Aileen (00:01):

Thank you, everyone for joining today’s episode of the, how did they do it Real estate podcasts. We are your hosts Seyla and Aileen and today’s guests. We have Paul’s [Inaudible]. Paul is the co-founder of great builds, an online concierge that connects homeowners with general contractors for their renovation prior to great builds. He spent over 20 years in real estate, investing as partner at Westcliffe Realty and as partner at RP DK associates. Paul has also flipped over 350 homes. Welcome to the show, Paul, how are you doing today?

Paul (00:31):

Hey, thanks. Thanks for the intro. It’s great to be with you guys today. Thanks for having me.

Aileen (00:35):

Thanks for taking the time to be with us. So can you start off by telling our listeners a little bit more about your background and just, how did you get started in real estate?

Paul (00:44):

Yeah, of course. The very quick cliff notes are I did a masters for in real estate development at USC. Then I went on spent 10 years working for real estate developers, working for other companies. And then I went on my own. I had a small private equity fund where I put together a little bit of family and friends money and we invested in other people’s deals. We invested in probably 30 deals of all different kinds. And then the next phase of my life, I spent 10 years flipping homes. I had a partner and like you mentioned from 2009 to 2019, so about 10 years we flipped a about 350, probably over 350 homes in Southern California, a lot of back in the day, a lot of foreclosures, short sales res, and then I quit doing that. And now I’ve started this company, great belts and here we are today.

Seyla (01:45):

Awesome. So, Paul, you mentioned that you and your partners have flipped over 350 homes in the, from 2009 to 2019 where you’ll be able to share with us of how you’re able to flip that at that capacity. Is there a strategy that you guys use?

Paul (02:04):

Yeah you know, I think like anybody else unless you’re a big company and we were not, and we were not a big company, we were just two guys and not a lot of money. You start with one, it’s as simple as that, I still remember the very first flip, you start with one, you finish one, then you do two, you finished two, then you do four. So I remember our first year in business, we did one a month. So we did 12 homes. The next year we literally doubled it. We did 24 and then we did 48. There’s no magic to it. You just start with one. And then you, we needed to, we needed to staff up. So we got some staff we needed to raise money. So we raised money, but literally it was just one at a time.

Paul (02:50):

Our strategy was, everyone has a different strategy for flipping homes and we didn’t have any experience with it other than just normal real estate experience. But our strategy up front was let’s get to know as many real estate agents as we can in, in, in Los Angeles. And we would just get on the phone and we would say, hi, Susan I noticed you have a listing this property [inaudible] and you know, back then Susan or the real estate agent would say yes, but I have 20 offers. I’m whatever we’d say, okay, no problem. But do you mind if we exchange information? So for the next one you can call us, we can call you. So I would literally make 20, 30, 40 of those phone calls every day and my partner would, and we’d have a spreadsheet and we got to hundreds and hundreds of hundreds of agents. And if you can believe it towards the end, maybe the last three or four years of doing what we did, we almost never had to look for homes. Deals, deals always came to us because of our network. So that was probably the best strategy we had.

Aileen (03:54):

Oh, wow. And were all of these homes that you’re flipping where they’re all in the Los Angeles area or? Yeah.

Paul (04:01):

We stuck to Southern California at the area was first. It was really small. Like the San Fernando Valley, we were really comfortable and slowly we kind of went outside our comfort zone and just kept growing and growing, growing. But, but I will say that, and we never really had the desire to really go outside the area. But one time we said, Oh, we’re good at this. We’re going to try Orange County. And we flipped two homes in Orange County and we lost money on both. So it taught us that we’re going to stay closer to home.

Seyla (04:31):

So, Paul, what is the one thing that contributed to your success of flipping those 350 homes? If you can share with us.

Paul (04:39):

Yeah. One thing which is, you know, what I already mentioned was just network, network, and network. Most of us, aren’t comfortable going up to people and saying hello or making cold phone calls, but you have to do, what’s not comfortable. It’s not comfortable to me. I’m, that’s not the kind of person I am, but we had to get out there and just do it. Network, network, network. You have to, I think you have to be patient. I think you have to. I find myself in a lot of people that I know they get, they fall in love with deals. We find a deal and it’s so exciting and we fall in love with it. But we have to just be rational and we have to make good decisions. I learned early that you make your money on the buy, right? You make your money on the purchase.

Paul (05:22):

So you have to be rational about what you really have. And that’s why I always really enjoyed having a partner because I liked the idea that we can do you like the house? Do I like the house? If we both like it great. But if one of us doesn’t like it, you know, there’s probably a reason then I might just be a little bit irrational about it. So I like the idea of always talking about deals together and getting two perspectives. We always, we had an agreement with my partner. One person could veto a deal if one of us doesn’t like it, we kill it. So anyways, that’s a couple of a couple of ideas.

Aileen (05:55):

No, it makes sense. And it’s good to have open up front conversation in the beginning to set expectations. And so for the homes that you were flipping you said it was just you and your partner. How are you able to, like, from the financing side of it? Like, how are you able to scale so quickly? If you can talk to that a little bit.

Paul (06:15):

Yeah. So we first found one or two investors in our network and it was literally we would tell them, we want to flip this house. Are you okay with that? They would, they would put up the equity. We would put up the money to renovate and the time, obviously the effort and it would literally be a 50 50 split. And it was one house at a time. We would just say, look, we’re going to do this one. You’re going to put up the money. And if we make money for you, hopefully you’ll invest in the next one. And that’s what happened. So we probably did that. We, we did that with one investor. Then we found another investor that was able to do it because of our track record with the first one. So I think we got to the point of where we had four investors and they did one house to house three house, whatever. And then after maybe three or four years, we decided to start using hard money loans because it was cheaper. And so probably, you know, for the last 250 homes, we just used hard money to finance every single one.

Seyla (07:14):

Got it. And then in your bios, you now co-founded create bills. Will you be able to talk a little bit about great Bill’s company and what was the motivation to great company?

Paul (07:28):

Yeah, yeah, of course. So when I was flipping homes the stories I’ll try to keep it short and stories a little bit long when I was trying, when I was flipping homes, the, one of the hardest part about flipping homes is finding a good contractor, right? So you have to fix it. I don’t know how to fix it with my own two hands. So I had to find a good contractor. So if I find a good contractor on a home, it would be good. I’d have a good experience. If I ended up with a bad contractor, it would be just, it would be misery. It was just hell you’d show up to the job. They weren’t there. The work was terrible. I once had a, I once had a contractor paint over wallpaper. I said, no, you have to take the wallpaper off.

Paul (08:05):

Anyways. I have horror stories, but the point is I knew that. So then the other thing that I noticed is whenever I met somebody new and I told them what I did, I told them, I flipped homes. They’d want to talk to me about one of two things. One how they were, how, when the last time they remodelled their home, it was a nightmare. Right. And, and of course, I know that happens a lot. And number two, they’d say, oh, this is what you do. Great. I’m thinking about remodelling my kitchen. Can you recommend a good contractor that everybody would talk to me about those two things? And I thought to myself, maybe a couple of years ago, two, three years ago, this is hard finding good contractors. Why is this so hard? I did. And so I did start doing a little bit of research online, and I found this really interesting survey that was done a couple years ago.

Paul (08:52):

And the survey showed that they interviewed people after they remodelled. And it showed that over 50% of homeowners that remodelled were unhappy with their experience or their contractor. And it kind of blew my mind. I don’t know any other industry where 50% of the consumers are unhappy. Right. And I thought, how is this is crazy? So, so let’s, let’s think about how people find contractors, right? And I thought we’ve came up with the fact that really, there’s only one good way to find a contractor, which is ask a friend or a family member for a referral for someone that they used and they liked. And if you can do that, I think you’re going to be in great shape. You’re going to get referred to somebody. Good. But the other way, there’s no really good other way. The other way is sift through your junk mail in you know, for flyers for contractors go on a review site like Yelp, well, there’s over 20,000 general contractors in LA County.

Paul (09:48):

So how do you pick? So we, so we started this company called great builds to kind of serve that need. And what great builds is it’s kind of a matchmaking company. So whole, it’s a free service for homeowner’s realtors, investors that need a contractor to renovate. And we match them up with pre-screened reliable contractors, who we’ve already gone through a vetting process with to make sure they’re legitimate and good. We go through a really rigorous process. We really only want to bring in the good guys and we match them with these homeowners or investors let’s say. And then we stay involved through the entire renovation process so that if there’s any issues along the way, and there’s always some kind of issue we can step in and get involved and smooth it out and make sure that to keep the contract for accountable. So we’re kind of the matchmaker and service provider.

Aileen (10:44):

Well, thank you for sharing. Earlier I want to get into a little bit more about the great builds and how you met your sponsors. But before that earlier, you mentioned about horror stories. And so I was wondering if you could share a horror story that you’ve countered flipping homes. Yes,

Paul (10:59):

I have. I have a great horror story. I mean, I have a few, but I like this. I like this one the best. So I was flipping a home in the Valley and it was like October or November. It was like probably right around now. And so the weather was fine. I mean, it was, it just went from a hundred degrees. So the weather, it was really nice and it was time to replace the roof. So the contractor said, I’m going to tear off the roof on Thursday and put the new roof on Friday. It’s a two day job. Okay. No problem. So he came in, he tore off the roof on Thursday, and then he said, Oh, I’m sorry. I got some things, some emergency, you know, some excuse. I’m not going to come back to put on the new roof on Friday. I’ll come back next week. And it rains.

Paul (11:50):

So it rained on my house that doesn’t have a roof. So you can just imagine how I was. And the fact that the whole thing got flooded were taken off drywall where, you know, it was, it was a nightmare anyway. So then he puts the roof on and, and, and we go on and I’m like, okay, that usually every house has at least one big headaches. I said, okay, that was the headache for that house. So we put everything together. We closed it up. We’re about 99% done. And then the water heater inside the house bursts and floods the house a second time. So I had a house with two floods.

Aileen (12:27):

Oh my goodness. What happened afterwards to that house?

Paul (12:31):

I mean, it sold just fine, but yeah, well, we didn’t make a lot of money because we had to fix it three times, you know, three times.

Aileen (12:42):

Oh, that was a, that’s a triple nightmare, I guess then

Paul (12:45):

That was a doozy. You can be flipping homes, you got to be ready for that kind of stuff and take it with a grain of salt.

Aileen (12:52):

Thank you so much for sharing.

Seyla (12:56):

And I want to ask about a great bills. You mentioned that you have a vetting process in place to making sure that you pre-screening the contractors. Will you be able to walk our listeners through the vetting process?

Paul (13:08):

Yeah, sure, sure. So we came up when we started the company, we said, okay, how can you tell the good contractors from the bad contractors? It’s not that easy. Right? Most people, I interviewed enough people to, to ask them, how did you make a hiring decision? And most people essentially came up with two things. One is price is the con, it was the contractor priced. Right. And number two was, Oh, my gut. Feeling about them. How did I feel? Did I like them? Did they seem nice? Did they smell good? When, when you meet with them, the problem with that is they’re on their best behaviour. They’re trying to sell you. And so it’s not, it’s not enough, it’s a good start, but it’s not enough. So we put together this 10 point screening process that we put every contractor through.

Paul (13:55):

Licensed check goes without saying, you want to check the contractor, state license board, not just for the active license, but that they’ve been licensed for a certain amount of time. They have experience five plus years and that there’s no derogatory issues on their license check their insurance, or even call their insurance broker to verify they have a liability. And workers’ comp we run a background check to make sure that there’s no bankruptcies, no lawsuits, and no criminal records. So that’s important. We checked experience to make sure, you know, permit records to make sure they’ve been working in, you know, in the area for a while. We do reviews and social media checks. That’s easy. You can go online and do that. We have an in-person interview with the management, you know, the owners of the company. We always, always, always call their references to make sure that old clients were happy. And we don’t just ask, like, were you happy? You know, did you like them? We ask things like, if there’s one thing they could have done better, what would be? And that’s when people start opening up. And lastly we make all our contractors sign a code of conduct. We’ve created 20 points. Here’s how we expect you to behave, to act with our clients. Here it is. You sign it. If you’re signing it, we expect you to uphold it. And that’s, that’s our screening process.

Seyla (15:12):

Wow. That’s pretty thorough.

Aileen (15:14):

So what happens if a client and a contractor have come to a district admin and they’re unable to resolve the issue, how does your company get involved?

Paul (15:23):

Yeah, we try to so we try to limit that as much as possible by screening the contractors, number one. But it will, it can happen. It does happen. What we want to do is sort of play therapist. We’re not, we don’t have any legal abilities to make them, you know, settle anything, but we try to play therapist. Usually the client, there’s some kind of miscommunication. There’s some kind of issues we want to listen and we want to be responsive with the contractors. We can go to them and say, look Joe you’re great. We’ve worked with you for a while. We give you lots of jobs. Mrs. Smith says you know, your guys are not a, you know, you’re not locking up. You’re not closing the door or whatever the issue is. Whether it’s a valid issue or not, I’d like you to address it because we want to make Mrs. Smith happy. If you make Mrs. Smith happy, you make us happy. And if you make us happy, we continue to send you jobs. They usually, maybe they don’t, they don’t always care about one client because it’s just one client. Although our contractors are pretty conscientious. They believe in doing good work. They they’re going to act on our behalf because we continue to send them really great clients. So we have a little bit more power, a little more cloud.

Aileen (16:45):

Makes sense. Thank you.

Seyla (16:47):

And then let’s say I will be your client what would a client expect from the service where you’ll be marching us with multiple contractors and have us choosing of how does that work?

Paul (17:02):

Yeah, that’s a great question. So first thing we want is we want the client to call us. They’ll call my staff and they’ll have as long of a conversation as they want, as they need. Our staff will take the time to answer your questions. Do you want to talk about budgets, your project length? Let’s answer your questions. First. You tell us about your vision, your timing, your budget, your location. Then we’ll go back and based on what your project needs are, we’ll try to match you with the best three contractors that we think are a good fit they’re available. They work in your area. Budget wise, they should be a fit. We’ll send them to you at, you know at a time that works for you. They’ll bid your job. You’ll decide if you like the price. You’ll decide if, if you connect with them, if you like them we have no say so obviously. And if you end up hiring one of those guys then we’ll stay involved with, through with you throughout the whole project. So we’ll be checking up with you every couple of weeks, and you’ll know that we’re always there in case there is a question. There is a, an issue you want to talk about pricing. You want to talk about materials. You want to talk about whatever questions we’re also there, but we will be checking up. So we’ll S we’ll just stay there the whole time in case anything.

Seyla (18:22):

Got it. And how hard it is to switch a contractors. A one is already working on a project.

Paul (18:30):

Hard. It’s hard, it’s painful. You know, we notice a lot of people, you know, we see what people are searching online. You know, part of our marketing, a lot of, a lot of people search for fire contractor, how to fire a contractor, because if you’re want to fire a contractor, you’re really mad. I mean, something’s really gone wrong, but, but it happens like we said to 50% of people. So it’s hard because number one, you have to find a way to cut them off. You have to say, I’m not happy with you. I want you off my job. Okay. They’re going to say, great, fine pay me. And you’re going to say, well, you don’t deserve to be paid this much because you didn’t, you didn’t do good work. So there’s always a fight. So point of fire and contractor, it’s no fun. And then on the other side if you end up with a bad contractor, need to fire them, it’s not that easy to always find a new contractor that wants to come in and start in the middle of a job. You know, not a lot of contractors don’t want to do that because they don’t know how, what, what the other guy did. And anyways, it’s a headache. So you’re much, much better off getting the right guy from the beginning for all those reasons that, that, that you made.

Seyla (19:44):

So that’s why it’s very important to choose the right contractors at the very beginning. Like you mentioned. So that’s why your company come in and my chain and it three, the first three are not working. Then you eventually, it’s going to be sending additional contractors until you found one that works for your project.

Paul (20:00):

No question. I mean, you’re absolutely right. I mean, look, you have to match personality. I said, gut is not always the best, but you do have to mesh. So we’ll send three. Every once in a while, someone will say, I loved all three. They were great, but usually they’ll like somebody better than somebody else because they, they, they meshed and they had a good conversation. Some clients want to drive the vision that they want to tell the contractor what to do. Other clients want the contractor to give ideas everybody’s different. So three is a good start. Yeah. If they’re, if they don’t mesh with any of those three, we’ll send them more. But three is a really good start so they can get an idea. They’ll get three bids. They’ll get an idea for pricing. It’s a great place to start.

Seyla (20:48):

Yeah. So obviously this is going to be a lot of work for your company under the pilot. And you mentioned that you offered a service to the clients for free, why for free and how your company is going to make money.

Paul (21:03):

What’s the catch, right? What’s the catch? So what we decided to do, we thought it was important that the clients can talk to us for free, because even if they don’t choose a great belts contractor, it’ll get them further on in the process. We want to be helpful to them and they could, you know, go on and choose whoever they want. So the way we make money is if one of our contractors is hired by one of these great clients who we match them with, then only then will the contractor pay us a success fee, a little commission for matching them up with a great client. So we get paid by the contractors if they get the project.

Seyla (21:41):

Got it. So from a client perspective, obviously there’s nothing else. There’s nothing to lose of trying to service out. Okay. And then is your company a national at a national levels or at specific region at the moment?

Paul (21:56):

Yeah, I wish one, one, one day. No, so we started only a couple of years ago and it’s just Southern California for now and I would love to I’d love to broaden that out to California and then nationally, but really I want to it’s a slow company to grow because, and that’s okay because I have 50 contractors in my network right now, plus, or minus, I don’t want to add a thousand tomorrow. I want to add two a month, but the right two or four a month, the right guys because as soon as we have a bad one that bad Apple is going to create problems for me and for the client. So we just want to add slowly to the, our contractors to make sure they’re the right guys. And then and grow it sort of organically.

Seyla (22:43):

Got it. So you want to grow it in quality? Not quantity. Yeah. So making sure that everybody’s coming in and work perfectly with the company and the clients. So you mentioned about California. So I want to talk about a project itself. You you’re aware already about the accessory dwelling units 80 years in California. Can you talk a little bit about ADU in California and how is that affecting your business?

Paul (23:09):

Yeah, of course. So if you can believe it about 50% of our calls of our clients nowadays are 80 use, you know, kitchens, bathrooms, additions, remodels, but about 50% is, is accessory dwelling units. So there’s quite a few, it’s quite a popular project because the laws have changed. Like you mentioned. It was only a few years ago that LA County was permitting maybe two or 300 of these. Now there’s over 15,080 use and in different stages and process. And so for your listeners you know, the state changed the laws. So it made it much, much easier to do a, an accessory dwelling unit, which is essentially a small home in your backyard. You don’t need any discretionary approvals. You don’t need any city council approvals, you just need to design your plans and submit them to the building department.

Paul (24:06):

And essentially the state has reduced requirements with regards to parking with regards to the fees involved limited amount of approvals. Like we said, they reduced the setbacks that on your property, you can build within four feet of your side yard for feet to your backyard. They allowed these to be rental units. Whereas in the past they would never allow you to rent these things. So there’s so much flexibility with 80 use that we’re getting a lot of interest from clients to build, you know, these accessory dwelling units in the backyard. And then the last thing we’ll say is we also, what’s interesting is we also ask our clients for what reason, what’s the use case that they’re building 80 users and we’ve heard some pretty interesting ones that I thought would be interesting to mention investors like myself, or are, are building them for rentals, buying a single family home and essentially making a duplex because you could rent both units, right?

Paul (25:05):

First time buyers in LA we’ve heard from those kinds of clients, they are priced out of the market. But if they buy a starter home and build an ADU or convert the garage and rent that that goes to paying helps to pay their mortgage. And that makes it cash flow. People are building 80 use in their backyard to house, let’s say an aging parent, you know that in the time of COVID, they don’t want their aging parents live in a community. So they’ll put a house in the back for them, or I think the most ingenious one I’ve heard a few times now is a retiree who lives in a home and it’s paid off, let’s say, they’ll build an ADU in their backyard. They’ll, they’re going to move into that ADU because they don’t need as much space anymore. It’s just one or two people they’ll move into the ADU and then they’ll take their front house and rent it. And that rent will essentially subsidize their lifestyle as a, as a retiree. So, so many nuances, so many interesting ways. And that’s why I think we’re seeing so much interest here.

Seyla (26:06):

Got it. And then for the ADU, is there any minimum square footage and any requirement for the ADU in order for the cities to approve, for example, Clyde toilets or kitchens or something like that?

Paul (26:22):

Yeah. It’s so let’s see, they can be one or two stories. Like it can be attached to the house or they could be detached from the house. The maximum square footage right now is 1200 square feet, which I think is plenty big. We’re seeing a lot of clients just convert a two car garage, that’s 350 to 400 square feet. But essentially an ADU is a living space. So you want to have some kind of kitchen or kitchenette. You want to have a bathroom. And you know, you want to have a living space and whatever number of bedrooms you like in terms of, in terms of approvals, as long as you meet those same requirements, as long as you’re meeting the setbacks and a good architect or designer can make sure of that. Most of these are getting approved. There’s a few caveats, you know, if you’re in a fire zone or a hillside zone or some other issues, there might be some challenges, but essentially the state have said, if you own a single family property or a multifamily property, regardless of the lot size, no minimum, lot size, you should be able to build an ADU. They’ve made it very far.

Seyla (27:32):

Got it. Thank you so much for sharing your knowledge on the 80 years for California. So what is next for you and your company?

Paul (27:41):

Yeah, I just expanding, I just want to expand and help more people here in Southern California. You know, I know that it’s and it’s hard as investors, as homeowners. It’s hard to find a contractor and we’re just trying to make it a little bit easier and we want to be there as a service provider. So I’d like to keep growing in Southern California helping people here. We’re slowly growing into Ventura County in Orange County and then hopefully one day cover all of California and go from there.

Seyla (28:16):

So how has real estate investing impacted your life so far?

Paul (28:22):

Yeah, I mean, its look for me. It’s been, it’s been great. I bought my very first investment home when I was 23 years old. And I wish, you know, if there was a lesson I would’ve told myself when I was younger is never sell. You know, you want to hold on and never see, even if it seems appealing to sell you, you really want to hold on. I think look, it’s helped me build a nest egg retirement. You know, if you can just like flipping homes, if you can just buy one, even every year, even every couple of years you put a tenant in it, rents usually go up over time and your mortgage always goes down over time. So it seems like a long time, 30 years, you know, to pay off a mortgage, but the sooner you buy it and, and you just build one after the other after the other. And that’s, I think that’s a good option for potential young investors. It’s essentially helped me create a portfolio where you know, I’m building a retirement nest egg and I think that’s helpful for everyone.

Seyla (29:26):

Awesome. And what is one thing that sets the successful people or people applied in the real estate investing business?

Paul (29:34):

Yeah, I mean, I would say two things that I’ve, I feel like I’ve mentioned, but I can reiterate one, what I just said, which is patience, you know, and real estate is not a get rich quick business. Your rents are not going to double tomorrow. Like maybe the stock market can. So its patients it’s buying one deal, renting it, buying a second deal, whatever it is, improving it, and flipping it. So patience is one. And number two, which I talked about at the very beginning is you have to get out of your comfort zone. The only way to find deals is to be to know people, to know real estate agents and lenders, and whoever is in the flow of deals [inaudible] deals. Aren’t going to fall in your lap. You have to go out and find them and the best way to find them is to be in touch with people that that have access to deals. So you just you’d have to network, network, the more people, you know, that increases your likelihood of opportunity, simple as that,

Aileen (30:44):

What tool or techniques have you used to improve the efficiency of your business or personal life?

Paul (30:51):

Yeah, I mean I think especially these days, limiting distractions, staying focused, taking the long patient view and also you know, when I was growing up, we didn’t, we didn’t have this. I feel like I’m making myself sound old, but there are so many resources nowadays, right? This is one a podcast where someone’s going to, you know, listen and learn something. Probably not a lot from me, but maybe they’ll take something away, maybe one thing, podcast classes books, webinars there’s. So, you know there’s so many resources available that I think that just taking the time to listen to something, increase your knowledge every single day has really has really made a difference to me and has been helpful.

Aileen (31:45):

Thank you. And if our listeners wanted to find out more about you and great builds, where can they go?

Paul (31:51):

Yeah. Our website is great builds.Com. That’s G R E a T B Y L D Z. So there’s a z@theend.com. I’m on LinkedIn or my email is Paul@greatbelts.com. So feel free to contact me. I’m always available to help or coach or mentor or if you want to talk bad contractors, I’m always up. I always, I always have a good story about those. Yeah, that’s the best way to get hold of,

Aileen (32:17):

I don’t know if you can talk the roof story though.

Paul (32:22):

That’s my favourite. I have a few of it. That’s my favourite.

Aileen (32:25):

Awesome. Thank you so much, Paul. I really enjoyed having you on today.

Paul (32:28):

My pleasure. Thanks for having me. You guys be well.

Aileen (32:31):

Thank You.