 10-minute walk to the beach. Um, no matter what they did, no one wanted that house and they couldn't sell it. Right. And they also so so knowing what to put in the property by looking at what buyers are liking, looking to see uh the comps that have sold, look for those flip properties or the properties that have been renovated and see what they did and how successful they were on their on their sales price to help you determine what is going to give the property the best price. Now, you you don't want to overspend. Right. Um, so we're putting nice stuff into our into our properties, but like if I'm not doing a multi-million dollar, three, four, five million dollar home, I'm not putting custom cabinets in it. So even if I'm selling a house for two million, we're still using nice dovetail drawers and that kind of stuff, but these are modular cabinets, right? Um, you know, they're still soft clothes, they still look nice, all of that, but you can't afford, like, you can't look at that investment like, oh, this is my property, this is my baby. Like, you don't you can't treat it like you want to live in it. And I see that on the on the opposite side too, people just overspending on stuff that's not going to get the return, putting in the custom cabinets, putting in the real marble where quartz would have gotten them the same price on the exit value. I mean, I put real marble in in my own property that that I live in because we wanted it, right? I would never put it in in one of the flips that I'm doing because you know I can go from 2500 for a slab of the big slabs, the jumbo slabs of quartz to 10 grand to the exotic Calcutta that you know some high-end properties want to put into it. So you really need to look at the the the best bang for the buck, but I also don't skimp on my remodels. So typically I'm doing full renovations on the properties that I have. Um, couple of things that I've learned over my career. If the house is a 60s, 70s, 80s house and it hasn't been updated, we're pretty we're not piecemealing anything. So we're pretty much going in there and we're doing everything. Um, even if the house doesn't have leaks in it, we're putting new PEX piping in it. And what I've learned over, because I see people try to, you know, cut corners on that, right? And they'll do a renovation and the house is all remodeled, but they kept the original pipes in there. And then when buyers come in, that's one of their first questions. They see a full remodel, they want to know if it's been repiped. Right. And so, yeah, it costs us another six to eight grand, depending on the size of the home, but then it's peace of mind for the buyer, and we don't have to deal with the buyer saying, Well, now we need to repipe it, and we've got to cut holes in all the drywall and do all this patchwork on a house that you've already fully renovated. So, on the renovation side, I don't know, I think you know, in a lengthy way that may have answered your questions, but you know, hopefully that that helps.

SPEAKER_01 35:54

Well, it does. And I I'm gonna, and you've had the same experience, so I want to throw it out there too. You know, when you walk into a home that's being flipped, you know right away the quality of work, yeah, right? But here's what I'm gonna tell you as an investor, and if you're gonna be doing this effectively and for a long period of time, your reputation, your rip, what people see you do, and you put a new product out, they expect the same. So if you do a bad job and a bad flip, trust me, agents go, oh, you're not gonna like it. You think that'd be cheap. But if you do a great job, agents will bring their buyers to you right away. So remember, your reputation precedes you in this process. And I want to move right into this, Gabe, because how what improvements consistently generate the highest return that you see?

SPEAKER_00 36:50

I I think that most buyers look at you know, the overall aesthetic. So having consistent flooring throughout, obviously kitchen and master bath, right? If I don't have it in the budget to do a secondary bathroom, just because we're on a very tight budget, but I normally still put that into the budget. But the secondary bathroom, you know, still is is okay. I'm obviously going to put my money in the master bath first before I'm gonna put it into a secondary bath. But kitchen and bathrooms, and then and then the overall aesthetic, the paint, the flooring, um, you know, are are the key things. If something is super old, like I don't personally like having you know a 20-year-old HVAC system in a property that's been completely renovated. Um, so you know, when when we're gonna do a full renovation, if the HVAC system is 20, 25 years old, we're replacing that, we're repiping it. Um, we're not getting into super old properties typically here in Orange County. So it's not too often that I have to do like a full rewire. But if it's the old original electrical panel and we're upgrading the house, we'll typically put a new electrical panel in. Um, but that's on a case-by-case basis. But that those those system things are are kind of lower on the list. I would say kitchen bathrooms overall aesthetic with the with the flooring and the paint and everything, too.

SPEAKER_01 38:10

Where do you find, you know, this is important too, because I think about this. Where do you find investors actually overspending?

SPEAKER_00 38:17

Um, I think what I talked about earlier is just putting in more expensive materials than are necessary or overspending in the yard. Um, I see that too. Like a lot of times if if my yard is is is good and decent. I just did a social media piece on this. Like the pool, yeah, that the house is fully renovated. The pool, it's not like 70s or 80s, but they probably redid it in the early 2000s with the tile around it. Like, I'm not gonna go, you know, redo that pool and go put all new tile in and have to jackhammer out, um, you know, and do all of that work and spend 15, 20 grand on the pool when someone can come in and see, oh my gosh, this house is exactly what I want. Maybe they'll spend a little extra money to make that yard exactly the way they want. I'm not gonna go spend 50 hundred grand on my backyard because you're not gonna get that money back. Yeah, um, at least you're not in Orange County. You know, I've seen people do that in Palm Springs where it's like really important where they'll put way more money into the exterior of the house. But from what I'm seeing, I'm minimizing my budget on the yard. I do a curb appeal package, you know, new sod, some new plants out in front, make sure the irrigation system's working, and then just beautification of the yard, but not like ripping out concrete and doing all this stuff unless it's just so bad it won't pass uh, you know, a buyer's standards.

SPEAKER_01 39:41

Awesome. So this this shift in that because this shift to market change, right? Because successful investors actually always adapt, right? So let's talk about today's market because we've seen so many different markets. We're dealing with today's world is you know, a little war action, all this other interest rates, and all these things are affecting. We're doing like a heartbeat up and down process in today's market. So let's go to in today's market. Is today's market easier or harder than five years ago?

SPEAKER_00 40:15

I guess it's it's a flip of the coin with regards to easier for who, right? So the the way I'll equate this is you know, when it gets harder to sell properties, it does become easier for an investor on the acquisition side to buy. But there's also sometimes this lag between seller expectations and what the reality of the market is. So right now I'm tightening my belt on my um, you know, underwriting because in the past markets, if we put out a really good product, you know, I've typically overshot my after repair value, meaning I've I've gotten higher. Right now, in this market, especially even over the last like 60 days, I've been having conversations with agents. I've got a flip on the market, I've got two more coming on the market. Um, I'm seeing definitely some more buyer sentiment of being, you know, pulling back. Um rates rates have gone up to you know 6.75, 6.8%. Affordability is obviously low. Um, it obviously depends on the zip code that you're buying in. Some are some are doing better than others. However, you need to factor that in to your underwriting and how you're buying. So I'm not gonna take a deal that I'm in any way feeling like it's a little iffy. I'm I'm gonna be more conservative right now because in the past, you'd be able to sell for higher than maybe what you're expecting based on market conditions. Right now, I feel like we're we're potentially looking at selling for a little bit lower than we were expecting based on on current trends that we're seeing in the market.

SPEAKER_01 41:55

So that's your biggest concern today, is where the where obviously the investors are overlooking certain things right out there. At the same time, the concerns are where's our market gonna hold? What's our market gonna approve? Um, but let's this shift out because I know you're an optimist, right? So, what you most excites you over the next two, three to five years?

SPEAKER_00 42:17

Yeah, I mean, I I think for me, and we can talk about this a little bit, what most excites me is the lessons I've learned throughout my career and and the and the mistakes I've made and doing it differently over the next three to five years. And what I mean by that is if you talk to any fix and flip investor that's mainly focused on fix and flipping, if you ask them to identify their, you know, their best flips over the last 10 years or something like that, and you say, hey, would you have rather held this property or flipped it for the profit you got back then? I can guarantee you a lot would have if they had the capital available to keep that property as a rental and hold it, they would make that decision. And so, you know, for me, I'm excited about you know continuing scaling the flipping business, but at the same time learning from those lessons and holding more properties. And if there's different ways that we can bring in other private capital in order to hold them and then refinance out and be able to maintain that property, I definitely have a goal uh to hold more properties than I have in the past.

SPEAKER_01 43:25

Cool. That's perfect. So, you know, there's another part of you that people don't know of, and I do, and I kind of read a little more about you, which I'm like, okay, I'm gonna ask Gabe about this part. So we both know, because I've done the same thing with my past clients, my spirit influence, that building wealth through capital and you know, private capital, right? So many investors eventually run out of their own capital or they can't start because they have no capital.

SPEAKER_00 43:55

Yeah.

SPEAKER_01 43:55

Talk to me a little bit more how you raised your private money.

SPEAKER_00 43:59

Okay. Okay, perfect. So I'll share with you how I've done in the past, how I've still worked with some of my investors, and what I've transitioned into. So it's kind of like I would say the professional evolution of a real estate investor. So really private money. If you look at private money, you can either get a hard money loan. That could either be from a hard money broker or more of an institutional capital type company, but they're going to max out the leverage that they'll give you. So they'll loan to you typically up to 90% of your purchase price. Most of the hard money lenders out there will also give you 100% of your construction costs. So that leaves a gap. The delta is typically 10% for your down payment plus another two to three percent for your for your closing costs. And then you need to have enough money for your holding costs. So on an average property, I do, even if I'm coming in with 10% down, I still need between 250 to 300 grand in order to carry that project from start to completion. So if you start getting five, six, seven, eight deals going at a time, that that that money really adds up quickly. So I will I will bring in private capital in order to bridge that gap. Um, some people will call it gap funding, but my private capital comes in and I typically will pay my private capital partners 12% on their money. Passive income for them. They don't have to do anything, they don't have to touch the property, they don't have to find it, they don't have to manage contractors, they just get you know mailbox money every month, you know, for every hundred grand that they loan to me, they're getting a thousand dollars a month as as compositive cash flow. Um, so that that is the the the most standard typical way that most investors would break into um getting into this without their own capital.

SPEAKER_01 45:51

Okay. And I love that. So you gave actually that was a lot more than uh I expected. That was great to give them the percentages of thought process because capital is important and capital of investors are important, cost of money is gonna be important, and you have to factor that into your worksheet. You know, uh not all of us will always have all the capital and want to build, if you want to get into three or four projects at one time, you know, depending upon the price point you use, you're gonna be using up that capital pretty quick. Um how do you build that trust with your investors?

SPEAKER_00 46:26

Yeah, that's a great question. I I obviously it's easier for me to say now because a track record and and relationships, right? Track record helps a lot. When I can go to them and show them, hey, I've done over 250 of these and I've been, you know, selling real estate and I've done, you know, and give them my credentials. If I don't know them very well, that builds immediate credibility because they know I'm an expert um and an authority on the subject matter. Um when I'm just getting started, right? It it was all about relationships and you know, doing the right thing, even if a property, you know, didn't do as well as we thought, investor still gets paid, right? Like, you know, if I'm doing this as a debt instrument, which typically I am, that the onus of responsibility is on me. Um, if that project doesn't perform as well as I thought, my investor still gets paid. So I take I take first loss, not not the investor. Right. And I think it's it's really showing the track record, showing and having those stories that you can explain um to the investor. Um, but going back to what you asked me before, Stephen, with you know, going back into the evolution, um, so now I have a real estate investment fund. Um, and the reason why I transitioned to that was because I wanted a vehicle to continue raising capital so I have it available to deploy on the projects that I see fit without having to go back to the investors each time I'm trying to grow and scale and do more projects and do the loans. Um, also, in in the event that I'm doing, let's say I put one lender into a project and it's it out for four or five months. If I flip out of that property in three months and they get paid back, they're like, okay, great, Gabe. Well, what do I do with my money now? Now it's just, you know, now I either have to find another investment or wait for you to find another property. And so there's certain cases where I've had it where I've had investor capital into my deal. I pay them off, they're happy, but then I go back to them a month later and they're like, Yeah, I didn't want it sitting in the bank anymore. I made another investment, you know, somewhere else. Uh which obviously I get it. They want their money working for them. So that led me down the road of you know, getting going the fund route. So what I did was I I've got a SEC attorney and I formed it's called a Reg D 506C. And that allows me, there's a 506B and a 506C. 506C allows me to publicly solicit. So the thing with you know, the way the laws work with advertising, if you're not structured that way, you see investors out there doing it, but technically it's not legal to try to raise capital if you don't have this structure. So basically, I can um only take money from accredited investors, and they have I have different tiers of interest that I pay them based on the amount of money that they put into my fund. So if they're gonna put 250K into my fund, I pay them 12% on their money. Uh-and you know, a lit it's more liquid than you know, going investing in like a multifamily syndication or something. Basically, a year notice, they can get their money back. Um, so they maintain some liquidity. And uh that's that's kind of how the fund structure works. So I'm really focused on growing that and getting getting more investors into my fund as well.

SPEAKER_01 49:46

So, you know, you have two different kinds of strategies, right? We talked about one strategy of an investor and how you pick your partnership is important, is to give them a piece of the the money, right? Of the return. The second strategy is taking their money and giving them money, uh, a percentage of interest throughout the process. Which one and how much is the best scenario for you?

SPEAKER_00 50:09

Yeah, great, great, great question. Um, I think as you get more experience and seasoned in this space, um, I I prefer the debt side of things with my investors. But what I would suggest to anyone who's just getting started in this is cut whatever deal that you can to get started. Because as you grow and as you get more experience doing this, those dynamics can always change because you can call the shots at a later time. But don't let that percentage stop you. So, for example, if I were just getting started today and I couldn't find enough money available to just find, you know, debt partners that would pay me, you know, that would that I could pay 12% interest on their money. If they were like, no, Gabe, we want a piece of the action. Well, I would do a joint venture with them, and if they want to be on the LLC with me or we form a separate entity that goes out and buys properties and they've got the money and I'm doing all the work, you know, there's a number of different ways that you can, you know, structure that. Commonly you'll see a 50-50 split. The money partner comes in with the money, I'm handling everything else. I'm an agent myself, so I'm gonna get the listing fee when I go and sell the property. Um, but I wouldn't let that hold you back from moving forward. Just cut whatever deal you can find today, and then as you get more experience, that can always change in the future.

SPEAKER_01 51:31

Perfect. That's a great answer. I love that because everybody always wonders how much I give the investor for his funds. And sometimes it's 50-50, sometimes it could be different. Depends upon the investor and what you can return.

SPEAKER_02 51:42

Yeah.

SPEAKER_01 51:42

Um, and I think also how experienced you are the track record.

SPEAKER_00 51:47

And it depends on the deal, too, right? All those things that you said are are accurate, but it depends on the deal and the and the anticipated return level that you can offer them based on that deal. Yeah. Um, and you you don't have to just go with a 50-50, you can do a waterfall schedule. This is getting a little bit more complex, but you can say, hey, the first 10% goes to you, no matter what, 10% preferred return. After that, you know, for every you know, X percent that you get, you know, and then if you really knock it out of the park, maybe it sways more towards you as the manager, and maybe you get to a 70-30 or something like that, right? So it there's a number of different ways that it can be structured.

SPEAKER_01 52:23

All right, I'm gonna shoot some uh quick rapid fire questions to you. Uh short, quick answers. I want to see your brain working, right? So first thing I want to say buy, hold, or flip.

SPEAKER_00 52:35

Oh I'm gonna say flip, but then a percentage start holding.

SPEAKER_01 52:41

Okay, there you go. What's the percentage? Uh 20%. There you go. Beach or mountains? Beach. Okay, biggest deal you ever completed.

SPEAKER_00 52:51

Uh on the investment side? Yeah, yeah. On the investment side. On the investment side, we exited like a four and a half million dollar property in Corona Del Mar.

SPEAKER_01 53:01

Congrats, that's awesome. Worst deal you ever done.

SPEAKER_00 53:04

That was the Texas one I already told you about.

SPEAKER_01 53:07

Most profitable renovation.

SPEAKER_00 53:09

Oh, I had a really killer deal about a year and a half ago. Laguna Nigel, California. Uh, we bought the property um for a million one. We put 425 into it, and we exited for 2.4. Wow.

SPEAKER_01 53:26

Okay. Okay. Um, biggest lesson learned from losing money.

SPEAKER_00 53:34

Um biggest lesson learned from losing money. Um stick stick with what you know and don't be afraid to adapt quickly if you really see and feel that something's not not working.

SPEAKER_01 53:47

Okay. How about this one? Well, what have that contribute to you most of your success?

SPEAKER_00 53:56

Perseverance. Yeah. I mean, look, being a real estate agent, being a real estate investor, you're gonna have lots of things hit you in the face. And if you can't keep moving forward when you get hit in the face, then you're you're gonna go find a job or you're gonna go find another industry to work in because you got every successful agent, investor, developer that you're gonna meet and talk to doesn't quit when they when they hit adversity.

SPEAKER_01 54:26

So knowing you, like I asked you these questions, I know who you are. Your favorite business book.

SPEAKER_00 54:33

Um, I would say one of the ones it's business, but it has a lot to do with mindset. Um, The Gap and the Gause by Dan Sullivan.

SPEAKER_01 54:42

Awesome. I love that one. How about your favorite podcast you listen to?

SPEAKER_00 54:46

Um, how about convos with Steven Christie? There you go.

SPEAKER_01 54:50

That's the answer. Okay, how about advice you would give your 25-year-old self?

SPEAKER_00 55:01

Um, manage your finances properly and build for long-term wealth. That's awesome. And what I mean by that is invest in real estate, hold property, create a portfolio for long-term wealth, even if you're stretching thin in order to make those investments, um, figure out a way to keep going and hold property.

SPEAKER_01 55:27

You know, it's huge. You know, uh, someone asked me that a while back, and I always said to myself, fail to win because we bring ourselves from what we've been growing up like, and we have fears of not having something. And some of that fear has been brought into our world because you know, we're in real estate sales, right? You know, we are determined by our results by what we do and our actions every day. Yeah, and most agents get concerned when they go to a new year and they go, Can I do that again? It's like just duplicate what you did, but add more. You know, but you know, I think the biggest challenge for a lot of people who, even my past clients who I built portfolios for, is the fear of the first one. And it's kind of interesting. But first of all, I know we're getting down to the end. And Gabe, first of all, thank you again. You know, I appreciate you spending time with us today.

SPEAKER_02 56:17

You know, absolutely.

SPEAKER_01 56:18

What I really appreciate, you know, is what you share, you know, not only your success, but also the process, the discipline, and decisions behind it. I mean, one thing I know is that you enjoyed so many things that you did through your process. And that's like how the today's conversation is about you. It tells you about your accomplishments, but it gives us a real look into how you think, you know, and this is why I wanted you on this. How you evaluate properties, how you protect yourself and your investors along the way. So whether someone is an experienced investor, a real estate professional, considering their first flip, or simply looking to build long-term wealth through real estate, of course, I know you're always walking away from the conversion or even the conversation that can put you into action, as we always see people do. And to everyone watching and listening, you know, I want to also thank you for joining us for another episode of Conversations with Legends. Um, if you found value in today's conversation, please like the episode, subscribe to the channel, and share it with someone who's looking to grow their business, investors, invest smarter, and also learn from people who have already created success. Why I brought Gabe into this discussion. So, this is exactly why we created this podcast to learn from those who have earned experience, uncover decisions behind success, and give practical ideas that can apply to your journey. So, what I'm gonna say today is begin every legend is a story, right? Behind all the legends is a huge story. Behind every success was Gabe's decisions, right? So, my question to everybody listening: what decisions will you make next? Right? So, Gabe, I want to say you have gave a lot of great information and people don't share as much as you do, and that's why we we work together. I want to thank you for giving these people the opportunities to learn from you. Um, if you guys have any business that you want done in Southern California, I'm looking at all Orange County and all around it. Gabe is that person. He has an amazing team of people he works with. If you want to throw an investment his way, um he has capability of doing a lot of things that other people can't. And I appreciate that. So thank you, Gabe, again. I'll see you guys next time on Conversations with Legend. Hope you guys have an amazing day.

SPEAKER_00 58:47

Thank you, Steven.

SPEAKER_01 58:48

You bet.