[00:03:07] Donovan Adesoro: But yeah, I definitely thought I was going somewhere with basketball, but wasn’t as good as I may have thought. 

[00:03:13] Patrick Donley: Did you play high school? I mean, what age were you? Were you like, ah, I don’t know if the NBA’s going to work out. 

[00:03:18] Donovan Adesoro: Yeah. So like, I’d say probably, yeah, I played like, you know, since I was like maybe four years old and like played in rec leagues and all that.

[00:03:24] Donovan Adesoro: Played middle school, high school, probably like sophomore and junior year. I was like, dang, every these other kids that I’m playing against are a lot better than I am. And some of them aren’t even getting like scholarship offers. So I was like, okay, maybe let me just double down on school, make sure I get into a decent school.

[00:03:40] Donovan Adesoro: It could get a, you know, decent career. So I’d say like junior year. So I, I started to realize that that that was the plan. 

[00:03:47] Patrick Donley: So you focused more on academics or were you always focused on academics? 

[00:03:51] Donovan Adesoro: Yeah, I’d always focus on academics in a, in a way, like I was, you know, always, always got good grades. But in terms of like, I’d say like, you know, scholarships, right?

[00:03:58] Donovan Adesoro: Like I maybe wasn’t as [00:04:00] focused on trying to get scholarships until I realized, okay, I’m probably not going to get athletic scholarships. I need to really double down on, on that and try to get some of those. And then I was working at the time, so like as soon as I turned 16, I started working at Arby’s.

[00:04:12] Donovan Adesoro: Arby’s was great company. I would say that I hated working fast food, but again, you know, needed some money to buy clothes and whatnot and, and whatever. So instead of playing basketball like my senior year, I think I just doubled down on working and at scholarships because I was like, yeah, that’s, this isn’t going to really take me anywhere.

[00:04:29] Patrick Donley: Summertimes too. We’re were you working at Arby’s or did you have other, other 

[00:04:33] Donovan Adesoro: jobs? Yeah, so I worked at Arby’s up until I turned 18, like the end of my senior year. Cause I have like an early. The turn senior or 18 senior year. Then I started working at a, at a gas station, which a little better, but still not ideal, but I think those are both super good.

[00:04:49] Donovan Adesoro: Yeah, super great in teaching that customer service skills. I think, you know, now I can handle all types of people no problem. Because of, you know, what I went through there. 

[00:04:57] Patrick Donley: So what happened next? You, did you [00:05:00] apply, you applied to universities? How’d you decide on, on the career field? Go into how you chose what you chose?

[00:05:06] Donovan Adesoro: So, I, I knew I was going to have take up student loans to, you know, get, make it through college and so I was like, okay, I need a job that’s going to be able to pay these back you know, on the, on the back end. So this probably isn’t the most What advice that most parents want to hear for their kids. But I just googled what was the highest paying major with a four year degree because I wanted to make some money, but I also didn’t want to stay in school for, you know, 12 years and become a doctor.

[00:05:30] Donovan Adesoro: So the thing that came up was petroleum engineering and I was like, you know, sounds good enough. And just looked at every school that had petroleum engineering. There’s only like six or seven and so just applied to all of them and then kind of just went to, ended up at the University of Tulsa in Oklahoma because they honestly just had the most scholarship money.

[00:05:47] Donovan Adesoro: So it just, just made sense. So did your 

[00:05:49] Patrick Donley: parents push you in any kind of direction growing up, or they just mostly wanted you to get a good education and a good job? Was there any kind of specific thing they wanted 

[00:05:57] Donovan Adesoro: you to do? No, not at all. I guess, which [00:06:00] was nice. I mean, it was, it was just basically college.

[00:06:01] Donovan Adesoro: They didn’t really care what exactly I did because like my mom has a, like a social work degree, so she’s not really using that. So it, she, but she was like, you know, both parents were kind of stressful on just going to college in general. Didn’t matter what you did, just kind of go get it for you degrees, basically.

[00:06:16] Donovan Adesoro: The motto, 

[00:06:18] Patrick Donley: so you got your petroleum engineering degree. What happened 

[00:06:20] Donovan Adesoro: next? Yeah, I got the petroleum engineering degree and so I interned for a company in Houston junior year. And then, you know, I got the full-time offer and came, went down there July of 2019, which is when I graduated. Graduated in May, then went down there in July for the full-time job.

[00:06:34] Donovan Adesoro: And then, yeah, just started working like everybody else, you know, waking up at five and taking a shower, going to work, and then doing it every day for, you know, five days straight. And I’m, I’m probably, maybe two to three months into this and I’m like, so I gotta do this for like 40 years. Like, it just, I, I can’t, I can’t see it.

[00:06:51] Donovan Adesoro: So at night when I would come home from work, I would be just kind of bored looking up. ways to maybe make additional income, make [00:07:00] investments, because I didn’t know about any of that stuff growing up. So all of my education from, I guess investing in real estate was from podcast and YouTube videos. So I’d listen to those on the way to work each day, bigger pockets with big one.

[00:07:12] Donovan Adesoro: Then I’d listen to just go on YouTube and just kind of look up, you know, how do I analyze, I rental the property, just kinda looking up all these things and trying to learn about making money on the side. But you 

[00:07:22] Patrick Donley: had a great job, right? You were, you had a good income, I think you got a really nice apartment, nice car, kind of the typical trappings.

[00:07:29] Patrick Donley: Talk to us a little bit about that. Did you regret those 

[00:07:32] Donovan Adesoro: moves at all? Yeah, great point. So, yeah, I immediately, when I got, you know, cause coming outta college, you know, I thought, okay, this is my salary. And it was, you know, solid salary coming outta college, you know, right at like, kind of the six figure mark, which was more than like my parents made combined.

[00:07:47] Donovan Adesoro: So I was ecstatic. I was like, oh yeah, I am set for life, baby. This is, this is it. I made it. And then, you know, bought a new Hyundai, bought the nice apartment, got the nice apartment downtown. And then like, like I [00:08:00] said, like three or four months in, I’m like, ah gosh, I really don’t have much savings. And I, I thought I was making all this money, you know, obviously a good portion’s going to taxes, but then, you know, my rent’s eating up a good chunk of it.

[00:08:10] Donovan Adesoro: Cause it’s downtown, I have the new card payment. You have insurance because I’m, especially when you’re under 25, right? Insurance is probably like, almost double, it’s like 200 bucks a month. So all these things are just kind of eating at my income and I was like, even with such a great job coming outta college and not, not much not much debt.

[00:08:28] Donovan Adesoro: Right. Really the only debt was really the student loans. And I was like, I’m still don’t have enough money to really, I guess I didn’t like the amount of savings I had. So if that made sense. Yeah. 

[00:08:37] Patrick Donley: And it sounds like you weren’t too happy with how you were spending your daytime hours or, or you just looked around and you’re like, I can’t imagine being here when I’m 40.

[00:08:47] Patrick Donley: Or was it that kind of realization? 

[00:08:49] Donovan Adesoro: Yeah, it was like, you know, you didn’t go to work and you typically, you’d see your bosses and your boss’s bosses and you know, in theory that’s should be who you want to become if you want to keep working at the [00:09:00] company or you should want to be somewhat like them or in their role or, or like their responsibilities.

[00:09:04] Donovan Adesoro: And I was just looking at them and just kind of getting a feel for what their lives are like. Like yeah. You know, got big old house in kind of a suburb. Right. Got the family, got the three kids, you know, maybe the wife doesn’t, doesn’t work as much. She’s, you know, a homemaker kind of taking care of the kids, you know, you’re taking care of the entire family off of one income.

[00:09:23] Donovan Adesoro: And like, I could see, I was like, I mean, okay, if you have a $500,000 house, if you have three kids and you have, you know, a wife to support also, or a spouse or whoever, whoever’s the bread. I mean, that’s not a lot of money. You’re really saving. And so just that thought process of not having enough or being able to, I guess, have that cushion to where if I lost my job again because I’m in the oil industry, it’s, it’s pretty volatile.

[00:09:48] Donovan Adesoro: So that’s always kind of in the back of my mind is like, what can I, how long can I survive if I happen to lose my job? 

[00:09:54] Patrick Donley: It was around covid maybe. When you were working there, did you were, was there a threat of a layoff? Did that [00:10:00] possibility, was that a possibility? That did come up 

[00:10:03] Donovan Adesoro: a hundred percent. Yeah.

[00:10:03] Donovan Adesoro: It was a, a choose possibility. Matter of fact, they had actually offered like voluntary packages for everybody. And usually those voluntary packages are people who, for people who have like more tenured with the company, but because of covid and oil prices, I think, you know, the futures went negative and everybody was kind of talking about that.

[00:10:20] Donovan Adesoro: But you know, even the real prices. I don’t know, under $10 I think at one point. So yeah, they offered anyone who wanted to, to take the package. But then for me, I was like, well, then I have to go find another job. I have no experience. I just started this job, you know, less than a year ago, be tough for me to go get in their job.

[00:10:37] Donovan Adesoro: So I just had to stick it out. And what they did for the people who stuck it out was they, they cut everyone’s salary 30%. So right off the bat, the salary was cut 30%, you know, less than a year. In mind you, this was the time when I was getting my first duplex. So I was actually under contract for the first duplex while the salary got cut by 30%.

[00:10:55] Donovan Adesoro: So, as you can imagine, I was freaking out. I was like, well, how am I going to rent this thing? Like, [00:11:00] nobody’s renting during C O V. How am I going to make the payment? See, all these things were going through my mind, but you know, I just kind of persevered through it. 

[00:11:07] Patrick Donley: So you’re kind of planning your escape hatch, like how, how can I get out of this?

[00:11:10] Patrick Donley: How, how was it that real estate, what was the inspiration there that you kind of got the real estate bug? I know you were listening to bigger pockets, but what were some other inspirations? 

[00:11:19] Donovan Adesoro: Yeah, so I think the, yeah, the bigger pockets, obviously I read some books, but again, like I said, I was on Google and YouTube just checking out all the investment options.

[00:11:27] Donovan Adesoro: So people who are maybe kind of like me and just kinda looking at all the opportunities, like you probably looked at like Turro, looked at e-commerce, looked at, you know, Uber, Lyft, like, should I do that on this side? Like, I looked at everything. The reason why I chose real estate was because first the leverage, so you can get a lot with only putting a little down.

[00:11:48] Donovan Adesoro: And that was, that was super key to me and was a bunch of low down, low down payment loans where you can get in pretty easily. And so for me to get in with almost no money and also [00:12:00] eliminate my housing expense, that was like the double, just kind of like a, I don’t know, two reasons why I should pick that over.

[00:12:05] Donovan Adesoro: Maybe some of the other options were weren’t as you know, lucrative, you know, because I’m saving that housing payment by renting the other side of the duplex. 

[00:12:13] Patrick Donley: So you mentioned some books. What were some of the books that had a 

[00:12:16] Donovan Adesoro: impact on you? Yeah, so think like everyone talks about like Rich Dad, poor Dad.

[00:12:21] Donovan Adesoro: I read that. I’ve read books like The Go-Giver, which was not necessarily about real estate, but just, you know, kind of about just being helpful. And then I read, there was a book called Set for Life by Scott Trench. He’s actually a, a bigger pocket guy and does a, a website or does one of the podcast.

[00:12:38] Donovan Adesoro: The key for that book was like, it, it kind of tailored to people who are maybe coming outta college or just getting into real estate where it kind of sets you up of like, okay, if you’re coming out of college and you’re getting your first job, here are like some of the milestones you should hit. And so I won’t summarize the book for everyone.

[00:12:56] Donovan Adesoro: You should go check it out. But it just had a nice kinda, it, it, it was right [00:13:00] for me at the time, which is what I liked about it. Yes, 

[00:13:02] Patrick Donley: Scott was a guest on our show a while back, but yeah, I think he’s running bigger pockets now. I think he’s like in charge of the show. Yeah, I 

[00:13:09] Donovan Adesoro: think he’s big time. C e o. Yeah.

[00:13:12] Patrick Donley: We were talking about Sean Sweeney before the show, and I think Rich Dad, poor Dad was also a catalyst for him. He came across that book at, you know, in a bookshop and I think he was considering law school and, you know, he wasn’t really sure about that. He read that book and it really was a spark that set him in the direction that, you know, he’s now a developer as you know, and kind of set him on his, on his path in, in a lot of ways.

[00:13:35] Patrick Donley: So it’s definitely a 

[00:13:36] Donovan Adesoro: great book. Great book. Yeah, it’s a classic. Definitely worth at least to read once or twice 

[00:13:42] Patrick Donley: for sure. I’m also a big fan of Cash Flow. The, I don’t know if you’ve read that, but Cash Flow is one of his books as well, which I think is probably a little better, like really gets into the nuts and bolts of, you know, how to, how to create cash flow for your life.

[00:13:54] Donovan Adesoro: A hundred percent. Yep. That’s a great one. So I 

[00:13:56] Patrick Donley: wanted to hear more about your decision. You bought this [00:14:00] house in Houston. What was the loan like? What was the house like? It was a duplex, is that correct? 

[00:14:07] Donovan Adesoro: That’s correct. It was a duplex so. In Texas, there’s a loan that a few banks offer. One of the banks, particular Bank of the Ozarks, I think now offers it.

[00:14:17] Donovan Adesoro: It’s a 0% down loan for a one to two unit property. The key with that loan is that there’s no income cap requirement. So with a lot of, you know, 0% down loans, there’s some sort of cap on your income. The nice thing about that one is that as long as you buy the property, I think has to be in a low to moderate income track.

[00:14:37] Donovan Adesoro: So, and you can Google this just online, like if you look up your city and then look up L M I track, you’ll be able to see which areas qualify. And so if you buy a property in one of those zones, there’s no income cap requirement and you can get 0% down. So that’s how I got this duplex was buying in one of those areas.

[00:14:54] Patrick Donley: And LM I stands for low 

[00:14:57] Donovan Adesoro: to moderate. Okay. 

[00:14:58] Patrick Donley: Got it. Got it. So you [00:15:00] bought that place, you moved in one half, you rented out the other half. How did you go about finding your tenants and how was that process? Were they good tenants? Was any horror stories from 

[00:15:11] Donovan Adesoro: that experience? Yeah, for sure. There’s some interesting stories.

[00:15:15] Donovan Adesoro: So again, like I closed on this one, I closed on the duplex a little bit, which I’m still in now. It’s of April of 2020. So this was like peak covid. I mean, even Texas was kind of shut down, like nothing was open. You had to wait in line at the grocery store to get in because they, so this was like probably the worst time to close on a new property as a new investor.

[00:15:34] Donovan Adesoro: But, you know, I stuck with the, kind of stuck with my guns because the numbers made sense and what, I mean, the numbers made sense. I had a target of like, I don’t look at a, a duplex or a house hack at least as you know, what am I going to make when I live there? The key for me is what is, what am I going to make when I move out?

[00:15:51] Donovan Adesoro: So I look at what will the each unit rep for when I move out versus my monthly payment. . And so from that I wanted at least like a hundred bucks [00:16:00] of cash flow, which sounds pretty thin, but the reason why I was okay with that is because mine was new construction. So you know, there shouldn’t be much maintenance on a new construction property.

[00:16:08] Donovan Adesoro: You would think. So I was okay with slightly less cash flow. And so yeah, that’s what I, I, I bought that one and then the tenants I got were from, it was tough time, as you can imagine, because it was covid, like nobody wanted to do anything. My one on Facebook and, and got like a few different roommates, I was, I was struggling to lease the whole unit in one.

[00:16:27] Donovan Adesoro: So I started leasing it by the room for like, I think like 600 bucks or 500 bucks or so. And that was able to just kind of get me, kind of bloat me by. My goal was to kind of keep them in for a year and to kind of make it through covid. And so the, those tenants weren’t too bad. They were, I think they were relatively clean.

[00:16:45] Donovan Adesoro: The issue that came up was that, you know, two of the tenants were sisters and then there’s one tenant that, you know, just didn’t know them. because there’s three bedroom duplex, a three bedroom unit and so they, the two sisters kind of. Ganged up on the one tenant for some reason it was like [00:17:00] they got in disagreement and the two kind of ganged up.

[00:17:02] Donovan Adesoro: So it was just like a little like drama and then that one tenant ended up moving out. But it ended up being a great deal overall. Like it’s appreciated as you can imagine, from 2020 to now. And so it was just, just kind of getting through that tough part of like just sticking with it was was well worth it.

[00:17:17] Patrick Donley: So there’s three bedroom, what kind of square footage is are on each 

[00:17:21] Donovan Adesoro: side? Yeah, each side’s about like 1150 square feet, three bedroom, two bath. 

[00:17:27] Patrick Donley: Okay. So my co-host Robert Leonard, has written a book called The Everything Guide to House Hacking. He’s really into house hacking and has done it a lot. We’ve got a lot of beginning investors on, on the show that are listening in.

[00:17:39] Patrick Donley: Is that a strategy house hacking that you would really recommend as a first step to get involved in real estate? Or would you maybe have gone a different route looking back on things? 

[00:17:48] Donovan Adesoro: Yeah, looking back, I would do it the exact same way. I think the duplex is one of the best ways. Obviously if you can get, if you’re really like into real estate and you want to go three to four units, that makes sense too.

[00:17:59] Donovan Adesoro: But I feel like [00:18:00] duplex is the easiest way because you’re only managing one other tenant, right? If you have four units, or if you buy fourplex, you know you’re managing three other tenants, you got the least three other tenants just a little bit more difficult. But if you wanted like a super, in my opinion, kind of the lowest risk way is to get a duplex and just rent out the other side.

[00:18:18] Donovan Adesoro: It’s a lot easier managing one tenant than than three especially when they’re all, you know, in the same complex. So yeah, a hundred percent would recommend that as a first step. 

[00:18:26] Patrick Donley: And then on your unit, are you running out the other extra rooms? 

[00:18:31] Donovan Adesoro: Yeah, initially I was, so again, like I wanted to keep as much money as possible and so I rented out the other two rooms on my side.

[00:18:39] Donovan Adesoro: I actually moved into the smallest bedroom so I could Airbnb the large bedroom. So I was taking out all the stops to increase the, the cash flow. Definitely worth it. I don’t rent out the rooms anymore now that I’m not as willing to kind of deal with some of that stuff. But yeah, when I first started for a good two years, I rented healthy rooms.

[00:18:57] Donovan Adesoro: Tell me about 

the 

[00:18:58] Patrick Donley: Airbnb experience. How did [00:19:00] that go? Was that more profitable than running out rooms to individual tenants or how 

[00:19:05] Donovan Adesoro: did it go? Yeah, it was kind of more of like a say, probably like a break even because, so in theory is a little bit more profitable, but because I was right there, I was cleaning it, like it didn’t make sense for me to hire a cleaner.

[00:19:16] Donovan Adesoro: So anytime I Airbnb, you know, a guest left, I’m changing all the sheets and washing everything, cleaning the tubs and whatnot. So in my opinion, I ended up just going back to. Just kinda long-term renting it by the room because it just wasn’t worth the hassle of constantly cleaning it for like, maybe an extra 5,000 bucks a month.

[00:19:33] Donovan Adesoro: It just, yeah, it wasn’t worth it. 

[00:19:35] Patrick Donley: So what did your cash flow look like once, if you had it fully rented? Were you doing better than the a hundred dollars that you had initially mentioned, or were, what, what did the numbers 

[00:19:44] Donovan Adesoro: look like? Yeah, so my, my monthly payment is about 18, it’s like 1880 or something, just under 1900.

[00:19:52] Donovan Adesoro: And so each side initially was going to rent for about like 1350, so it was going to be about 2,700 [00:20:00] gross. And then 1850 was my payment. And that was p I t i. So that factored in Texas insurance. P i t I means principal interest taxes, insurance. So that’s your total monthly payment to the bank, usually.

[00:20:11] Donovan Adesoro: And then they’ll pay the taxes insurance on your behalf. But yeah, so like I had some, some wiggle room for expenses because I, I budgeted about like 15% of the gross revenue. Or of the gross rent. So up to 2,700 I budgeted, call it like three fifty, four hundred bucks for expenses. And so that was my proforma like, you know, performer, meaning that’s what I plan for initially.

[00:20:32] Donovan Adesoro: But now if I were to do it, I think I could get closer to, you know, 1500 per side. So closer to 3000 gross rent. So again, ended up being a great deal. Do 

[00:20:42] Patrick Donley: you still own it? What’s the long-term plan with it? Will you hold it 

[00:20:44] Donovan Adesoro: forever? Yeah, good question. I’m still trying to figure that out. I’m thinking about, so there’s a nice thing in the tax code where if you’ve lived in it for two of the past five years, and you can sell it without, you know, any capital gains.

[00:20:58] Donovan Adesoro: So my, my plan would be to, [00:21:00] if I do move out, is to sell it somewhere in that timeframe. That way I can, you know, take advantage of that that capital gains. 

[00:21:07] Patrick Donley: Yeah. Yeah. It’s, it’s huge actually. Yeah. What’s, has the plates appreciated since you 

[00:21:11] Donovan Adesoro: bought it? Yeah, so I bought it for 2 75, a two 75,000 with a 0% down loan payment was, like I said, 1880.

[00:21:19] Donovan Adesoro: Now it’s worth about like close to 400 to four 10 or so. And then I’d say it’s, that’s probably where it’ll kind of stay, you know, with the rates kind of going higher, I don’t think it’ll go too much more like in the near term. So, yeah, you know, in, in two years, that’s not, not a bad return, considering I put 0% down.

[00:21:37] Donovan Adesoro: Yeah, no, it’s pretty great. Yeah, I got pretty lucky for sure. 

[00:21:40] Patrick Donley: Is that loan, is that a one-time deal or is that something you can do? Could you do it again at this point? Or is it just a first time home owner kind of like program? 

[00:21:50] Donovan Adesoro: Yeah, so it’s like a, it’s like a first time. It’s kind of like first, the reason I’m hesitant, hesitant is because you can only do it once per bank.

[00:21:57] Donovan Adesoro: As far as I. . So [00:22:00] with like in my example, bank of the Ozark, I couldn’t do anything more with them, but if I can find another bank who can do the 0% download, I might be able to get away with doing it again. So that’s what I’m looking at is maybe my next option. 

[00:22:13] Patrick Donley: So you’re doing the house hack, what happens next?

[00:22:15] Patrick Donley: Do you start, you’re still listening to bigger pockets, you’re still at the petroleum company, you’re still working on your real estate education. What, what happened next after that? 

[00:22:26] Donovan Adesoro: Yeah, so again, like you said, I’m still getting educated, still learning, and then bigger pockets, a big thing they talk about is to buy a property, renovate it or rehab it, rent it out, and then refinance it.

[00:22:37] Donovan Adesoro: And the reason why that would be advantageous is, you know, you can recycle the same amount of capital. You know, if you put 40 grand into a deal for a a down payment and you renovate it, make it all nice and pretty, rent it out, and you can get a higher value on the appraisal, then you can pull your money back out that you put into it.

[00:22:55] Donovan Adesoro: And so, Doing something like that was, was super intriguing to me because again, [00:23:00] like I didn’t have any money really. So that, that’s the birth 

[00:23:03] Patrick Donley: strategy, right? That you’re referring to the birth strategy? 

[00:23:06] Donovan Adesoro: Exactly. Yeah. So 

[00:23:07] Patrick Donley: you’re studying the birth strategy and I know Brandon Turner’s, he at the time, I remember listening to him, he was really into the birth strategy, the one of the hosts of Bigger Pockets.

[00:23:18] Patrick Donley: Did you, did not go forward with that or talk to us about that process, about analyzing the bird deals that you were looking at? 

[00:23:27] Donovan Adesoro: Yeah, so I was on YouTube kind of checking out like what does the bird strategy mean? Like how do I analyze the property? And so I was looking at different deals in Houston where basically a single family home would need to be fixed up.

[00:23:38] Donovan Adesoro: You know, I would try to estimate some sort of budget. Again, that was tough because again, I didn’t have any experience. So what I did to get around that was to just reach out to some contractors on these local Facebook groups. So like, , any decently sized city probably has a, you know, a Cleveland Facebook group or Houston Facebook group.

[00:23:57] Donovan Adesoro: So I’d reach out on there and just get some estimates of, [00:24:00] okay, how much would a new kitchen and countertops cost? And just try to budget some numbers that way. And so as I was doing the numbers on these deals in Houston, it looked like the, the numbers were, were pretty thin, meaning like, you might not make that much profit if, if something went wrong.

[00:24:16] Donovan Adesoro: So like if you forecasted that you would maybe sell it for the highest comparable comp, or you’d get appraised at the highest comparable, you know, property similar to it, then it might work. But for me, being a little conservative, I didn’t really feel comfortable with that. And so I began to look at, you know, what would the numbers look like on a new build?

[00:24:36] Donovan Adesoro: Because with the new build, you’re adding so much value to raw land. It might make, it might make more sense that it’s a little bit more margin in the deal or a little bit more profit that can cushion you should something go wrong. So, Long story short, when I started to run the numbers on new builds, those made a ton of more sense, began into kind of go full steam ahead in terms of how do I get a new build even though I don’t have any money or [00:25:00] experience.

[00:25:00] Donovan Adesoro: So 

[00:25:01] Patrick Donley: I want to talk about that there’s a lot of mental hurdles that people, first time investors have to jump through and smash through. What were some of yours? How did you get, have the confidence to start looking at these deals and considering them with no experience? 

[00:25:16] Donovan Adesoro: Yeah, for sure. It was, it was tough.

[00:25:18] Donovan Adesoro: Obviously I was doubting myself, which rightfully so, cause I didn’t have any experience. So the key thing I think was the education piece. So really making sure you understood the numbers that you had on the, basically in your, in your model or, and again, when I say model, I’m being pretty dramatic. My model may have been a piece of paper with four lines on it with land.

[00:25:39] Donovan Adesoro: Construction costs, what are they going to sell for? And that’s it. Like, it may have just been those three numbers. So, but the point is, I got, I’ve drilled down really on those, those numbers to make sure I was comfortable in terms of presenting it to somebody who may be willing to partner with me. So, you know, the land numbers were pretty straightforward, right?

[00:25:57] Donovan Adesoro: You can get, you can get the land values from [00:26:00] pretty much just going on Zillow, on the m ls. Obviously those may be a little bit overpriced, but you can more or less get a feel for what land is selling for. And then close to that, it’s like you also can get the, what is it going to sell for, right? You can go on MLS and you may not be able to see all the transactions, but you can get a feel for what’s up is selling for, based on, you know, what is it listed at?

[00:26:19] Donovan Adesoro: If it’s listed at 400, it’s probably not going to sell at like 300 overnight, going to sell somewhere and call on like three 80 to 400 maybe. So I did, that’s where I found those two numbers. And then the construction costs, which was the toughest part, is what, what I did for that is I would send a. Kind of identical deal or a similar deal that was on the MLS to a contractor or a builder and say, Hey, contractor builder, how much would you charge me to build this?

[00:26:47] Donovan Adesoro: And once I had that, that was enough to kind of gauge what the construction, construction costs would be. Okay. He’s, he wants to charge me $200,000 to build a 2000 square foot duplex. So that means he’s charging me [00:27:00] about a hundred bucks a foot. Okay. Well now you have the a hundred bucks a foot number. You can kind of scale it up and scale it down.

[00:27:06] Donovan Adesoro: So for example, okay, I know he is going to charge 180,000 for 1800 square foot duplex. So those are the kind of the numbers I I got confident with. Did 

[00:27:15] Patrick Donley: you feel at the time that you should have done a flip first to just learn basic construction and get a basic sense of construction knowledge? Before you jumped into doing ground up development, what was that?

[00:27:31] Patrick Donley: What was your thinking there? Because I know when I first started into it, I was like, I gotta do a flip first to just understand the entire process. Were, were you thinking along those same lines 

[00:27:40] Donovan Adesoro: or no? Yeah, so I was like, yeah, I gotta get the flip done, then I can, you know, do other stuff. But again, just because the numbers were so thin on the flip, I didn’t feel comfortable, you know, asking someone to partner with me on the flip, knowing that it could easily go sideways because the margin or the profit was so thin.

[00:27:59] Donovan Adesoro: And so [00:28:00] it took me a while to kind of get comfortable with just going straight to the new build. But when I was looking at, again, the, the profit or the margin for error, I was like, okay, even though I don’t know anything and I’m dumb and all that, even again, it, it still might work out okay because maybe instead of making 40%, we make 20%, which is isn’t the end of the world, which is kind of what I was thinking in my, in my head.

[00:28:24] Donovan Adesoro: So what were 

[00:28:25] Patrick Donley: some of the biggest challenges you, I want to kind of start at the beginning. You’re buying individual lots. How are you finding those? How are you sourcing them? How are you financing them? How did you partner up with people? I threw a lot of questions there at you. So let’s start with just first, how are you finding the 

[00:28:41] Donovan Adesoro: lots?

[00:28:42] Donovan Adesoro: Yeah, so I was finding the lots through, mainly through realtors and wholesalers and the way I was getting in contact with them initially was the realtors I would, I would see who had sold similar pieces of land like within the last month or two. And I would call ’em up, just kind of cold call ’em, Hey [00:29:00] this is Donovan, I’m looking to do a new build.

[00:29:03] Donovan Adesoro: I’m looking for a land just like you sold on 1, 2, 3 Main Street. If you have anything else, you know, feel free to send it to me before it comes to market. Ideally, that was kind of my pitch was, you know, closing quickly and with cash to send me your kind of off-market land deals. And so that’s how I’ve found some deals.

[00:29:19] Donovan Adesoro: The other was wholesalers. And so in a lot of these Facebook groups that are just public, you can just join them. You’ll see wholesalers post deals that they have off market. And so we found that’s, I’d say our first ones came through the realtor pocket listings. Then some came through the wholesalers and some were just on market.

[00:29:37] Donovan Adesoro: I want to 

[00:29:37] Patrick Donley: backtrack. You mentioned a pocket listing explains who our listeners, what a pocket listing is for people that might not know. Yeah, 

[00:29:43] Donovan Adesoro: good point. So the pocket listing is essentially a listing that a realtor has secured with a seller, but hasn’t necessarily necessarily listed it on the market yet.

[00:29:51] Donovan Adesoro: So, you know, it’s coming to market realtor and, and the seller are planning to list it, but the realtor may have someone [00:30:00] who’s a kind of a perfect fit or perfect buyer for that, and they may shoot it over to them in hopes that they just buy it and make the transaction quick and easy for everybody without having to go through the process of listing.

[00:30:11] Donovan Adesoro: What were 

[00:30:11] Patrick Donley: some of the ways you developed a good rapport and relationship with both the wholesalers and the realtors not having any experience? How did you gain their trust as someone to be taken seriously? 

[00:30:23] Donovan Adesoro: It was tough for sure, as you can imagine. I think at the time I was 23, so they’re like, you know, what are you going to do with a lot?

[00:30:29] Donovan Adesoro: Like, you don’t have any money? Which they were right. But what I did was kind of specifically outlined my criteria. So I said, Hey, I want a 5,000 square foot lot in this zip code non-food zone. I has utilities accessible. So basically getting really granular in his criteria can make them take you a lot more seriously since like, okay, this guy knows what he is looking for.

[00:30:49] Donovan Adesoro: It’s not just, Hey, Donovan wants me to send him any off market deal. That that doesn’t really, you, you’re not going to be first in their mind when they find the right deal. So when I was very granular of, [00:31:00] Hey, I want something here, you know, this size, this square footage, you know, non flood zone. I start to pop in their mind when they, when they think of something.

[00:31:08] Donovan Adesoro: And then one thing, one more thing to add, just for. Kind of the newbies and like myself who are getting started was to, when they send you something that doesn’t fit, make sure to explain why it doesn’t fit. A lot of times realtors, wholesalers may send something to somebody or potential buyer, and the potential buyer doesn’t reply with anything.

[00:31:24] Donovan Adesoro: They just don’t respond. You know that maybe if you’re big time you can do that, but I think when you’re new it helps really to explain why that lot doesn’t work for you, and just kind of giving them the kind of quick feedback makes them feel a little bit more confident in your ability to execute. 

[00:31:38] Patrick Donley: So it’s almost education in two ways.

[00:31:40] Patrick Donley: It sounds like you’re educating them on the specificity of exactly what you’re looking for, and then when they are sending you deals, you’re educating them on why something wouldn’t meet you’re criteria. And then by doing both those processes, you’re really honing in on, you know, teaching them exactly what you’re looking for.

[00:31:59] Patrick Donley: Talk to us about [00:32:00] that first lot that you bought. How did you purchase it? Had you partnered with somebody at that point? 

[00:32:06] Donovan Adesoro: So around the time when I was getting. Guys familiar with realtors and wholesalers. I started to put together a presentation with the numbers I mentioned earlier of like how confident I was with them.

[00:32:16] Donovan Adesoro: So once I was confident with those numbers and confident that, that I could get it done one way or another, probably with a bunch of mistakes. But j confident nonetheless put together a quick presentations just outlining kind of what the plan was. Okay, I want to, we’re going to buy piece of land in this area, this zip code, here’s the reason why I like the area.

[00:32:35] Donovan Adesoro: Here are the numbers on the deal. Here’s what the profit split will be. Here’s what I need from you. I need X amount of dollars. I think the first one I needed, maybe like 50,000 total. And the land on that first deal that, you know, going to your second part of your question was about 36,000 or something.

[00:32:52] Donovan Adesoro: So right around 36,000. And then the rest of the money of that 50,000 I was requesting was going to be used for planes and [00:33:00] permitting. So 

[00:33:01] Patrick Donley: how did you find that first investor? You, it was a Facebook group. Is that, did I hear 

[00:33:05] Donovan Adesoro: that correctly? Yeah, correct. So during this time when I was looking at the, when I was analyzing deals for Flips, Collin, we talked about earlier, I was constantly networking with people on these Facebook groups in terms of, one of ’em was like a bigger pockets one, one of ’em was like an apartment investors something again, just different real estate Facebook groups and specifically looking for people who were okay with investing out of state.

[00:33:29] Donovan Adesoro: So for example, I kind of targeted people who would say, Hey, my name’s John, Joe, whoever. I’m looking to hire a property manager out of state. Does anyone have any advice? So, so people who were posting something about investing out of state that made me know that they were comfortable with not necessarily seeing their investment.

[00:33:47] Donovan Adesoro: And so I would comment on their post or I would DM them saying, Hey, my name’s Donovan. I have this opportunity to build duplexes with as little as, you know, $50,000 out of pocket and you kind of have me [00:34:00] as your boots on the ground and I take care of everything. And you just kind of. Maybe sit back and collect the updates and hopefully collect the check on the back end.

[00:34:08] Donovan Adesoro: And a lot of people were interested, but again, I didn’t have any experience. So they kept were, they kept saying, that sounds good, but you know, I’ll catch you on the next one. Or No, thank you for now. Call me in like a year, which made sense. But eventually found one doctor in New Jersey who was like, okay, yeah, I’m in that.

[00:34:26] Donovan Adesoro: That sounds good. What would you 

[00:34:28] Patrick Donley: say was the key to, what did you do that convinced him that he should put $50,000 with you and move forward with the investment? 

[00:34:36] Donovan Adesoro: Yeah, so I, I was really trying to focus on just the margin for error of the deal and as well as how all the ways he was protected. So I said, Hey, it’s like when we’re buying this piece of land, it’s not like I can just take it and sell it, right?

[00:34:50] Donovan Adesoro: Or you don’t even have to send, you know, when we buy this piece of land, you don’t have to send me the money personally or to the business account. , you can wire it directly to the title company. [00:35:00] That way if you’re worried about, you know me, right? You don’t know me, completely understand it, you may not want me to necessarily transferring funds, no problem at all.

[00:35:08] Donovan Adesoro: So just getting comfortable with the process and the logistics of it, of like, not so much focusing on how much money they were going to make, per se, but focusing on all the ways, all the downsides that I’m trying to protect already. Okay. Here’s the way that you, you, you might be able to get burnt with someone else that you’re not going to get burnt with me.

[00:35:26] Donovan Adesoro: Right? You don’t have to send any money to me. We’re going to create the l l C through a lawyer, you know, 500 bucks. So we’re, we’re doing all that legally in the right way. So just, yeah, really focusing on hedging the downside. So 

[00:35:38] Patrick Donley: making sure you had a margin of safety. You convinced him that way. Did, were you talking to him face to face?

[00:35:44] Patrick Donley: Were you flying to New Jersey to meet this guy? Was it Zoom meetings, phone calls? How are you doing that? 

[00:35:50] Donovan Adesoro: Yeah, only phone calls and emails. So, I think to this day, this has been, we’re going on two and a half years now. I still have not met him in person. 

[00:35:59] Patrick Donley: And you [00:36:00] have done, how many lots have you bought with him?

[00:36:02] Patrick Donley: Eight. Eight. That’s crazy. That’s wild. 

[00:36:06] Donovan Adesoro: Interesting. Yeah. Very, very crazy. He’s no, he’s, he’s nice. But you know, once he realized that like, okay, Donovan’s kind of doing stuff the right way, he’s being diligent of like, you know, if I’m making a mistake, I’m letting him know, okay, here’s what I did wrong.

[00:36:20] Donovan Adesoro: Like, okay, maybe I should have talked to the architect before talking to the city or whatever. It was the mistake I made, I try to keep him in the loop. And so he is like, you know, as he was kind of seeing that he is, okay, let’s get another one. Then, you know, after like the second one he was like, okay, actually let’s, let’s scale up to eight.

[00:36:37] Donovan Adesoro: So, when he said that, we just started to find more land that kind of fit our criteria, and then we just kept buying. And were 

[00:36:45] Patrick Donley: the lots you were buying, what kind of neighborhood was it? Were they all centrally located? Were you spread out? Were you trying to keep things centralized? 

[00:36:53] Donovan Adesoro: Yeah, definitely trying to keep things centralized.

[00:36:55] Donovan Adesoro: So actually it’s, they’re pretty, they’re actually in the same area, same zip code as the [00:37:00] duplex I bought to live in. So the reason why is because it’s one of the few non-food zone areas of Houston that’s also pretty affordable and also close to, you know, medical center downtown. We’re close to three universities.

[00:37:13] Donovan Adesoro: So I was very focused on this area because that’s where the coms were, right? I didn’t want to go and build something with someone else’s money and not have an idea of what it was going to be worth on the back end. So I wanted to be pretty much certain, okay, here’s what the comps are saying right now, we’re going to build to that comp.

[00:37:31] Donovan Adesoro: And so I was just kind of trying to stay, keep the wrist down as much as possible, while also being in kind of a gentrifying area, which is, which is what it is. So did you 

[00:37:40] Patrick Donley: have a playbook that you were using to follow step by step? That’s somebody that you were following along and saying, here’s what I need to do by the lot.

[00:37:48] Patrick Donley: I need to get permits, I need to talk to an architect. Talk to us about that process. What kind of playbook you were using or were you just making it up as 

[00:37:56] Donovan Adesoro: you went along? Oh yeah. I would kill for a playbook going [00:38:00] back then. I mean, I wish I had it. I did not have one, so I was, yeah, I was making it up as I go.

[00:38:05] Donovan Adesoro: I mean, even when the first investor said he was interested, I was like, okay, okay, what do I do now? Just because I, I didn’t even, I didn’t think I would get that far. And so each step, I’m, I’m kind of making it up. But what I think I did do well, or try to mitigate some risk is, you know, get the good, a good team behind me.

[00:38:21] Donovan Adesoro: So like, I made sure the architect and the person doing the permitting, like was ex or experienced, and they have, they’ve done duplexes, they’ve done them in the area I’m looking to do them in. So just trying to rely on people who may have a little bit more experience to execute what they do well. And similarly with the blender, you know, they’ve lent to newer borrowers like myself, so I just try to rely on the team more.

[00:38:43] Donovan Adesoro: So, but yeah, it was a lot of making it up along the way for sure. 

[00:38:47] Patrick Donley: So for the financing and, and getting the money to do the projects, were you using the, the land, the lot that you had as collateral to then fund the construction costs or was the doctor [00:39:00] funding the entire thing? 

[00:39:02] Donovan Adesoro: Yeah, so the, the way he wanted to do it at first was he was going to fund the entire thing, but instead he wanted to leverage that money by getting more lots.

[00:39:11] Donovan Adesoro: So like we could have done two duplexes cash, or we could have bought, you know, eight pieces of land and then leverage those with a bank loan to do the eight duplexes. So yeah, we would buy the land in cash and then leverage that for the, typically the entire amount of the cons. And the banks 

[00:39:28] Patrick Donley: were okay with doing that kind of loan for you, obviously.

[00:39:32] Donovan Adesoro: Yeah. So yeah, as you, the only reason they were is because my partner had to sign on. Right? So partner is you know, kind of a higher net worth individual. So even though we didn’t necessarily have the experience, because he had, we had already bought the landing cash plus he had well over a million dollar net worth, they were okay with with giving that loan, assuming both of us sign a, a full recourse loan recourse, meaning that if the loan [00:40:00] goes sideways and we can’t pay all the loan back, then they are in the clear to come after some of our personal assets, i e our home in that.

[00:40:09] Donovan Adesoro: So he was 

[00:40:10] Patrick Donley: a really key part of making all this happen. I mean, without him it would’ve been really tough. Right? So that was the first hurdle is gathering the money, which is often the case I had. 

[00:40:21] Donovan Adesoro: Yeah. So there, it would’ve been either really, really tough without him or really expensive, you know, going a, a kind of a hard money route and paying a bunch of po bunch of points.

[00:40:29] Donovan Adesoro: And, you know, for a new borrower, I had 

Eric 

[00:40:32] Patrick Donley: Weather Holtz on recently, and he, he had a quote recently about, you know, capital being the lifeblood of real estate. And you know, without capital you’re not doing deals. How would you recommend to younger guys, younger people in general, h how to raise capital?

[00:40:50] Patrick Donley: You went into it a little bit, but how, how to raise capital and how to find a partner that you align with that can also also be really difficult is finding someone you just align with 

[00:40:59] Donovan Adesoro: [00:41:00] philosophically. Yeah, a hundred percent. That is a big piece of it. Again, obviously, like I mentioned, the presentation was super helpful.

[00:41:07] Donovan Adesoro: but again, like a, I guess really focused on was like looking at the downsides. Like poke holes in your own story or take your your story to someone else and let them poke holes in it, and then kind of come up with a kind of a defense for whatever the maybe concern is in terms of like finding investors, you know, Facebook groups, they have meetups as well.

[00:41:28] Donovan Adesoro: So like, one of my investors actually came through a meetup. So I was going to these local Houston meetups, you know, they, they’re put on by whoever, like you can look ’em up on meetup.com. They have ’em all the time. So I think finding them was, was through something like that as well as maybe posting on social media.

[00:41:45] Donovan Adesoro: That has been a kind of a game changer for me to kind of propel my business forward was, you know, posting on Twitter, not so much to say like, oh, you know, here, you know, look what I’m doing. I’m more so posed to get people to understand like how I think about things. [00:42:00] because when investors can see how you think about things, they can decide if they kind of agree with that and if they kind of want to align themselves with it.

[00:42:07] Donovan Adesoro: So for example, and I’ve been posting on Twitter for a few y you know, maybe a year and a half kind of consistently. And so now when I meet potential investors in person, they kind of already know how I think about things. And it’s not, it’s kind of an immediate yes or no. It’s either, okay, I saw the way you think about things.

[00:42:22] Donovan Adesoro: I saw what your projects you did, I’m not interested. Or I saw it and I, and I liked it and I’m kind of ready to move forward. So whatever you can do to kind of get your, your thought process out there in the in the world will definitely help as well. 

[00:42:35] Patrick Donley: That’s a great point. So growing your Twitter following, were you basically posting about your process as you went along?

[00:42:43] Patrick Donley: Were you just sharing your learnings and like, here’s what I’m doing world and both your mistakes and the 

[00:42:48] Donovan Adesoro: successes. Exactly. Yeah. So however’s small something was that I was doing, I, I would share it and, and I think it’s an, it’s a little intimidating, right? Because if you’re on Twitter, like there’s some people doing some amazing [00:43:00] things at a high level and they’ve been doing it for like 10 plus years, so you’re like, why would anyone care about my little house hack duplex?

[00:43:07] Donovan Adesoro: But the important thing is, is like people want to see, people like to help people kind of coming up. From what I’ve seen, at least in the real estate community, and especially on Twitter, people love to help people kind of up and coming that are like that. See, they’re working hard. So, you know, I would just post about like even my house hack duplex, like, okay, here’s my income.

[00:43:26] Donovan Adesoro: Here’s you know, here’s how I rented out the bedrooms. I use this website, whatever it was, I would just post about it and just to kind of get my dot process process out there as well as, you know, through the building, I would post about my mistakes. Okay, here’s what I did wrong. I, for example, one of the biggest bigger threads that I did was I waited too long to order my gas meters and ended up costing.

[00:43:48] Donovan Adesoro: You know, four months of interest payments, which ended up being like $8,000. So, you know, posting stuff like that in there and just being transparent, I think helps, kind of builds trust even with people who may not necessarily have spoken to you [00:44:00] before, but they can, they can see where you’re coming from.

[00:44:02] Donovan Adesoro: Yeah. 

[00:44:03] Patrick Donley: Real estate, Twitter is such a great resource. Are you learning, are you using it also continuing to learn from, from it? And do you ask questions for example, like if you run into a hurdle, do you put it out there? Like how would you guys handle this? 

[00:44:16] Donovan Adesoro: Yeah, that’s the amazing thing about Twitter is you can kind of get anything answered and not even, doesn’t even necessarily be specific to real estate.

[00:44:24] Donovan Adesoro: The reason I actually got the job I am at now with Fund that Flip as a, as a lender on the investor relations team is because I would, I had posted about, hey, I’m thinking about leading my oil and gas job to maybe do, I dunno, investment banking or, but I would prefer to do something real estate related.

[00:44:41] Donovan Adesoro: And so I got a DM from someone who was kind of a higher up in the company and said, Hey, like you may take a look at this position, see what you think and you know, let’s talk about it. So even stuff like that you can get, you can, I’d say the last like four quality job offers haven’t come off LinkedIn, they’ve came from Twitter, so that’s a big piece.

[00:44:59] Donovan Adesoro: And [00:45:00] then, yeah, if I have a, I’m stuck on a construction piece, you know, side of things. I mean, I post a question I think just maybe a few months ago I said, Hey, my water meter guy is completely backed up. Does anyone have a plumber that they can recommend? Somebody immediately reached out, DM me, and I’ve been using that plumber for two months now.

[00:45:17] Donovan Adesoro: So again, just all types of value you can get from there, which is why I try to post so much because I get so much from it. I feel like the least I can do is try to put something out there for maybe people who are starting to come up and want to just kinda. Yeah, and it’s great 

[00:45:33] Patrick Donley: inspiration for somebody. I mean, the danger I find for me is it’s like the shiny object thing.

[00:45:39] Patrick Donley: There’s so many people doing so many interesting things that it’s like, I want to do self storage now, or I want, you know, like, there’s so many cool things and so many smart, smart people that are, you know, figuring it out and, and doing doing great stuff in real estate. So that’s a hundred percent. But it’s, that’s the beauty of it too.

[00:45:56] Patrick Donley: It’s just the, the learning is just like probably the ideal place to be, I think. [00:46:00] Absolutely. I wanted to get into fund that blip. You mentioned that. What are you doing for them? What do they do and at what point did you leave your, the petroleum company to, I guess, would you, you started at fun that flip after leaving that, that first.

[00:46:16] Donovan Adesoro: Correct. Yeah. So this was end of 2021 is when I started to, so when we were starting, we’d already started construction on a few different projects and we were, as you can imagine, like you gotta talk to your general contractor builder, almost ideally daily. And so I was talking to the general contractor and he would call me with, you know, questions or, Hey, can you send me this permit?

[00:46:38] Donovan Adesoro: Or whatever it may be. Just, just little things like that. And I was finding myself having to run into my office and kind of hide to take a phone call. And I was like, there, there’s just no way this is sustainable. Like, one of these things is going to kind of falter, right? It’s either the job is, or the actual projects were.

[00:46:55] Donovan Adesoro: And especially because I had, you know, people’s monies, people’s money on the line, [00:47:00] you know, investors that trusted me with their hard earned cash. I was like, I, I can’t, I can’t let that falter for sure. I was looking for a job that would a little bit more, I guess, flexible or allowable for my personal real estate goals.

[00:47:13] Donovan Adesoro: and so on. That flip is a, a lender kind of bridge lender, meaning we’ll do loans for people who are doing fixed and flip or new construction. What we do differently is we obviously, you know, can close quickly, you know, in two weeks and we can do all the stuff that everybody can. But the nice thing about us is we turn around and offer those loans to invest accredit investors on our platform.

[00:47:36] Donovan Adesoro: So, you know, accredit investors can buy a piece of our loan and kind of earn monthly interests the same way as the lender would. They kind of almost become the bank. The reason why that’s important for the borrower is because we, as we saw it last year, during July, August when the rates shot up, a lot of the big institutional kind of hard money guys, they kind of started a close up shop or came down way low [00:48:00] on their leverage or everything just kind of stopped because the only people they have applying their capital are these large hedge funds.

[00:48:07] Donovan Adesoro: And when those thing, when that spigot turns off, There’s no, there’s no alternative for us. When that spigot turns off, we can divert things to the, the crowdfunding platform. So we have a diversity of, of capitals stack, which is beneficial for the borrowers. So, and again, they’re fully supportive of what I do on the side.

[00:48:24] Donovan Adesoro: They encourage it and that’s super helpful. I mean, a lot of people in the company are real estate investors, so it was just like the perfect fit for me. So what’s your role with them now? Investor 

[00:48:33] Patrick Donley: relations Director. Investor relations director. So would you say it’s helped working with Fund that flipped?

[00:48:39] Patrick Donley: Has it helped your, you know, your doing the duplexes and, and that whole process you’re investing in real 

[00:48:45] Donovan Adesoro: estate? Yeah, because I really wanted to learn kind of the back end of how a bank or a lender looks at a loan. You know, what are their criteria, that they really wait more than others. Like is it just, are they experienced or is it credit or is [00:49:00] it, you know, all these things.

[00:49:01] Donovan Adesoro: So I got to really see how the underwriting works as well as, Just getting to meet investors right before meeting investors was just something I would do on the personal side when now meeting investors is part of the job. So it’s been super beneficial to exchange information, Hey, here’s what I’m doing differently.

[00:49:17] Donovan Adesoro: Here’s the new trendy countertops, or here’s the, here’s where I get my paint supplier, right? There’s all these little maybe nuggets that I can pull from just meeting with different investors. That’s been super helpful. That’s 

[00:49:28] Patrick Donley: awesome. I wanted to talk to you about finding a general contractor. When you did that first duplex, how did you go about finding someone that you trusted and were you worried about getting ripped off, whether financially or doing shoddy work, or talk to us about finding a GC in that process.

[00:49:48] Donovan Adesoro: Yeah, so I mean, finding a good GC is like the, the lifeblood of anyone doing construction or heavy value add projects because if you’re not going to do it yourself, you’re at their mercy more [00:50:00] or less. And so it was, it was definitely tough. I, I try to interview or at least meet with people, GCs, at their projects.

[00:50:08] Donovan Adesoro: So I’d originally find them through these Facebook groups. Looking back, the thing I would do differently would be to drive around in areas you want to develop then, or do remodels in and stop at the job sites that are actively ongoing. So if you see a flip coming on or going on, you see the painters there.

[00:50:25] Donovan Adesoro: The painter may not be the gc, but if you stop and say, Hey painter, I’m looking to do a remodel myself, can you send me your, you know, boss’s number or your, the general contractor’s number? because the people who are actively doing stuff there may not, might not have the time to be on social media, right?

[00:50:41] Donovan Adesoro: Because they’re so busy. Like my GC now is not even on social media. So the first GC didn’t end up working out. He didn’t necessarily he screwed over, screwed me over a little bit. But tell that story. 

[00:50:52] Patrick Donley: You r wrote about it. I, and I think it’s interesting what he did. Yeah, 

[00:50:57] Donovan Adesoro: for sure. So basically, I had so many, well, [00:51:00] I gave him a good amount of projects.

[00:51:02] Donovan Adesoro: Well, no, sorry. I guess there’s two juicys, two juicy stories. The first GC that you’re talking about that I mentioned on Twitter is I had a GC that had built the duplex I live in. So that was, I thought it would work out great because they built the one I live in then, you know, I try to use them for the, the build of ours once we were at that point.

[00:51:20] Donovan Adesoro: And so we had, we had talked, we had arranged the contract, we were all good. And then a week after, I guess a week before we were supposed to, we were supposed to start construction. He he calls me up and says, Hey, price actually just went up from 200,000 though, like 230,000 or something. It was something like 15, 20% increase.

[00:51:40] Donovan Adesoro: Just, just like that. There was no explanation, Hey, here’s a new price. You know? How, how did that happen overnight? Like, am I did like a asteroid hit all the lumber factories or like, and you can’t get any, I mean, what, what’s the reason he’s like, Oh no, don’t, like, this is my new cost. Like you can afford it.

[00:51:57] Donovan Adesoro: You know, trust me, I saw the loan amount that [00:52:00] you, that you guys have. I was like, well, well first of all, the loan amount, you know, has other costs in there that aren’t specifically just for construction. Like we wrapped some of the closing costs in there and just some other stuff. So I was like, actually, we don’t have the money.

[00:52:14] Donovan Adesoro: We have kind of what you, what we agreed upon and what we signed a contract on. So go, well I just won’t do the work. I was like, okay. And we just terminated it from there. We just didn’t really speak again and I had to, I had to go find, kinda get my backup option. Now my backup option ended up getting too busy on his own projects to work on mine.

[00:52:34] Donovan Adesoro: So like, things starting to take a lot longer than they were supposed to end up having to let that guy go. So, as you can see, I am just a magnet for, you know, great contractors and it works great every time. , but I don’t regret that because the reason, the thing that I think I did do well to protect the investors was I wouldn’t release any money until work has been completed.

[00:52:55] Donovan Adesoro: So I don’t pay any upfront. I said, you know, same thing with the contractor who I had to fire. [00:53:00] It wasn’t that big of a deal because I just paid him for what he has done. There was no, I didn’t give him extra 30,000 to kind of keep going. You know, he, if, if he stopped like 60% of the way through, I’d only paid him 60% of the money.

[00:53:12] Donovan Adesoro: So it really wasn’t too difficult to get another GC in there and have him finished. 

[00:53:18] Patrick Donley: What are some key things that you look for in knowing that a GC is going to be a good one? And it’s hard to know until you get into it, but what are some things early on that you can, maybe red flags also to 

[00:53:29] Donovan Adesoro: be aware of?

[00:53:30] Donovan Adesoro: Yeah, it’s like you said, it’s tough to, until you get into it, but I think red flags are maybe too eager to respond sometimes. Right? I mean, if they’re constantly maybe checking in on, on that quote they gave you or they gave you, or if they want to meet at the, the site, it’s like, , aren’t you busy? Like, don’t you have stuff to do?

[00:53:48] Donovan Adesoro: How can you meet four days out of the week? Like I would imagine you should have some projects going on. So I think when they don’t have projects going on, it can, it’s not necessarily a bad thing, but you just gotta be a little bit more cautious because it could be [00:54:00] easily a little bit of desperation.

[00:54:01] Donovan Adesoro: Right. I mean if that’s their, their full-time job and the way they make all their income and they don’t have any job going going on, they may quote you a great price and it may not necessarily be what it’ll actually kind of end up being. They may start to nickel and dime you here and there. See, it is difficult and I think I would still do it the same way.

[00:54:18] Donovan Adesoro: Like I would still only pay for work is completed. That way you’re, you’re not exposing yourself to too much risk. 

[00:54:24] Patrick Donley: Yeah. There’s no way I’d pay for guys that ask for work or money up front. It’s like that’s definitely a red flag. You know, if they don’t have whatever, if they don’t have cash to like fund themselves for the next week or so, it’s like, 

[00:54:35] Donovan Adesoro: oh,

[00:54:37] Donovan Adesoro: Yeah. I don’t know. If I watch you working on my job then, because that could be. You know, as you know, right? So for people who haven’t done a construction loan, the bank pays you and draws, draws, meaning the bank or lender will send out an inspector to verify the work has been completed. And you know, for whatever reason, sometimes the inspector may miss something or the bank is closed and your draw is delayed [00:55:00] by a week or two.

[00:55:01] Donovan Adesoro: If you have a, a GC who doesn’t have any of his own cash, and you are having to, if he’s like, Hey, I need that money like today, and you’re like, well, the bank’s not sending it till Wednesday or whatever. Either you personally have to pay that, or your lender or, or the GC has to make it up. And so again, I’m, in my case, I’m willing to pay it, but the point of the story was like, if they don’t have their own money to last, like another week, it’s like, okay, it’s a red flag.

[00:55:28] Patrick Donley: And so did you finally find a good gc and was one of the, it’s sounded like one of the hurdles was. Somebody that’s really good and really busy. If you’re doing smaller, not, not that what you’re doing is small, but to maybe the GC at small and it’s easy to get pushed off. I’ve had that experience where it’s like, eh, you know, I’m making more money from X, Y, Z person.

[00:55:51] Patrick Donley: I’m going to focus on them because they give me solid, consistent work that I know that I can rely on. You’re just kind of a, maybe just a one-off deal. They [00:56:00] don’t know how, how did you overcome that to not get pushed off and get the work completed? 

[00:56:06] Donovan Adesoro: Yeah, it was, it was obviously difficult. Like thing we had going for us is that we started to acquire a lot, kind of all at once.

[00:56:14] Donovan Adesoro: So by the time we had started construction on the, I think the first one or two, we’d already acquired 12 lots between three different investors. So my pitch to the, the GC was like, Hey, you know, for example, like the one that I had to come in and, and start to take over, I’m, that’s the one I’m still using to this day.

[00:56:32] Donovan Adesoro: I said, Hey, Do me a favor, come in and take over this project and finish it up for me at this budget and I will give you these other tent. So there’s a kind of a carrot and a carrot to kind of chase after there where, okay, I’m going to give you some volume. And so in exchange I need a decent price. And so that’s one way.

[00:56:50] Donovan Adesoro: But yeah, if you don’t have the volume, then you’re kind of at their mercy to, you might have to pay a little bit more than, you know, someone who’s giving them volume would then, if you can make the [00:57:00] numbers work and you, and it’s your first one, you know, maid has kind of gotta kind of get it done and then once you can get some volume, you can start negotiating the price a little bit better.

[00:57:09] Donovan Adesoro: Yeah, 

[00:57:09] Patrick Donley: that first project is still important just to be able to show people that you can make a building happen or a duplex happen that you can do what you say you’re going to do. Exactly. I wanted to talk about your exit strategy. Once you’re building the duplexes, are you then renting them or are you selling them off?

[00:57:26] Patrick Donley: Or is it a combination of both? 

[00:57:29] Donovan Adesoro: Yeah, it’s a combination of both. What I do, again, this is another thing, back to like getting investors of protecting their money, what I did was I wanted to make sure that we could either sell it or rent it. It had to be profitable in at least two different exit strategies for me to feel comfortable to kind of take it to an investor.

[00:57:47] Donovan Adesoro: And so this was a reason why I couldn’t get comfortable with the flips, because when you do a flip and you couldn’t sell it, they wouldn’t really cash flow. And so both options work. It’s just a matter of what the investor wants to do. So [00:58:00] some investors, so right now I guess we have total of I guess like 12 investors total.

[00:58:03] Donovan Adesoro: And so some are, okay, I, I only want to hold, I want to refi and keep the cash in the deal or, and just kinda get the cash flow. And some are like, okay, I just want to sell. So it’s kind of the investor dependent. But the good news is that both options work should you know, one, not ma you know, make more sense than the other.

[00:58:20] Donovan Adesoro: So are you doing 

[00:58:21] Patrick Donley: a separate L l C for each project? 

[00:58:23] Donovan Adesoro: In theory we should, we do a separate L l C for each investor, so with, yeah, with one investor. I may have multiple projects in that same L L C. I’d say if we’re, and the reason is because we should probably split them up. The thing is though, like when we are signing the GC contract, the liability is kind of attached to the gc.

[00:58:42] Donovan Adesoro: So we, we don’t really, I’m sure we have, there’s probably some recourse that someone could probably figure out, but in general, most liability is from the GC on the building side. But yeah, as we transition to more long-term rentals, we’ll, we’ll probably look at doing like a series L C, which is kind of just multiple LLCs [00:59:00] under one umbrella, L L C.

[00:59:03] Patrick Donley: And how many projects have you done to date? 

[00:59:05] Donovan Adesoro: Yeah, so we completed a, like fully cycled and then we’re have 15 under construction currently. Wow. 

[00:59:13] Patrick Donley: 15. So are you at the projects? How often? What’s a daily, you’ve got your regular job, how are you managing this 

[00:59:20] Donovan Adesoro: as well? Yes, like I mentioned, the nice part is that they’re all in that area where I live in, so I can hit all 15 sites in the span of 10, 15 minutes because they’re all two minute drive from my house.

[00:59:33] Donovan Adesoro: So I probably hit them a couple times a week, I would say. But then I’m also in constant contact with my GC in terms of like what inspections we have or what’s left on a, on a project. So that’s been super, the communication piece has been huge. Now that I’ve done it a few times, like the GC kind of knows what I’m looking for.

[00:59:51] Donovan Adesoro: We keep the floor plans more or less the same. So we’re doing the same thing on each one. Same tile, same tile, you know, flooring, cabinets, granite, [01:00:00] everything’s the same. So the GC is, you know, again, he’s finished eight of ’em for me, so he kind of knows, you know, what I’m looking for at this point. Make it way 

[01:00:07] Patrick Donley: easier once everything’s kind of standardized than you just scale it.

[01:00:10] Patrick Donley: How, how often are you communicating with your investors? 

[01:00:15] Donovan Adesoro: Yeah, so I communicate, I guess I try to do like monthly or sometimes it’s like quarterly, depending on what the news is. When there’s active construction, I try to do it monthly, but if there’s, if we’re just waiting on permits or something, there’s not much to really communicate, you know, Hey, still waiting on permits.

[01:00:31] Donovan Adesoro: And then as we get closer towards like the end of construction, they’ll say, Hey, I kind of confirm each exit strategy with them. So, hey, you know, I’m planning to list this at this price. You know, here’s the offer we got. Are you, you cool with accepting it? And most of ’em already kind of implicitly trust me, like, yeah, you don’t, you know, do what you think is best.

[01:00:50] Donovan Adesoro: But I still include them to make sure that we’re still on the same page. So, hey, we’re, we’re good with selling at this price. Here’s what the, you know, net profit would be more or less, but, yep. [01:01:00] Sounds good. Send me the check when, when it’s done. 

[01:01:03] Patrick Donley: Do you have any of ’em? I don’t know, get a little nervous and reach out to you making too many phone calls or, or, I’ve, you know, I’ve, we’ve interviewed some hedge fund guys that, like when things are dropping precipitously and fur face investors get nervous and they’ll reach out and make phone calls.

[01:01:19] Patrick Donley: And Do you ever have that happen? 

[01:01:21] Donovan Adesoro: Yeah, I had a few of those, like last fall, like when rates shot up. They were only like maybe two or three, like called and were like, Hey, you know, how are we looking? Are we, we still looking? Okay? And I said, yep. You know, I’m, I think on, on every single project, we, we still, even the ones that we started at the peak of last year, we’re still going to hit the same pro performer numbers for the sales price.

[01:01:42] Donovan Adesoro: And so, and I said, Hey, the reason why is because the supply is so low of duplexes in Houston because there’s so much land. Everyone just builds single family and they, we just go out and out and. Nobody builds infill duplexes. So if someone wants an infill duplex, we set the price because we’re the only, we’re our own competition [01:02:00] at this point because we’ve already sold the same floor plan.

[01:02:02] Donovan Adesoro: You know, here’s the comps, you can kind of take it or leave it. Because the nice part of about being able to rent it out is, Hey, if we don’t get the price we want, maybe we just rent it out. And so, you know, that’s been able to get some buyers on board with the, with the price. So I’m going to try to start the low ball late last year.

[01:02:18] Donovan Adesoro: I was like, no, there’s no, there’s no comps for that, which is a nice part, right? In residential, that’s all based on parallel sales. Like, nope, we’re, we’re going to get our, our full lasting. Otherwise we’ll just, we’ll just keep it. So, luckily so far is, so far has been good, but, you know, maybe a more challenging market here in the next, you know, one to three years.

[01:02:37] Patrick Donley: Do you try to stagger the sales? Like when you f let’s say you’ve got two finished projects, will you put one on the market and like hold the other kind of in reserve to release later? Is that something you do? 

[01:02:48] Donovan Adesoro: Yeah. What I do is try to, I try to market them off market on my social media, so I’ll post them, Hey, I got these addresses available that way.

[01:02:57] Donovan Adesoro: Cause I don’t, like you said, I want to stagger [01:03:00] how I post them on the mls. That way they, they don’t see five duplexes and now they’re trying to decide between which one. I try to give them one or two options. So I may only have one or two active at one time. And then the other ones I’ll try to sell off market on my Instagram or, or Twitter.

[01:03:15] Donovan Adesoro: And that way there’s not, I’m not competing against myself too much. That’s cool. 

[01:03:20] Patrick Donley: So long, next couple years, what do you see going forward? Are you continuing to push it? Are you continuing to buy lots or are you with rates up? Are you taking a little bit of a breather? 

[01:03:30] Donovan Adesoro: Yeah, so we haven’t the, we actually just closed on our first slot, you know, this like two weeks ago.

[01:03:35] Donovan Adesoro: But before that, we hadn’t bought anything in since April, 2022. So the last two, three quarters of last year, we, we didn’t buy anything just because I wasn’t comfortable with where the prices were relative to where rates were going. So, but now I’m starting to see sellers are starting to be a little bit more realistic, starting to get more comfortable about where rates may be.

[01:03:54] Donovan Adesoro: Like maybe they’ll, they’ll land in the five to six range for homeowners, which means [01:04:00] investors, I can, I can kind of underwrite to a, a reasonable refi rate, right? Rather than hoping and praying, because I think last year when I was doing my numbers, I was underwriting to a, a five and a half, which seemed reasonable because rates were at three and then end of the year, you know, we ended up re refining at like seven and a half.

[01:04:19] Donovan Adesoro: It was like, oh, well that wasn’t as accurate. So now I’m just kind underwriting to that seven and a half with, I don’t think the rates will go up too much from here, but if they do, again, we’re, we’re still have enough profit margin to where it’ll make sense. But yeah, I want to scale up and I want to do hopefully some bigger projects.

[01:04:37] Donovan Adesoro: in terms of either like multiple duplexes all in one, like one subdivision type of thing or because right now they’re all scattered so I’d like to keep them more centralized and get some kinda efficiencies that way as well as get into some hopefully apartments one day. 

[01:04:51] Patrick Donley: That’s awesome. So how are you doing the split with the investors?

[01:04:55] Patrick Donley: What does that agreement look like? 

[01:04:58] Donovan Adesoro: Yeah, so kind of areas I guess [01:05:00] more or less it’s usually 70, 30 in their favor or 60, 40 in their favor. So I make sure they have kind of controlling interest cause I want them to, first I want them to make money, right? I want them to make a lot of money them to be happy because I want them to come back on the next ones.

[01:05:14] Donovan Adesoro: So I think right now I’m being like, I don’t charge any fees either. So that’s the other thing. I guess the typical maybe raising money model is like 70, 30 or 80, 20 to the investors. But you’re charging fees. And now again for me on a small deal just doesn’t make sense to charge fees. It’s maybe like two grand or something.

[01:05:31] Donovan Adesoro: because think about it of like, 2% of a hundred thousand dollars raised, you’re not really, you’re not getting rich off that. So I prefer to just leave it all that in the deal and just do a straight profit split. And again, for newbie investors, I think that’s good because you don’t make any money until your investor make money.

[01:05:48] Donovan Adesoro: So that’s the way for the the investor to get comfortable. It’s like, Hey, I don’t get anything until I actually execute. 

[01:05:54] Patrick Donley: Yeah, that totally makes sense. I had a younger guy on recently, the interview [01:06:00] actually just was released today, Shawn o Dowd. 

[01:06:03] Donovan Adesoro: Okay. Yeah, I know. 

[01:06:04] Patrick Donley: Yeah. And he talked about how he wants to just work his butt off until he is 35.

[01:06:10] Patrick Donley: He’s got a number that he wants to hit, and then once he hits that wants to go do, you know, whatever, go travel with his wife and kids or do whatever, you know? Do you have any kind of goals like that? 

[01:06:20] Donovan Adesoro: Yeah, good question. I don’t have a number, well, I guess I do have a number. I have a certain number of like cash flow per month that I would like to hit, but I don’t necessarily want to maybe relax.

[01:06:29] Donovan Adesoro: From the, on the gas from there, my goal is to hit that number by 30. Basically. It’s just some multiple of my living expenses are that way I could choose to do kind of whatever I want or have the quote unquote financial freedom. But I think I’m too like addicted to real estate to I think ever stop.

[01:06:44] Donovan Adesoro: I think I’ll, I’ll be in it for as long as I can tell. Just a matter of what, what asset class at that point. So, but yeah, I want to have a, this monetary goal by 30 I’d like to hit, but just, it won’t really change anything. Yeah. 

[01:06:57] Patrick Donley: You got the fever, I think I read you, you wanted to be an [01:07:00] accredited investor by the time you’re 30. Was that, is that right? 

[01:07:03] Donovan Adesoro: Exactly. Yeah. That’s, that’s one of the goals for sure is like, you know, I guess I, I like to hit the 200,000 for two years, which is like one of the, the metrics I guess. So I’d like to hit that for sure by 30.

[01:07:15] Patrick Donley: Right, right. Well, I wish you all the best, Donovan. This has been really great.

[01:07:19] Patrick Donley: I’ve got a ton of questions, I didn’t get to, so maybe we can do this again some other time. I, I really enjoyed talking with you. 

[01:07:26] Donovan Adesoro: Hundred percent. Thank you so much for having to me on. 

[01:07:28] Patrick Donley: Yeah. So for our listeners that wanted to learn more about you or reach out to you, what’s the best way for them to get in contact?

[01:07:35] Donovan Adesoro: I’m on Twitter at @DonovanBuilds. Instagram, donovan_651 or if you want to shoot me an email, it’s donovan.adesoro@fundthatflip.com. 

[01:07:48] Patrick Donley: And you’re pretty active on Twitter. Do you respond to people that have questions for you?

[01:07:51] Donovan Adesoro: Oh, all the time. Yeah. I try to help out as much as I can. So let me know anything I can help out with and you’ll, you’ll hear from me for sure.

[01:07:59] Patrick Donley: Awesome. Donovan , thanks so much for your time. Really appreciate it. 

[01:08:02] Donovan Adesoro: Thank you so much and take care. 

[01:08:04] Patrick Donley: Okay, folks, that’s all I had for today’s episode. I hope you enjoyed the show and I’ll see you back here real. 

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