Table of Contents - Rehabbing vs Wholesaling with Beka Shea
Dave Debeau [00:00:09] Everyone, Dave Debeau here with another episode of the Property Profits Real Estate podcast today, zooming in all the way from beautiful Philadelphia. We've got Beka Shea. How are you doing today?
Beka Shea [00:00:20] I am great. It's a beautiful day here.
Dave Debeau [00:00:23] That's wonderful. It's a beautiful day here in sunny Kamloops, B.C., as well. So Becca is a very, very interesting background, very experienced real estate entrepreneur, even though she started relatively not that long ago. Twenty thirteen, I believe, is when you first came here. But she's done a phenomenal volume of deals between rehab deals or what some people call Flip's or buy fakes and sells. I think she's done somewhere around 60 of those and one hundred and twenty assignments. She's definitely got a lot of experience. So, Becca, before in and a very interesting background, which we'll talk about in a second. But first things first. Can you kind of for those people that aren't familiar with it, define what is what you call rehabbing and what is wholesaling, what is actually mean?
Beka Shea [00:01:13] Yes. So I first off on that, I'm a little bit of a word nerd, right. There's power in words. And I found when I first got started, I was a rehabber I'm a remember at heart fiction flipper. I would say I'm flipping houses and I couldn't figure out why. Sometimes people would get confused about what that meant. And what I came to realize is that people who assign deals wholesaler's when they say they also say that they're Flipper's because they're flipping a contract. And so I just decided, especially as we got into both worlds, that I wanted to get really clear on what what I was talking about. So I'll reference wholesaler's meaning assigning contracts versus rehabbers, who are people who fix up flip resell the properties for a profit.
Dave Debeau [00:01:55] All right, perfect. So when it comes to rehabbing, what do you think are the biggest benefits to that strategy? What do you like the most about it?
Beka Shea [00:02:04] I like the most about it. The project management side, really the puzzle pieces in the before and afters. So that is who I am at my heart. And after doing a whole bunch of investing, I would say to your audience that I have noticed there's a tendency of what type of people do better in which arena, and specifically rehabbers tend to have this project management. Then you see a lot of former accountants, engineers, contractors who who do really well in the rehabbing space. And I think it's because they like breaking things down into the process and. Yeah, and then managing the process. Right. Yeah. And wholesalers ask people to sign deals. They tend to love the art of the deal. Right. Like they they get jazzed up about, about wheeling and dealing and we call it and Philly, they say slingin deals and that like the sales type of thing. So I personally love the rehabbing side of things that taking something that other people would would view as just broken down and worthless and being able to see the potential in it and then unlock that right now.
Dave Debeau [00:03:10] That's incredible. I mean, it kind of ties into your background because you were you were a military person. You were in the Navy for quite some time. Tell us a little bit about that now, how you transitioned from that into real estate?
Beka Shea [00:03:22] Well, when I was young, I thought I wanted to be a pilot. I mean, I did I wanted to be a pilot. So I kind of took the best path there. I did ROTC and then I joined the US Navy and I was a military officer. But unfortunately, my eyesight disqualified me from flying. A lot of times they can correct it with surgery. Mine was uncorrectable. And you know, what's funny thing about dreams is they evolve with you. So I had had this dream like six or seven years previous. By the time I got there to flight school, I was kind of realizing the reality of it and thinking, is this really what I want to do for the next 10 or 15 years or so? I ended up getting out and I did mechanical engineering, which is what my background is for about seven years. So four years military, seven years mechanical engineering. And then had my third daughter and said, I want to try this this house flipping thing and I don't want to travel as much. That was really where it came from.
Dave Debeau [00:04:17] All right. Yeah, well, OK. So interesting. Interesting path. And that goes to show why you're so good at doing rehabbing because you've got that analytical background. So you've also done a lot of wholesale deals. So can you explain to us how that works and what do you think are the big benefits for people that like to do wholesaling?
Beka Shea [00:04:38] So wholesaling to me is a sales and marketing company, and we having it's more like a construction and project management company, so it starts with marketing, that's the first thing is being able to figure out who do you want to talk to and why would they want to talk to you? I think a lot of people get into marketing. I see this with new wholesalers. They often talk about them like me, me, me. I buy houses, I fix houses. I like. The sellers don't care. They want to know how are you going to make their lives better. So it starts with the marketing piece and then it goes into the sales. And to me, sales is not I don't personally subscribe to the Grant Cardone methodology of like close, close, close. I think sales in this case is really figuring out what their problem is and solving that problem so that it's a win win for everyone.
Dave Debeau [00:05:28] So what is it about wholesaling that people like so much as an investment strategy, as a real estate strategy?
Beka Shea [00:05:34] It's fast. And if you're good at making deals and you recognize your value, I mean, there is a lot of money to be made and especially just that the problem solving. Right. You're solving a problem for the sellers and then you're solving a problem for the REHABBERS because the REHABBERS don't really want to do marketing and sales. They just want to fix things going into the next project, know the numbers work. So a wholesaler is really providing the solution to the market. That's not it's not out there. Like realtors don't want to deal with ugly houses. They just try to offload them as fast as possible. And the wholesaling you can you can provide the solution and get paid for it in a pretty quick manner. And you don't have to spend money on marketing. Most wholesalers do. But there's a lot of ways that you can really spend zero dollars just your time and your skill set and make money. And I think that's what appeals to a lot of people, actually.
Dave Debeau [00:06:25] Excellent. I'm going to ask you a few questions about that in a second. But first of all, because so it sounds to me like you are doing both rehabbing and selling at the same time, is that correct? Correct. So was it the fact that you'd really kind of dialed it in and really got your marketing machine working? Well, so you had this pretty good inflow of of prospective deals. Some would hold on to yourself, to for yourself do flips with or to rehabs with others you would pass on to other investors. Is that pretty much it work?
Beka Shea [00:06:58] Yeah, I started wholesaling because I just wanted to market for my own rehabs. I was spending so much time trying to find my next deal. And so that's how it started. And then I saw some wholesalers who are just crushing it at scale and I got a little bit of ego and I was like, I can do if they can do it, I can do it. And when I figured out after 12 months is that I'm not a salesperson, that was not my passion. Just because they're doing it doesn't mean I have to do it.
Dave Debeau [00:07:23] OK, so you so you did it for a while, but then you stop doing it, is that correct? Yeah. OK, so how long were you kind of actively doing the wholesaling stuff?
Beka Shea [00:07:31] About four years. So twenty sixteen. Just right around the end of twenty nineteen. So yes, that's four years. January to December.
Dave Debeau [00:07:40] And are you, are you now primarily focused on doing rehabs or. I know you're you're working full time with, with the company that you're with. Yeah.
Beka Shea [00:07:49] So I when I wanted to start scaling my business, I joined the mastermind, which is a really cool way to get around people doing more to get out of your just your local market and be exposed to people doing stuff on a greater scale. And that's what opened up my mind to wholesaling and kind of showed me the back end systems. So I did that. I grew my company and what I found through that, I started rehabbing in twenty thirteen. So it was really close to a seven year journey of rehabbing. What I found through the journey was that I like rehabbing, I'm good at it, I don't like wholesaling, but I'm really good at the marketing and the marketing analytics. So I, I ended up doing some consulting for other people and just digging into their KPIs like, hey, you're spending five thousand dollars to get a contract. On average, most other people spend three thousand dollars to get a contract. What can we do to to dial that in. Right. What's not working? And that was where I moved kind of out of the active wholesaling into helping other people with marketing. And then I came aboard seven figure flipping, which is the mastermind to run these accountability groups, which is a whole nother story.
Dave Debeau [00:08:56] Right. OK, but if you don't mind, Becca, and we'll talk about seven figure flipping in a in a few minutes, but what are some of your what would be some of your tips for relatively new real estate investors? You may or may not want to wholesale or flip, but they are looking for, you know, direct to owner type deals. So what are some suggestions that you have for you know, you talked about some low cost ways of finding deals. What what's working now?
Beka Shea [00:09:23] First, I would say you have to pay attention to the type of market you live in. One of the things that I've noticed is that the urban seller versus the suburban or the rural seller are different animals like they they have different motivations. People who live in and so, for example, Bandit signs the signs on the side of the road, they work really well in my rural, suburban but more rural market and in cities, they don't really work at all. And I think what happens is in the rural market, there's a little bit of distrust in the seller there. They want to deal with locals. They've probably lived here their whole lives. So they see a sign on the side of their back road. They think this company's local versus if you put up bandit signs and telephone poles in the city, No one, a lot of city properties are rentals. So you might not even get in front of the owner of that of the properties you're targeting. And number two, it just gets lost in the noise of all the other visual distractions in the city. So that's to me, that's the one thing is to think about where you're at and who you're really trying to get in front of. And then same thing with, like, direct mail. You know, direct mail consistently works, but you have to tweak it like you have to pay attention to what's happening and think about who you're trying to mail to, what types of properties do you want. And then if you don't have any money, I always recommend that people start building relationships with, like probate attorneys and real estate agents and just be top other wholesalers. Right. I tell a lot of rehabbers they think, oh, I got to do marketing to find my deals, which is exactly what I thought. And I say, you don't really need to get on every wholesaler's list you can find and just be top of mind, because you know what a wholesaler wants more than like the highest assignment fee ever. They want a buyer that they know is going to close. So just just work that relationship and prove that you're the buyer that's going to close. That's your marketing.
Dave Debeau [00:11:15] Yeah, because basically, even if you're paying an assignment fee of whatever, several thousand dollars, that's a shortcut. You don't have to do all that legwork. You don't have to do all the marketing. And you don't have to be putting up the bandit signs or anything like that. That is your marketing fee. Yeah, that's a shortcut to. All right. Makes sense now to do 60 rehab deals. I'm thinking that's probably fairly capital intensive. So did you save up a ton of money from your from your military and your engineering career and and self finance everything? Or or have you worked with investors or you raise capital? What what do you do for your capital for these kind of deals?
Beka Shea [00:11:58] So I started with I partnered with someone. I had 60 grand. They had 60 grand. We knew our purchase plus renovation will be somewhere around that. So we partner 50 50. And then once we did it, I reached out to friends and family and I basically said, you know who I am? I did a rehab. So like proof of concept, did this rehab. And then I said, I'm looking for people to lend. At the time I sent a letter, I said, I'm looking for ten thousand dollars minimum on a one year note. I'll pay you, I think, twelve percent interest. And I said the first five people that say, yes, I'll pay you thirteen percent interest. And so I basically raised money over a year from friends and family at 12 and 13 percent interest. And that worked. And then I grew that. But then as I started doing more property simultaneously, I started working with hard money lenders. And the way I looked at it always is just does the cost of the interest make sense in the price of the deal? So if I'm going to make thirty or thirty five thousand on this, but I have to pay ten thousand dollars in interest, I'm still making twenty twenty five thousand. OK, that makes sense. And so I really worked with all of them at this point. I worked mainly with private money lenders. There's a lot of people have money just sitting around making three, four, five percent or less. Right. And they like the idea, especially if you can secure it to your project.
Dave Debeau [00:13:18] So that was my next question. So how do you secure there? What's the collateral for their money? How are they secured typically?
Beka Shea [00:13:25] Well, now I'm at the point where if I'm borrowing money from a private lender on a property, they're going to cover purchase plus renovation. Typically somewhere around 10 percent is what I pay, although I have some seven and eight percent and we secure it with a mortgage to the property at closing so that when I finish fixing it and then basically any money that's left over all the rehab money, the title company will wire back to me. And so I put it into an operating account. I actually kept a separate construction account so I would know that this is just for repairs. And then at closing, when I sell the property, my lender gets made whole. They get their money plus their interest back. I get the leftovers.
Dave Debeau [00:14:04] Nice. So when you say your lenders these days. So they're putting up all of the all of the capital to buy and renovate the property, so just give us an idea what's the kind of typical price point for the kind of properties that you're buying in your area?
Beka Shea [00:14:23] Well, I tell all rehabbers that the sweet spot is that first time homebuyer, so for me, one of my counties is about one hundred and eighty five thousand all the way up to like two twenty five. So I'm typically borrowing around one hundred and ten to one hundred and fifty thousand dollars on the project to cover both the purchase and the renovation.
Dave Debeau [00:14:43] And ideally you're getting that from one lender, is that correct? Correct. So these are in you're working with private money lenders, not hard money lenders at the moment, is that correct? So it's private individuals that have money sitting in whatever it is. Are they able to use their IRAs for this kind of project?
Beka Shea [00:15:00] Sure. I actually helped a couple of people set up self directed IRAs. I myself have a self directed IRA that I lend out. I used equity trust for a long time. I now use some people I know use Advanta IRA, I use Kamma plan, do your research on that.
Dave Debeau [00:15:16] And here in Canada, that's the same thing as a self directed RRSP. So different. Different like I'm just telling the audience. So it's the same concept you guys. It definitely works in Canada as well. I just wanted to reconfirm a very, very cool. So BECC time flies. I told you what went wrong and what a joke is. Just a little bit about the company that you're working with, seven figure flipping and how people can get hold of you if they'd like more information.
Beka Shea [00:15:44] Sure. I'll keep this simple seven figure flipping to mastermind, which helps people grow their businesses, either starting out or then a higher level when you've hit the ceiling. But we have kind of a flagship seminar once a year. In October this year, it's in Orlando. It's going to be awesome. There's a lazy river at the resort. So if you're interested in learning more, I would say go to Filipacchi Live Dotcom. That's the kind of a great step in and it's going to be a fun event that that would be my recommendation.
Dave Debeau [00:16:12] Awesome. Very good. There has been a lot of fun. Thank you very much for sharing your wisdom.
Beka Shea [00:16:17] Thank you for having me. Appreciate it.
Dave Debeau [00:16:19] My pleasure. All right, everybody, take care and we'll see you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast and you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom. Take care.