(intro)

Welcome to The Gold Collar Investor Podcast, with your host Pancham Gupta. This podcast is dedicated to helping the high-paid professionals to break out of the Wall Street investments and create multiple income streams. Here’s your host, Pancham Gupta.

Dave Zook

Hey, this is Dave Zook. I listen to Pancham at The Gold Collar Investor Podcast, and so should you.

Pancham Gupta

Welcome to The Gold Collar Investor Podcast. This is your host, Pancham. I really appreciate you for tuning in today. My guest is Leka on this podcast. She is a real estate developer and broker based in Seattle, Washington. She is the president of Rehabit Homes, a company focused on residential and commercial redevelopment. She has spearheaded hundreds of transactions, developing around 100 million in real estate. 

Leka brings eight years of experience in construction management and redesigning. She has been featured on numerous podcasts and other media, including Business Insider and BiggerPockets. She is a chapter contributor in a recently published book, The Only Woman in the Room. In an effort to give back to the community, she hosts a popular virtual networking mixer, Real Estate at Work, featuring prominent speakers from the industry. Leka moved to the US from India 14 years ago. Prior to investing in real estate, she worked at Nordstrom Corporate in Merchandise, Strategy and Financial Planning.

(interview)

Pancham Gupta

Leka, welcome to the show.

Leka Devatha

Thank you, Pancham, for having me.

Pancham Gupta

Well, it’s such a pleasure to connect with you. I’ve seen you all over LinkedIn. I’m really happy one of our common friends connected us. So, thank you for your time. So, before we get started, are you ready to fire up my listeners break out of Wall Street investments?

Leka Devatha

I am so ready to demolish some orthodox ways of thinking, and really help people understand that there’s multiple ways to create wealth.

Pancham Gupta: Love it. So, why don’t we start with your background, how you got started into this business of real estate and, more importantly, the person behind that background?

Leka Devatha

Sure. So, I actually moved here from India in 2006. I had a very vast experience in fashion merchandise and design. And so, when I moved to the country, I worked in fashion merchandising strategy for Nordstrom Corporate. Then one day, I was driving to work, and I heard a real estate investing company that was coming to Seattle for just a seminar. They were talking to people about how to flip homes.

In India, as you know, we never flip homes. We break them, and we build them. So, I was like, “What does that mean?” So, I started really digging into it, because it just caught my attention. It was something that I have to learn. I couldn’t sleep till I actually learn about it. Because it was so fascinating for me. That’s really how my career in real estate started. Back in 2014, I started with one flip. Today I have done over 75 single-family flips.

Pancham Gupta

Wow.

Leka Devatha

Now I ventured into multifamily investing. We can get into my background more later.

Pancham Gupta

Nice. So, that’s a great background. When you came from India, your idea at that time was to work full time in corporate, and just climb the ladder. Was that the goal?

Leka Devatha

My life’s goal has never been that — even coming from India, to hear that I was going to somehow find a path to entrepreneurship. I started my first company when I was 18 years old back in India. I just enjoyed earning a paycheck for myself. And so, I knew even back then that I would thrive when I didn’t have a boss. So, I had to somehow find that out.

When you move countries, you don’t even know what the currency looks like. You know what it means? You don’t know anybody. You don’t have a community. You have to build all that up first to effectively do something.

Pancham Gupta

I know. I can 100% relate to that. Especially, when coming from India or China, you have this something called H1B process. I don’t know if you’ve been through that.

Leka Devatha

Yes, I did.

Pancham Gupta

You did? Right. So, you know all about that. For people who are listening and they’ve not heard about it, basically, it’s a process of you getting here legally on a work visa, which is H1B. You have to get your green card after that. During that time, you are legally not allowed to do anything outside of what you are here for, under that visa.

I know people have done things outside when they’re on that visa and have made it successfully. I also know people who have done it and not made it successfully. So, there are all different kinds of cases. There are all of these hurdles, like you said. There is the community issue, and there’s all that different kind of things. So, I totally agree that we have to build it up.

So, let me ask you this. In 2014, you started flipping, right? At some point, are you full time into this now? Are you still working in corporate? What’s the deal?

Leka Devatha

I quit my job in 2014.

Pancham Gupta

Oh, 2014 itself. Wow.

Leka Devatha

I quit my job. I had the luxury of having a husband that had a W2 income. And so, it was less risky for me to quit my job. But also, I didn’t just quit my job. I started working. I started my company. Then I started working in real estate and realized that everyone that I wanted to meet could only meet during my nine-to-five job. So, I was like, “Okay. If I want to be successful, like really successful as a real estate investor, then I have to take it seriously.” I can always come back to my corporate job. But in the meantime, I need to break that mold and that pattern, and then go out and see what I can do.

Then A, I could be wildly successful — which is the optimistic me saying, okay, no matter what happens, I will be successful — or B, I’m going to miserably fail, and then I would just go back to finding another role within my corporate career. So, I never went back.

Pancham Gupta

Got it. So, you mentioned that you had the luxury of a working spouse, your husband.

Leka Devatha

Yeah.

Pancham Gupta

But did you have any fears while quitting that job at all? Were you completely fearless? I’m assuming that you came here in 2006. You did work good eight years before quitting. So, you get this hang of golden handcuffs or paycheck addiction. Did you have any of those fears?

Leka Devatha

I had a ton of years. I was like, who is going to even let me buy a house? I’m a woman with no real estate experience or background. I don’t know anything about construction, let alone construction here. The only construction I was used to was brick construction back home in India, brick and cement. They don’t use brick and cement to construct here. So, even starting from that point, I’m like, what business do I have getting into something like this, when you are investing literally all of your life’s earnings and savings into something that may or may not pan out?

But I think it was like that gutsy move that even made me want to keep pursuing this. First, I was like, okay, let me take this one step at a time, learn, and just build a network. Even early on back then, I realized that to be successful, I have to ask questions. To ask questions, I needed people to ask those questions, too. So, I had to build the network. And so, I started by providing value to some of the key people in my community. Like, how can I help you so that, in turn, you can help me? That’s literally been my mantra. Even for people that are starting up now, people that have had some success but also some failures, it’s like, how big is your community? Because your community can solve all your problems.

Pancham Gupta

Right. 2014, did you buy that flip with your own capital, the first one?

Leka Devatha

I used hard money financing, and then I had a HELOC on my primary residence. Then I use that as a down.

Pancham Gupta

Got it. So, I hear a lot of different stories for the first flip. I have done a bunch of flips, too, but not as many as you. I was done with like — it’s a full time. I felt that it’s a full-time job when I was doing it. It is. I’d love to hear your take on that. But before that, you got that hard money loan. Did you make money on your first flip?

Leka Devatha

No.

Pancham Gupta

All right. How about you talk about all the horror stories there?

Leka Devatha

I mean, I bought the house — sight unseen — because a wholesaler that I bought it from basically said that he couldn’t walk the house. Also, the wholesaler that I bought it from said that he had an amazing contractor that could do the work. Once we closed on the house, what should have been a 60k rehab ended up costing me 120k. That contractor that was promised to me was nowhere in sight. And so, not only did I now have this insane rehab but I also needed a contractor that could do the work. How did I even know which contractor to hire? So, I did 14 contractor walkthroughs.

Pancham Gupta

Wow.

Leka Devatha

I found them on Craigslist, on Thumbtack, through the network, through communities, through going to Home Depot and just standing there and waiting for someone with a pro shirt to come in and say like, “Hey, I’m a general contractor.” Literally, that’s how I sourced my contractors. So, I found a contractor to do the work. Obviously, it was not the best work that someone could have done, but we got it done.

We listed the house, Thanksgiving week. That was really bad timing, but I had no choice. We didn’t get an offer till January 1. But then, we ended up getting three offers. I ended up making a $5,000 loss. So, it could have been a crazy 100k loss. But I was able to mitigate that by just hustling my way through the project and reducing my loss considerably.

Pancham Gupta

Oh, wow. The way I look at that is that you paid only $5,000 cushion.

Leka Devatha

It’s an expensive learning experience.

Pancham Gupta

Yeah, exactly. Right. So, now, let’s talk about — that was the first flip. You lost money. Did you think that you made a horrible decision to quit all that time?

Leka Devatha

No, it was the best thing ever. Although I lost money, I have so much fun just doing a project. I’m like, okay, if I can take all this experience and actually go make a profit, how much better would that be? That experience would just really be elevated. And so, I bought flip number two, three, and four. I ended up making $100,000 on those two flips combined. Okay. This actually works. Then you get really overconfident, and then you end up buying deals that you have no business buying.

On the next few years combined, the next five to six deals combined, I probably made only a 30k profit because I didn’t know what I was doing. I’ve just gotten way too much on my head. So, I was like, okay, this is not working out for me. Then you have to sit down and analyze your business and say, what worked and what didn’t? Starting from financing, why am I paying 12%, two points for a five-month loan term? Why not go shopping around?

So, I started going to out-of-state lenders, and then started paying 8% or 9% interests and less than a point. That was the first step. The second step was start to analyze deals better so you’re buying those deals with a really super large margins in really good neighborhoods. Of all the houses that I had done — somewhere on cliffs somewhere on a WLO Street, just busy streets. I’m like, I’m never doing that again. I’m never doing that again. Just difficult floor plans. Nothing’s versatile.

Then you start going into a house, and you’re saying, okay, fine. This house has really good bones that I could build something, where I could create a master suite. I could have an open kitchen. I could have an amazing backyard. Those are things that started becoming important. Then I started making six figures on every flip that I did.

Pancham Gupta

Wow. That’s so awesome. So, fast forward to today, are you still doing flips? How have you scaled since then? Did you do in-house staff? Are you still contracting? What does your team look like at this point?

Leka Devatha

The greatest thing about real estate is that you can have all 1099 employees. You don’t have to have any W2, because there are so many different contractors. So, I have a full acquisitions team that I don’t pay for. They just bring me amazing deals. I have a full listing team that I do pay for, but they are also really skilled at what they do. I have a few different general contracting teams. I have my stager that I’ve used since 2014. I have the same escrow company that I’ve used since 2014.

So, I do have an automatic, passive way of doing my flips now. So, I get these amazing — now the flips that I do are all double digit six-figure income. So, I don’t ever do anything that is less than 150k of profit on a flip. It is Seattle, so it is an expensive market. So, it is possible. Because I do the full guard flips — all engineering, all structural work — it’s much easier to make that spread rather than just doing a cosmetic flip.

In any market, our risk is lower because our spread is higher. So, even if house prices are dropping 20%, we bought the deal for much lower. We’re fixing it up so it can be appraised at much higher. So, there’s lesser margin for failure.

Pancham Gupta

Right. So, let me ask you this question which everyone probably listening — I actually have two questions — they might be thinking. Number one, given the market, given the interest rates going up, and inflation is high, are you doing as many flips that you were doing before? Let’s say, 2021. Have you reduced that number?

Leka Devatha

Yeah, so, I do have three flips that I’m doing right now. They’re all great flips. I bought them sometime last year. I bought them for still really cheap compared to what they could sell for today. So, those are all slam dunks that I’m not really worried about. I also started investing last year into multifamily. I have been amassing a rental portfolio here in Seattle for the last five years or so. So, I’ve heavily invested into buying, stabilizing, and holding my own properties. So, I do focus a lot on that. Currently, I have about eight, or I’m rehabbing about 24 units across seven buildings. There are a variety of multifamily syndications to my own rental portfolio, to investing on multifamily flips.

Pancham Gupta

Got it. So, you are not slowing down because of all of that, the market conditions.

Leka Devatha

I think I’m not slowing down, but my underwriting has definitely changed a bunch. The way we analyze our flips, our ARVs, are much lower than they used to be last year. The way we analyze multifamily there needs to be a much larger cash flow spread. We have to buy a better cap rate, because otherwise our financing doesn’t work. Plus, we would do multifamily syndications under 3 million. Now we’re doing only 5 to 10 million plus, because that’s where we get better financing, better cash flow, better appreciation. So, a lot of the ways we’re underwriting deals has definitely changed. Are we slowing down? Not yet.

Pancham Gupta

Okay. Awesome. All right. My second question is, people who are listening, they’re super inspired by your story. You came to US in 2006, worked for eight years. You went to this seminar, $99 seminar. I’m just making that. I don’t know what that was.

Leka Devatha

It was $200.

Pancham Gupta

You got inspired. Here you are, successfully, scaling up the full business of flipping and then getting into rentals, and now multifamily. Anyone listening getting inspired by your story, what advice would you have for them? Let’s say, an engineer working at Facebook or one of these big tech companies that want to do what you’re doing. What advice would you give them?

Leka Devatha

I would say, honestly, if you have a full-time W2 job, especially with golden handcuffs like Meta, or Amazon, or Google, or Apple — the big tech companies — I would say, really find those people in your community that are doing big things, that are talking about it, that are out on social media, that don’t want to tarnish that image of being a bad investor, are doing not good by their passive investors or private lenders. Go find these people. Start shadowing them. Get in on one of their flips.

I have a lot of private lenders that are actually techies that want to learn to invest. So, what they do is they come in as my private lender on a project, and they literally walk through the project every time I go through a project. So, they know how I talk to my contractors. They know how I design my houses. They know how I conceptualize. Everything from kitchen cabinets to tile, they know about it. If it’s a multifamily building, then they walk the project with me a couple of times during the course of construction of the rehab process. So, they know. If you’re putting $500,000 into a building, this is what it is going for. These are all the various aspects that we are fixing up. So, they have an understanding.

Go find those local investors that you can partner with, and gain that experience for really no cost. Once you have that experience, go buy one project. Either it can be one apartment, one duplex, one triplex, one apartment. Whatever it is, do one project and make sure to go through the whole cycle — from buying the project, to stabilizing the asset, to refinancing or selling the project. Once you have that under your belt, then whether you have a W2 or not, you suddenly have this newfound experience to go create another stream of income. Honestly, it is much easier than getting your engineering degree.

Pancham Gupta

I 100% agree you know. Even though it may take more blood, sweat, and tear, it’s definitely easier than that.

Leka Devatha

It’s sweat equity.

Pancham Gupta

Yes, sweat equity. Right. Let me ask you this. How would you suggest someone who wants to follow your advice, to find a Leka in the local market who they can invest with or learn from?

Leka Devatha

Go to the local meetups. Luckily, for us, in-person meetups are back in progress. So, go on meetup.com, or go to your local Facebook groups, your real groups, and start attending events. See who those people are that are really putting their money where their mouth is, finding those people that are doing a project and not someone who’s just sitting back and giving advice. You have to find the people that actively are in the middle of things.

Then see how you can add value to their lives. It could be that, hey, I have my grandmother’s house. It’s a deal. I’ll offer you this deal if you can teach me. Or I have 100k that I can invest in your next deal. You can take me along to the ride. Whatever it is. My underwriter is actually amazing. He found me through my BiggerPockets Podcast. He has raised capital for me. He does all my investor relations for me. In turn, I’ve helped him buy units. I’ve given him my contractor to work with. He has GP in my multifamily syndication. So, it’s a very win-win situation. He helps me, and I help him. So, you have to find those mutually beneficial partnerships.

Pancham Gupta

Got it. That’s great. Well, that was some golden advice right there. That’s how I actually got started — going to local meetups.

Leka Devatha

Yeah, exactly.

Pancham Gupta

It was a long, long time back. Then I met people at auction in all different kinds of places. One thing leads to another. You’d have to take action. That’s the bottom line.

Leka Devatha

You have to take action. That’s the only way. The other thing is also, get yourself out there. Go on LinkedIn. Build a presence. Go on Instagram. Build a presence. They’re two very different platforms. LinkedIn is very high net worth income earners. Instagram is not that high of an income earner, but maybe you can find a thousand investors. On LinkedIn, you need five.

What kind of information are you putting out there? Or if you’re not a social media enthusiast, you can go and just comment on people’s posts, and bring credibility to yourself. When I’m not posting on LinkedIn, then I’m commenting on people’s stuff. Every comment gets four to five likes, just my comments. Because it’s well thought out, and it’s somehow giving more value to the post. So, just do that. If you’re more of a lurker, go and look.

Pancham Gupta

Great. Well, this is some very, very sound advice. I think I can use some of that on LinkedIn. I’m not as good. I don’t spend time on social media. I should more than that. I need to listen to this advice, for sure. All right, Leka. So, I have two questions for you, which are totally unrelated. Then we’ll move on to the second part of the show. My first question is, at the moment, what goal are you most inspired by and uncomfortable with at the same time that you’re working towards now?

Leka Devatha

Creating passive income. Here’s why it’s uncomfortable. I have been such an active investor, that to say that I’m going to create my passive income goal and sit back and enjoy or retire, that scares me. That is super uncomfortable for me. But at the same time, I feel like I do need to retire from real estate in order to make wealth in real estate. If I keep putting my money back into new deals, I’m never going to retire. I’m never going to be hands off. And so, my goal is to create passive income and also be uncomfortable about it.

Pancham Gupta

Okay. Awesome. So, my last question before we move on to the second part of the show is, do you have a morning routine that you follow? If so, what is it? Do you think that attributes to your success?

Leka Devatha

Yeah, so I do have two kids — nine and six. My morning routine includes me getting them ready for school. Every morning, I’m making them a four-course breakfast meal. My kids are really spoiled because they don’t just get cereal and milk. No, it’s a gourmet, a four-course meal. But also, I see a personal trainer twice a week. If I don’t do that, I feel like I’m failing. And then drink lots of water. Simple as that. But I’m always up by 6:30, sadly.

Pancham Gupta

That’s good. This gourmet meal thing, I’ll tell you maybe it’s an Indian thing. I don’t know.

Leka Devatha

If it’s an Indian thing, it’s terrible.

Pancham Gupta

Oh, wow. I have to talk to you offline. What do you make? All right. Cool. Thank you for sharing that. We’ll be back after this short break.

(break)

Do you ever feel overwhelmed by the thought that you have no time after work and found no time to learn about investing? Do you feel left behind that you are not putting your money to work for you? Do you want to create passive income, but you do not know where to start? If so, I have good news for you. I have created an investor club which I call the Gold Collar Investor Club for Accredited Investors. I will be putting together investing opportunities exclusively for this group. These are the opportunities where I have done my part of the due diligence for you and will be investing my own money alongside you.

If you are interested, please sign up on thegoldcollarinvestor.com/club. I repeat, thegoldcollarinvestor.com/club. I will reach out to schedule a 30-minute phone conversation to discuss your investing goals once you sign up. This can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some cash flow. In case you are wondering what is an accredited investor, accredited investor is someone who has earned more than $200,000 as filing single or more than $300,000 filing jointly for the last two years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million, excluding your personal home. It includes your stocks, 401Ks, IRAs, cars, et cetera—just not the equity in your personal home. If this is you, I would highly encourage you to sign up.

(interview)

Pancham Gupta

So, Leka, let’s move on to the second part of the show, which I call Taking the Leap Round. I ask these four questions to every guest on my show. My first question for you is, when was the first time you invested outside of Wall Street? Was it in India, or was it here when you bought that first flip in 2014?

Leka Devatha

The first time I invested was on my own business, back when I was 18 years old. I was doing a craft out of bread. To do that craft, I obviously needed money. So, I basically borrowed money from my dad and invested in this company. I knocked it out of the park. So, that was funny. When I was 18 years old, that was probably 2000, 2002.

Pancham Gupta

Okay. You’re revealing your age.

Leka Devatha

I’m 40 years old.

Pancham Gupta

All right. Did you have any fears when you borrowed that money from your dad at the age of 18 to do that business, when you started the business?

Leka Devatha

No, because I knew that I already had a bunch of — I was making this craft, but I also was teaching it. So, as I was making it, I was also earning an income from teaching the craft. I had so many students already signed up, that I honestly didn’t have fear. That was very safe.

Pancham Gupta

Got it. All right. My third question, can you share with us one investment that did not go as expected? I know you already shared one of them, your first flip. Anything else that you would want to share?

Leka Devatha

Yeah, flip number 37, I lost $65,000 — my biggest loss in real estate. It was a small house. It was a 900-square-foot house. It was listed in April. Yeah, I think April 2018. The city went mad. August 2018, the city was completely bonkers because Amazon introduced a head tax. And so, people stopped buying in Seattle. Because they said, okay, let’s just go to Austin or Virginia and buy there because Amazon’s moving there. We just had a lull in real estate sales in August 2018. It’s like a switch had been flipped. And so, it was a crazy buyer’s market.

At that time, I had this property, which we had to overspend on because the city — it was such a small house, and the city did 37 inspections. It was our permit. I think, all in all, it was just a bad deal. I lost money. But that was 1 out of 70 properties that I flipped. So, I think that was the most money I’ve lost on a deal.

Pancham Gupta

Wow. Well, you do and you learn, right? Those are real-world seminars. Those are some expensive lessons.

Leka Devatha

Exactly.

Pancham Gupta

All right. My last question, what is one piece of advice would you give to people who are thinking of investing in Main Street that is outside of Wall Street? I know you shared some of that already. Would you want to add to that?

Leka Devatha

Yeah, I would say, take massive action. That’s what defines you from someone who is not successful or still thinking or talking about it. You can listen to as many podcasts, read as many books. But if you’re not taking massive action and actually experiencing it firsthand, practically, then honestly, you are not going to take that next step or the step after that. In five years, you can still say, “I’m still reading. I’m still learning.” But you’re never going to take action. So, I would say, get that practical experience out of the way.

Pancham Gupta

Exactly. That is so crucial — taking action. Especially, people who are listening to the show, people who are engineers, potentially, by background. We have this habit of analyzing anything until you get paralyzed. Analysis paralysis and not taking action. There’s this saying that — I forget who said it — they’re going to leave the house when all the 10 lights are green out of the door. Well, that’s never going to happen. As long as you have—

Leka Devatha

That’s never going to happen.

Pancham Gupta

If you have 5, 6, 7, 8, whatever the number is, at green, you just leave and figure it out.

Leka Devatha

Yeah.

Pancham Gupta

We’re cool. Well, thank you, Leka, for sharing your wisdom and time with the audience. If someone wants to connect with you, find out more about you, how can they reach out? I know you’re in Seattle. Some of the listeners of the show are definitely in Seattle.

Leka Devatha

Awesome.

Pancham Gupta

So, they can connect with you.

Leka Devatha

Yeah, I’m on Instagram. My handle is @leka_devatha. I’m on LinkedIn. Just first and last name, Leka Devatha.

Pancham Gupta

Great. Well, thank you so much for your time.

Leka Devatha

Thank you, Pancham. Thank you for having me.

Pancham Gupta

Thanks for listening to Leka’s story. It resonated so much with me. I totally understand what she was saying — how to create a community, the struggles, and all the challenges that you have when you come to the US. You have to build everything from scratch. Anyway, I hope you got value from it. Definitely, reach out to her if you resonated with her or just want to connect with her.

If you have any questions for me, reach out at p@thegoldcollarinvestor.com. That’s p@thegoldcollarinvestor.com. This is Pancham, signing off. Until next time, take care.

(outro)

Thank you for listening to The Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com and follow us on Facebook @thegoldcollarinvestor. The information on this podcast are opinions. As always, please consult your own financial team before investing.