WCI #319: Wholesaling and Flipping Real Estate with Jamil Damji

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.

This White Coat Investor podcast number 319 wholesaling and flipping Real Estate with Jamil.

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Just coming back from a couple of trips. May's a crazy month for me and.

That'S when we're recording this.

I know you guys aren't listening to.

It until June, but we're recording this in May and May I've been looking forward to for a long time because we had three trips in May. So all of my work for May, both my shifts and WCI work got.

Compressed into basically one week of the month.

And it's been a crazy week because I'm also trying to train for an upcoming trip to go climb Half Dome. Maybe done with that by the time you listen to this. I just got back from a great trip floating on the Salt river in Arizona. Really a gem of a river. Nobody knows about it. It only runs for a few months. A some years it really doesn't run big enough for rafts to go down at all, but this year with our great snow year in the west, it was spectacular.

Also had the experience of flipping my raft for the first time.

That wasn't so awesome, but you know.

All'S well that ends well.

Next time I'll try to keep the rubber down after that.

Had a canyoneering trip with friends and family.

Got to take my daughter Whitney and show her some of the coolest places I know of on The Planet went and did another canyon that was first done in 2019 with a group of friends and I, and this was only the third time that canyon has been descended. It was pretty cool to go back there and stand someplace that few have ever stood. Upcoming trip with the kids, we're taking them across the pond. Actually going to introduce them to the fantastic United Kingdom as well as France, the most widely visited by tourist country in the world. Looking forward to that right at the beginning of the summer. So lots of great stuff going on in our lives. I hope you have some great plans for the summer as well.

Our quote of the Day today comes from Morgan Housel said. There's a saying that if you get public recognition for donating money, it's not charity, it's philanthropy. And if you demand recognition, it's not even charity, it's a business deal.

I like that quote, by the way. If you are not aware of this, we have some partners that offer surveys. They want to pay you for your free time. Right time you're commuting on a train or a bus or sitting around waiting for patients.

You can make money. You just sign up for these people who want your opinion and they pay you for their opinion.

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Oncologist, this is a particularly good deal for you. If you're an emergency doc, maybe not as much, but there's still stuff out there for you. It's still worth checking out. So whitecoatinvestor.com paid surveys hey, I need to say something about April Fool's Day because there's apparently a lot of white coat investors who don't know about April Fool's Day. I don't know if it's because they grew up in a different country or a different culture or maybe just don't.

Pay attention to dates. I don't know. But there's a tradition in the United States to have jokes and pranks and things like that on April Fool's Day. And occasionally on the White Coat Investor blog, we actually run posts on April Fool's Day.

That's April 1st of each year that.

Are not entirely truthful, believe it or not. And so for months after running these posts, I get emails from people asking about them. I've still got people asking me about my Tesla.

All right.

I don't own a Tesla. That was an April Fool's Day post. Quit asking me about Teslas.

Maybe I'll have a Tesla someday.

I'm not against Teslas if you can afford them, but I do not own a Tesla. Nor have we made payroll by shorting.

Ethereum here@whitecoatinvestor.com neither have I disinherited my kids, despite what was written on a recent April Fool's Day post. It was a lot of fun to write.

It was a lot of fun to have my kids read.

I wonder if they took it as maybe a warning shot across the bow. But I have not made steps to disinherit my kids. So stop writing in and asking me to reconsider what I've done, because I.

Haven'T actually done anything.

All right?

It's just April Fool's Day.

It's a lot of fun, but the joke's clearly on some of you that completely missed it. Now, lots of people miss it until they get well into the post, and that's just the sign of a well written April Fool's Day post. But if you get to the end and you still don't know it's a joke, you're not reading very carefully.

All right, don't forget our sister podcast Milestones to Millionaire. These drop every Monday, and we've added.

A lot more content to them based on your feedback. A lot of I don't know that we want to call them Basics or Finance101, but I'm covering a lot of topics there. And if you feel like everything on the maiden podcast is going over your head, listen to those, because we're hitting a lot more of the basics there. Maybe stuff that we covered years ago on the White Coat Investor podcast, but we're getting into that, you know, along with the interviews that we've traditionally done in the Milestones post. But a lot more information there to check out. All right, I've clearly been gone a while because I had a lot to cover before we got into our interview today. Our interview today is super interesting. It's a fellow who invests in real estate, but in a very different way than most of you do. And I think most of you are going to listen to this podcast and go, maybe that's not for me, but that's okay. There's probably a few of you out there for whom this method of investing sounds really interesting, really attractive. And so let's talk about wholesaling, let's talk about fixing and flipping, and let's get jamil Damge on the Podcast Our.

Guest today on the White Coat Investor podcast is Jamil Damji. He's a co host of the Bigger Pockets on the Market podcast and the author of how to Wholesale Real Estate the no Cash Strategy to Build a Scalable Business. He's a co founder of Key Glee, which helps real estate investors find properties, and the founder of Astro Flippy. He's also hosted a TV show, Triple Digit Flip on A&E. 185,000 people follow Jamil on Instagram. Jamil, welcome to the White Coat Investor Podcast.

Thank you, Jim. It's a pleasure to be here. Thank you so much.

All right, well, people don't know you that well, most likely that are listening to this podcast. So let's let them get to know you a little bit better. Let's start at the beginning. Tell us a little about your background growing up and how that affected your views on money.

Oh, love it. So I grew up in Calgary, Alberta. Well, born in Los Angeles, but at the age of 5 my parents moved to Calgary, Alberta, Canada and they both worked very hard. They traded their time for money. My mom was a data entry operator, my dad worked at a truck stop that he actually owned with his brothers. But you know, being self employed, it was really difficult for them. They were had lots of competitors from big multinational corporations who essentially put them out of business. And so I grew up in a, a very tight household when it came to money. And the mindset that my parents had about how I was going to gain financial freedom was a very traditional one. Come from an East Indian background. And so I had two options in life. I was going to be a physician or I was going to be a physician.

Right?

That was it. That was the only way that I was going to be able to make it out. And occasionally they allow you to be an engineer, but nothing else. This was what I had laid out in front of me and I gave it my best, right? I got a bachelor's of science in physiology. I wrote or took the MCATs you guys in America say took, but in Canada we say wrote. I took the MCAT exam. I did fairly well on it. And I got an opportunity to have an interview at medical school and I didn't get in. And it was devastating for me. And I had put so much effort and time into trying. And so the thing was they said we'll try again next year. But I thought, you know, I did everything I was supposed to do and another human being had the ability to decide my destiny. And that was the Aha moment for me, that was the time where I said, I've got to get myself into a situation where I make the decisions, I make the choices, I decide what's going to happen to me, not somebody else. And when I took that approach, it's what led me into being an entrepreneur. I devastated my family in telling them I wasn't going to pursue medicine any longer. I went completely in a tangent from where I had been from physiology to entrepreneurship. Now I'm in a media company trying to convince people in the early 2000s that they needed a website for their business. And so that's where I am. And it puts me in proximity to a real estate investor who I, you know, eavesdrop conversations and listen to what these guys are doing while I'm trying to hawk websites on the, you know, in my full time gig. And I, and I find an opportunity in real estate. So I, you know, one day interject into a conversation these guys are having about a duplex they're developing that they're making $160,000 on. And for a guy like me who just doesn't understand money like that, I, I was all ears. Tell me about it. What are you guys doing now? Of course they said, well, if you got no credit, you have no money, you have no opportunity with us. And then they go on complaining about how they can't find any of these lots that they're bulldozing to build these luxury duplexes. So I find an opportunity. I said, well, what, what if I can find you one of these lots? And they're like, well, good, bring it. And so again, you know, I'm, now my mind's going, the opportunity is there. I have a buyer now. I just got to have a product. So I'm walking my dog the next day and this is the best thing in the world, right? It's serendipity and synchronicity at its finest. Walking my dog the next day, and there was a house that I had actually tried to rent three months earlier, but it was $200 a month out of my budget. Just to give you an idea of where I was financially. $200 decided where I lived. I called the number on the sign. She's still trying to rent the house. I asked her if she'd be interested in selling it instead of renting it. Her, her answer is, well, the price is right. I said, well, what do you want? $350,000. Perfect. I run over to the office, I talk to the guy, what would you buy this house? For 400,000 bucks. Now I got a $50,000 problem to solve. Because I don't have 350,000 bucks, I can't buy the house. So what do I do? I do what I know how to do, which is cold call. I start cold calling real estate attorneys. I get all the way to the letter S because the attorney who answered the phone, his name is David Steed. S, T, E, E, D is how his last name is spelled. And so I get to the letter S. I went hard, and I. He's so fresh out of law school, he doesn't have a secretary, answers the phone, and I tell him what I'm trying to accomplish. I said, I want to buy a house and sell a house. I have no money. Is there a way to do this? And he enlightens me into this thing that's called wholesale real estate. Essentially, I'm able to get control of the property contractually and then sell my contractual rights to another individual and make a fee in the process. And he shows me exactly what I got to do, emails me the contracts in which to do them, and I get the deal done. A few weeks later, I pick up a $47,000 cashier's check, and this guy who had been watching my parents suffer and work for that amount of money, got that done in a couple of weeks, and nothing was ever the same for me again.

So tell us a little bit about what you're doing professionally now. You've got a number of things you have your fingers in. Tell us a little bit about that.

Well, the basis of it is exactly what I just said, right? It's still wholesale. So I built a company now that does this nationally.

Right.

So we find and curate opportunities for developers, fix and flippers, and other real estate professionals who are looking for deals, looking for equity, looking for opportunity. That's what I find. I find the diamonds that you want that you don't have the time to go look for. I'm the diamond hunter, and I'm going to make a little bit of money on the process that you're going to trade some of that potential to me because I'm doing the work, right? And so, because I understand that, I built a company called Keeglee, which you had originally talked about. Now we're franchised in over 118 markets where I have got people who are out there pounding the pavement looking for these deals and selling them to investors. And so my first business is that the next business I have is where I show people how to do it. So there's people who are like, hey, I don't want to work for you. I want to do this for myself. Perfect. Okay, let me teach you. So I have a mentorship program where I teach over 4,000 people how to do what I do. What's the process? Who are the prospects? How do I create the relationships? Where are the buyers? How do you find them? How do you put them together? How do you do this without needing a real estate license and money? So I teach all that. And then, because I gained quite a bit of attention by doing that, A and E came knocking, and they put us on national television. And that's been a blessing and a huge opportunity in my life as well. So, you know, right now, I'm obviously a busy guy, but the beautiful thing about it is I get a lot of purpose. I have a lot of purpose because I'm watching people gain financial freedom. I have doctors in my community. I've got attorneys in my community. I've got engineers in my community. I've got law enforcement. I've got a chief of police. I've got a U.S. marshal. You know, these are people who are learning from me how to do this business model. Right? It's incredible. So to me, it's one of the most fulfilling things because I get to watch people who are essentially trading time for money gain financial freedom by learning a skill and not have to take the risk. Right, because wholesale means I'm trading paper. I'm not buying houses, and then I'm where I'm subject to. To depreciation or a market collapse. I don't. I'm never in that risky situation.

Well, let's talk for a minute, because I think a lot of our audience probably doesn't understand the term wholesaling when it comes to real estate. So can you. Can you define that for us? Explain to us what that means to wholesale real estate?

Yes, absolutely. In the clearest terms, I think wholesaling is where we sell potential. All right, so let's break that down. I have to find an opportunity where there's potential. And you guys can see this all the time in many neighborhoods, right? Let's just say you're living in a gentrifying area, or say you live in a beautiful area, but there's that pimple on the block. There's that house that is. You drive by it every day and you say these people, they're not mowing their lawns, they're not taking care of the house. Something's going on there. Vacant or boarded up, whatever it is these things happen. And there's typically about at any given point, at least 5 million of these opportunities available in the United States at any given day. Five million of them. And so that's what we do in any business model. There's a wholesale step up process. Let's just say you talk about hamburgers, for instance, right? McDonald's. You don't, you go to McDonald's, the patties, the buns, all of it. It started somewhere and every, you know, let's just take the patty, okay? It started in a cow. So from that situation, somebody had to raise the cow, they slaughtered the cow, they then transported it and packaged it and processed it and transported it and transported it again. And then finally it gets to a restaurant. And every one of those step ups there was value added and work done and it got more and more expensive. Well, that's exactly the same thing that happens in a house. You got a hoarder house, for instance. Let's just say this house has been sitting, it's vacant, there's squatters living in it. It's dangerous to the community, it's bringing down the property value. We find that opportunity and we sell it to somebody who's going to beautify it and make the community safer. And for the time and energy and effort that it takes us to do that, we get a healthy fee. That's wholesaling real estate. I'm finding the houses that are problematic and then we are repositioning them or finding opportunity people who will reposition them and do something good with it.

So how does a wholesaler find these properties?

A number of ways. There's some real grassroots ways, like door knocking. You can drive around neighborhoods and look for overgrown weeds and mail stacking up and boarded up windows. But I love a different approach. You know, there's other people who cold call, I'm sure your audience, who have multiple properties because they may own real estate. You're getting these annoying phone calls from people, hey, you want to sell your house? And they text people and they call people all day. That's the way, you know, people are doing it that way. My favorite approach though is I work with relationships, so I've mastered the skill of the referral. What I do is I will create relationships with real estate agents and other professionals, attorneys, others, you know, bankruptcy people, divorce people, all the folks that deal with these sort of distress situations. And I offer them an opportunity of a solution. Now, I may not be the best solution for every house and every situation, but what they'll do is present Me, right? And so let's just say, for instance, you're a homeowner, you inherit a house, and this house needs a tremendous amount of work for it to be financable. You know, you can't just put it on the MLS and have somebody could move in. It's going to need repairs and it hasn't been updated in 30 years. So it's not going to get top dollar. You could get top dollar for it if you had the time, energy, money, resources and skills to renovate it and try. But that's also risky. Let's just say you're a heart surgeon, you inherited a house, you don't really care, you're not going to go, and you're not a designer, you're not trying to do a fix and flip right now. You just want to get rid of the house and get what you can for it. And so like anything else, when you've traded in a car, right, you knew the guy you traded the car into is gonna sell it and make money on it, but you still do it because it's convenient for you. Well, I'm, I'm literally that solution in house. So I make relationships with real estate agents. They present me as the Carmax solution. You're gonna trade your house to this guy, he's gonna make some dollars on it, but you're gonna be hands off. It's as is. They will pay you cash and close quick. Or you can go and fix it and try, or you can go and renovate it and try. Your choice.

So what does it pay to wholesale a property?

On average, I'm making about 10 to 15,000 bucks a house.

And how much effort do you think you have to put in to do that?

Well, it's compound, right? So it starts off with a lot of effort because if you're starting in the beginning, you have no relationships, you have no people, you don't know what you're doing. And so that the learning curve can be, it can be time consuming. You know, typically when a new person starts the business model, I would say it takes them typically 90 days to get a deal done in the beginning. But then, because the way that I teach it and the way that I do it is a relationship based approach, those start to compound. And then all of a sudden, now the phone is ringing, right? So for me, after being in this for 20 years, I don't call anybody anymore. My phone's ringing all day long with opportunities. I've got agents sending me deals all day. And not only that, I've got so many now that my own reps have agents that are sending them deals all day. And so it becomes, when you approach this from not a transactional approach, but a relationship approach like the way we do, it becomes a snowball effect of opportunity. And so now the effort is not nearly as great as it was when you get started.

What do you think you've gotten it down to? How many average hours of work do you put in on one property?

Me personally, right now, I typically see and will look at 10 opportunities a day of which we. I may personally contract one. And how long does that take me? I can comp a house in two minutes. So I'm. I'm probably putting in an hour a day in that. In that space. And that will generate about a $10,000 opportunity for the company.

Pretty darn nice hourly rate, I'd say. So, yeah. All right. So a lot of people talk about wholesale wholesaling. Real estate is kind of the way to break in to real estate. You know, you don't have much money, kind of like your story in the beginning. And that seems like its primary use, I think, for a lot of our listeners. You know, they look at real estate investing and find the hardest part is to find the property. And if they find a property, the last thing they want to do is turn around and give it to someone else. They want to keep it themselves. Why have you chosen to stay in this business of wholesaling rather than go that route?

Well, I don't necessarily give everything up. I mean, I do fix and flip. I have a television show where I'm fixing and flipping houses. So I'm obviously developing. And I do have a healthy portfolio of rentals that I keep as well. But not every deal makes sense for me. And I have to also look at my buyers and say, what do they want?

Right.

I'm not going to keep deals that my buyers want because I want to feed them and keep the relationship going as well. So when you look at it from the point of view of cash flow flow, okay, a buy and hold investor, for instance, they're going to buy a house, they're going to put 20% down, they're going to fix it up, and then they're going to refinance it and they're going to pull some money out. Not all of it, typically, but they're going to pull something out and then it's going to cash flow a few hundred dollars a month.

Okay.

And that's. They say they do that and they add one every year. Okay. That's cute. That's going to make you a couple of thousand dollars, you know, and by the time you're retired, you might have 5,000 or $7,000 a month in added revenue. With inflation the way it is right now, I don. That's going to do. You're going to have some mortgage pay down, which is also going to be good. But there's also going to be tenants who are going to destroy your house in the process. There's going to be all kinds of headaches and problems that you're going to deal with. There's going to be vacancies, there's going to be things, there's going to be Covid. There's going to be black swans, there's going to be issues. Life is not without its problems. So the reason why I've stayed in this process is my company can generate tens of millions of dollars a year in cash flow. And I'm talking about money that I'd have to own thousands of doors to be able to create. But I'm doing it as a business. And here's the beautiful part about it, is one day my business can sell. So I can get a gorgeous multiple for my company that has created this incredible cash flow machine. And I did it. Trading in real estate opportunity without having to deal with the headaches of owning real estate.

So tell us a little bit about.

The contracts that you're buying these properties with.

It sounds like you have options to buy is what. Is what we're talking about.

Sometimes I do it with an option, sometimes I do it with a purchase contract. You know, there's, there's a number of, of instruments that you can use to do the deal. But let's just be simple. I had a residential purchase contract that a real estate agent sends me.

Right.

First and foremost, I need to make sure that my contract is marketable. So there's a thing called equitable interest, and that's what I'm trading in. When I get a deal under contract. I now, I now have equitable interest in that property and I can sell my equitable interest. So because of that, the fastest and easiest and most economical way for me to sell that is by assigning the contract. So I need to have an assignable contract. Now during my inspection period is where I'm making my decision. Am I going to keep it? Am I going to flip it? Am I going to rent it? Am I going to wholesale it? And I disclose that on my contract. In fact, one of the most clear statements on my contract is in the buyer is an LLC in the business of buying and selling real estate for a profit. Buyer may decide during their inspection period to fix and flip, buy and hold or wholesale property. That's it. And the disclosure is there. It's clear as day. And the person who's reading it understands what's going on. And I may wholesale the house. And what was interesting is I thought this was just a hustle, right? In the early days, I'm like, ah, you know, it's only people who don't make money or don't have money or just trying to get started that are doing this. It's not true. As I got more sophisticated and I did better deals and bigger deals, I started doing deals with big companies. I got into a deal where I sold a property to Dr. Horton, America's home builder, Publicly traded company, assigned my deal, made way more money than I did. And it was the right move for the shareholders, it was the right move for the organization. So knowing that, that this concept of assigning contracts, assigning interest, what do you think happens in a mortgage? You know, you go to a company, you get a mortgage and you spend all this time showing them everything about you, opening up your underwear drawer, the whole nine.

Right.

They know your pulse. Five months later, they don't own your mortgage. They wholesale happens. It is a very common practice, the.

Way of the world.

Sure.

Let's switch now to flipping properties. Can you describe that process for our listeners who aren't familiar with the concept.

Of fixing and flipping a property?

Absolutely. So again, fixing and flipping is fully going vertical with an opportunity that you might get from a wholesaler. Right. So for me, I'm going to find a house, going to have a good buyer pool.

Right.

Where is there a demand for me to fix and flip a house? I don't want to fix a house and then have nobody want to buy it. So I'm going to go and do a little bit of research and I'm going to see is there migration here? Are there a lot of properties sitting on the market? Or do houses sell pretty quick once they get listed? What is the finish that people want in this specific area? What level of improvement do I need to have? What sort of design characteristics am I looking for? And if I see something that resonates with me, then I have the a potential deal in my hand. I'll buy that house. And then the process is of course going through the renovation. Right now, luckily, I partner with my sister, who's my project manager, and she's a phenomenal human Being who can orchestrate a renovation project with precision. Even then we go over budget. Even then things cost more, take longer. And all of the things that you could imagine going wrong happen because it's construction. Right. It's never going to be an exact science. And you're doing your best to figure it out beforehand. But typically, you learn as you go. And so fixing and flipping is a. It's a beautiful, fun, risky, very, very stressful business model. But again, you can make phenomenal profits. I mean, my show is called Triple Digit Flip because our goal is to try to make over $100,000 on a fix and flip. And so, you know, does it happen all the time? No. Does it happen sometimes?

Of course.

And do we lose money? Yes. There's lots of risks, right. So our goal is to try to make way more money than we lose. But sometimes you pick a bad horse and things don't go the way that you wanted.

Right.

And so, you know, fix and flip is fun for those people that have the artistic and the patience, and they also have the appetite for getting into a project where you have to make real decisions based off of what. Not what you want, but what your potential buyer wants. And I think that's where a lot of people get it wrong, because they first get into the business and they think what they like, and they put that into the house, and then they put that out to the world, and then the world says, no, that's not what we want. And so you really got to look at trends.

I'm curious if your parents are just as disappointed in your sister as they are in you for not being in medicine or engineering.

Not at all.

No.

No.

She.

They. You know, the thing about us is that, you know, my family, they really gave us and instilled in us this concept of unity.

Right?

And my sister and I had. We've been united since we were young. My. She raised me, you know, I was a latchkey kid. My sister was the one who took care of me. My parents were working all day long, and so I have a really close relationship with her. But, you know, for her, because my culture, we're Indian, right? My sister's job was to get married. You know, that was. She was supposed to go to find a good husband, and I'm supposed to be able to, you know, be a guy who's going to be a good husband. It's. We come from a culture where that was the expectation, and both of us thumbed our nose at it. My sister was not going to be the one who was going to rely on a husband to make her life. My sister makes the life for her husband.

All right, well, let's talk a little bit more about this. You know, you go in, there's this property, it needs help. How do you decide which improvements to do yourself versus pay someone else to do, Particularly in the beginning. Now you're in a different place now in your life, But I imagine there was a time when you flipped a home and did some of the work yourself. How does one decide that what to outsource versus what to do themselves?

I'll tell you the DIY approach. I'm not a handy guy, right? So I. There was never, for me, authentically a time where I did any of it. I just never really got my hands dirty in it. I would rather have paid a person who's a professional to get it done. Now I know people who go and do it themselves. And so that's not to say that I haven't seen it done. Here's the thing, right? People notice quality. And you may think you can paint, you may think you can lay floor, you may think that you can lay tile, but the professional does it straight, right? With the appropriate lines in it, right. And so I've seen a lot of DIY projects just get hammered and on the market because people, they don't. They don't respect the quality.

So you think you're better off, right from the beginning?

I think. I think if you're going to do this business, be a professional at it and hire somebody from the first job.

That'S not the place to make the profit.

No.

Okay, let's talk about upgrades.

Now.

When you go in there, obviously there's lots of things you can do to a house. Which ones provide the biggest bang for their buck?

Oh, I love this question. There's a lot of small things, right? There's, for instance, I love a feature wall. There's these feature walls that we've been putting in some of our houses that are a very Norwegian esque sort of design feature. They're very inexpensive, right? We can put them in for a couple thousand dollars. And I have one in my house that costs $25,000. This big thin wall in my house. I have a huge house, but it's, you know, this. When I got it appraised, the appraiser gave me a value on that wall, just the wall of 150,000 bucks. I put $25,000 in cost into it. And the buyer perception, the person who walks through my house, they're like, I need this house, I love that wall. So I'm always looking at really, really inexpensive but high ROI features.

Right.

So these feature walls are incredible. Looking at the landscaping in the backyard and paying attention to, you know, could I put a little putting green in here? Is that going to attract a buyer and what's that going to cost? So my goal is to, if I'm going to spend a buck, I want $3 back for it. So if I can find a nice inexpensive thing that's going to set me apart from every other piece of product in the market right now, and I can get that done for, you know, a third of what I'm going to be able to get in terms of roi, I will put that in and I pay attention. And here's one of the ways that I do it. Every year we take a trip to Los Angeles and we look at what some of the multimillion dollar mansions have in design quality in the house, and then we see how we can create something similar for a tenth or much less than what this house is presenting right now. And we take those million dollar design features and elements and we put them in our standard remodels. And it makes people's eyes light up like they walk in, they're like, I can't believe that this is in this house. Wow. I can't believe I'm buying this house for $430,000. This is insane. And, you know, and it's, it pays, it pays to pay to pay a little bit more attention, you know, have you ever walked into a bathroom where they did a renovation and they stopped the tile job at the right where the shower head is, and they leave like a foot and a half above of just drywall.

Looks terrible.

It's terrible. Why wouldn't you tile all the way to the ceiling?

So, you know, people talk about doing improvements in their homes and they're happy when they can get, you know, 80 or 90% of the money they got back. You know, that's what you get in a kitchen or bathroom remodel, you know, or maybe, you know, some things that improve the curb appeal. You're talking about 300%, though.

Yeah.

You know, what about those bathrooms, those kitchens, those tile floors, that carpet, that sort of stuff? You have to do that when you flip a house, don't you?

Absolutely. And here's the other piece. When people are renovating their house, they also do it at different times, right? So like they'll, they'll renovate one bathroom and then five years later they renovate another one. And then they renovate the kitchen, and everything's been done at a different time. And then all the materials and all of the design is hodgepodge. You got a 20, you got a 2008 bathroom, you get a 2010 bathroom, you got a 2015 kitchen. And now it's 2020, and nobody wants any of it.

Right.

And so that's problematic. So I see a lot of homeowners that have that house. They're like, well, they describe it as remodel. They say, we've remodeled the home. And then you go and you look at it like, yeah, you did in three different decades.

Right.

And so this is the problem with it. Yes, it's upgraded to you. You love it. But the person who's going to now look at this and say, I'm going to live here, I'm going to. I want. They want it fresh, they want it brand new, they want it today style. And so that doesn't roi for people. The second thing is people are going to retail contractors when they do these renovations.

Right.

So they're paying an inflated price for this stuff. Right. I can get a kitchen done in $7,000. You can't. Unless you're in my business.

Unless you're doing 50 of them a year.

Yeah, exactly.

Right.

Most people go to, you know, a big box store and even they're paying $25,000 to do a kitchen, and it's the lowest grade cabinet that they've got. So there's economies of scale. There's being in the business, there's having connections and relationships and being able to buy stuff at prices that you can't get unless you do this at a volume scale.

So how much can you pay for a property and still make a reasonable profit flipping it? If we're talking about a percentage of the final sales price, how much can you pay? I mean, you gotta be getting these for 60%, 70%, 80%. What can you pay and still actually do?

Okay, that's a phenomenal question. It depends on the market. So I would say a great rule of thumb is to say 75% of the after repair value.

Okay?

So you look at the comps and you say, what would this house sell for? Okay. Then you take 75% of that minus repairs and minus other costs. Okay, so what do I. What are repairs? Right now, cosmetically, repairs are costing about 40 bucks a square foot. If you go full gut, 60 bucks a square foot, that's just back of the napkin math. Then my selling costs, they're going to be about 10% I got to pay two real estate agents, title, escrow, seller policy, all that. So I'm going to subtract that. So If I take 75% of it minus all my expenses, that's my maximum allowable offer. And if you're going to package all that up and put that into like a, like a general percentage, somewhere between 50 to 60% of ARV.

Wow, that would feel like a low ball offer to a lot of people selling their houses.

Well, the thing is it's, it's, it's arv, not equity, right? The, that's an as is value because this house doesn't, isn't worth that without a hundred thousand dollars in, in expense and risk. So you can do that homeowner. I mean, listen, if you've got the money, you've got the resources and you've got the people to do that, to do that job, by all means do it, right? And, and I think that's the question a lot of realtors ask their client. Do you have the stomach and do you have the resources to do this or are you going to let somebody else do it? Because you can. The options are always available, but it's not a low ball because the equity doesn't exist until the risk is taken.

So is there a difference in what makes a property good for wholesaling versus flipping?

I think that they both fall into the same bucket, right? A wholesale opportunity has to have potential and a fix and flip property has to have potential. So they're the same kind of, they're the same property. In fact, I'm wholesaling, fix and flips, right? So I think it's the same deal, but there has to be a little bit of opportunity for you to be able to make money in the wholesale deal. Now again, I don't, as a wholesaler, I don't take my, my profit from the, from the seller. I take my profit from the potential. I do my best to give a seller the top dollar because I'm competing against other people in the business. I'm competing against fix and flippers, I'm competing against other cash buyers. So I've got to be aggressive with my number and my offer is typically higher than my competitors. Because I have bigger buyers, I can do this at a greater scale, right? So I'm trying to give 100% of as is value and take my profit from the potential.

Some critics of flipping suggest that it isn't possible to do it ethically, that the only way to make money is to either steal the property from the seller at a ridiculously low price or to do upgrades that are so cheap that they're really only superficial improvements hiding the real problems. What's your response to that criticism?

I've seen both. I've seen both things happen, right? I've seen people go and make some ridiculously low offers to sellers who are unsophisticated and don't understand what they're doing and take advantage of people. I think it's terrible. I've seen fix and flippers go and buy a property and do shoddy work and really, really leave a product that is going to be problematic for a homeowner in a couple of years when all the paint peels off and everything that you hid is uncovered. I think this is a game of longevity and I think your reputation will precede you everywhere you go. And so for me, I again, I'm not for every seller. My situation doesn't work in 95% of the situations. It's not. Your house is going to be too nice. I'm not going to be able to offer on it. It doesn't make sense for me to buy this house because you've already done a lot of work here and you should go to the market and get top dollar. My solution works for people who just don't want to bother with it. There's some people who just will trade the opportunity for the convenience. They're aware. They're aware that they don't want to renovate the house. They don't want to do any repairs. They just want to sell it as is and, and move on. And that's when I come in. And so the matter of what we're talking about with respect to ethics, right? Because if we're going to say that making money is unethical, then we shouldn't be in the country because we live in a capitalist country where we make money on everything we do. Everything is pro. It becomes a product. And everything has, even the news we watch, everything is revised, right? So if you are going to make money and you're going to do this, everybody who goes to work today is trading their time for money. Every business is out there buying something lower and selling it for more. That's the, that is the purpose of a capitalist economy. That's what we do. And so when a fix and flipper makes a profit on a house, they are feeding their families, they are feeding a group of people in the process. There's so many folks that make money and are paid in the, in the, in the whole economy. Of a flip. I don't think there's anything ethically wrong with making money, right? It's just people all of a sudden say, you can't make money on that. You can't make money on that. You can make money over here, you can't make money over here. You can make money over here. And then, then we get into this whole craziness of like, what are we really talking about here?

Right?

The facts are, is that it's a business. An LLC is formed to make money. And, and if it's not, then we shouldn't be calling ourselves business people. And, and people should, you know, we should figure out how we can all just live on the same dollar. And, you know, why did you become a doctor instead of a nurse? Or why did you become a doctor instead of the custodian? You know, I mean, yeah, they all get paid differently. They work in the same building.

You know, I, as I drive around, I see these signs. We buy houses and a phone number, and somebody takes them down every few days and they're back up a few days later. What do you think of that marketing approach? That approach to finding out?

Well, that's called a bandit sign, and it's illegal. And so that's why they take them down, because the bylaw enforcement comes and takes them down and then people come and put it back up and they, they, they in fact annoy me because they, they make the coroners ugly. And, you know, I think that they're kind of literally, they're littered. The only people who get away with it legally are politicians. And even then, I don't like them.

Right?

So for me, bandit signs, I, it's not my favorite approach. I think it's. They call them bandit signs for a reason, because you're a bandit when you do it.

Right.

I, again, the way that I do this, and especially the approach that I take by working with real estate agents. See, a real estate agent is a fiduciary. Their job is to do and present the best case scenario and the best option to their client. When I am in the deal, the real estate agent has looked at it, They've talked to their clients, they've explained all of the other opportunities and ways that this deal can get done. And when they select me, their fiduciary has helped them make that choice. And so I put myself in a very good situation because how I handle this business and how I handle my transactions, I don't use predatory contracts. I use licensed professionals in all of my renovations. I work through licensed Brokers who have ethics and codes of standards that they adhere to. My own staff hold real estate licenses when we don't need to. We do it because we want to also operate with fairness and through the standards of practice and ethics that are out there. And so I've set myself up to do this in a way that doesn't have the stigma of unethics or predatory approaches. Again, I'm not for everybody. I'm for the people who see the convenient solution as the way they want to go. And that's just business.

You know, there's a promotional quote from one of your websites. It reads something like this. As someone who just six months ago was sitting in my room playing Fortnite 10 hours a day, $30 in my bank account, lost in life with no idea of what I wanted to do. Defining the niche of wholesale real estate from 14 year old in a TikTok video shows anything is possible. $21,000 might not be a whole lot for some of you, but for me this is only a start to a dream come true. Now this is a very different situation from most of our listeners, some of which have money and some don't, but all of which are busy. Are wholesaling and flipping really good methods of real estate investing for our audience?

They are if you are interested in doing deals, right, like you've got to really enjoy the art of the deal to want to be involved as a wholesaler or fix and flip, you know, like you've got to want to have to do this. It's not something passive. This is not a passive approach to real estate. And again, when you're wholesaling, I wouldn't necessarily even call it investing. We're trading, right? We trade and even fix and flippers are trading just on a longer time scale, right? Investing in wholesaling and fix and flipping. I think they're in different buckets. An investment is I'm going to park money here and I'm going to watch it appreciate and I'm going to take some cash flow from it and it's going to grow. Wholesaling is I'm going to create an opportunity and I'm going to sell the opportunity and make some money and I'm going to do it again and I'm going to do it again and it's my business, right? And so there's going to be people. And again, why have I attracted physicians into my world? Why have I attracted dentists and engineers and law enforcement and all these folks that come in here and do this Business with me. Why? Because the thing that they're doing right now isn't interesting to them anymore. They maybe did it for the wrong reasons, you know, but they have a lifestyle. I say, you know, I have a, I have a physician in my community who was making hundreds of thousands of dollars a year. And after the stress of what happened in the pandemic, she was done. She just didn't have the same love for the role any longer. And to her, she'd always been interested in real estate, but she wanted to get in in a way where she understood how to find opportunities and how to really do this at a way where she could spot the deal. So she recognized that learning how to wholesale was gonna be her path to being able to do more and actually make more in all of her investing. So she's using wholesale as, hey, I'm gonna find my deals, I'm gonna cherry pick the best deals, I'm gonna learn how to wholesale, I'm gonna sell the other ones off, then I'm gonna do five to six projects a year and I'm gonna triple the income I made as a physician, as a wholesaler and real estate investor. And some of these I'm gonna keep for my portfolio. And I think it's a phenomenal approach. But again, for the person who's passive that's looking at this, I'm not for you. You're not gonna passively wholesale anything. But if you're looking at this situation, you're like, yeah, you know, that makes sense to me. But I don't wanna give up my $40,000 a month lifestyle. I'm probably the guy you should talk to.

Yeah.

In some ways, maybe viewing it more as a side gig than an investment.

It starts as a side gig for a lot of people, then they get obsessed and then they can't. They get a taste of it, they do a few deals and they're like, gosh, I can't make money like this in my W2.

Yeah.

All right, well, our time's running short, but by the time this is all said and done and everybody's listening to this podcast, 30 or 40,000 high income professionals out there are going to have listened to this. What have we not talked about already that you think they should know?

I think that if you're, you know, a lot of people get starry eyed watching the home renovation shows, mine included.

Right.

And I, and I've seen a lot of professionals get involved and they make these grave mistakes in doing it.

Right.

I would say that it's probably not the greatest thing to try to get into real estate and start flipping houses if it's not what you're really passionate about, and if you don't have a pedigree in doing it, you don't have people, you don't have professionals that you can rely on to help you make decisions and choices. So I would, I would caution. I would caution the people who are watching the programming who are, you know, getting interested in real estate, but have limited knowledge on how to do it correctly. Be careful, right? Be careful about what you're doing. Find people to partner with. Find good professionals, trustworthy professionals that are doing this at a high level and partner with them and figure out this whole world before you dive in and get involved in a situation that could literally take away your 401k. Right? That's. That's the thing. I, I think there should be caution in this. And I think that a lot of people have, have taken the HGTV and the A E and all the things that we show you guys on television, and it's simplified. We do. We got to show you how to do this in 42 minutes. But let me tell you what, this house didn't take 42 minutes to flip. It took seven, eight months and a lot of sweat and a lot of heartache and a lot of money and a lot of risk. So understand that we can't tell you the story of a house in 42 minutes. We can only give you the Cliff Notes version. And you didn't pass medical school reading the Cliff Notes version of your organic chemistry textbook.

Yeah, for sure.

All right, well, we've been talking with Jamil Damji. You can get his book, how to Wholesale Real Estate, the no Cash Strategy to Build a Scalable Business. You can listen to his podcast, it's the Bigger Pockets on the Market podcast. You can check out his businesses@keegli.com, astro flipping.com and you can follow him on Instagram, TikTok, YouTube. He's all over the place. You can even go to his personal website at JDAMgee. Thanks so much, Jamil, for coming on the White Coat Investor podcast and explaining the world of wholesaling and flipping to us.

Appreciate it, and thank you guys for listening today. Have a wonderful, wonderful day. God bless you.

All right, I hope you enjoyed that interview as much as I do. He's well spoken and puts out, you.

Know, some great material. You can tell he's. He loves teaching and mentoring, and so that's why he's got a business doing that I love seeing people that have been successful, especially people who have had, you know, maybe a hard time growing up, maybe had some rejection in their life. You know, he mentioned at the beginning getting, you know, didn't get into medical school. And for lots of people, rejections like that can have a significant impact on the course of their life. And in his it sounds like it was mostly a positive impact. So I think that is a beautiful thing. But I hope you learned something today about wholesaling, about fixing and flipping. I know I did and that it was useful. Now am I planning to go out there and become a fix and flipper?

Absolutely not.

My life is way too busy as it is. But for some of you, maybe that is your best method of investing in real estate.

At some point in our financial lives.

It will be time to buy a home.

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