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Guess who we got on the pod this week?
It’s our very own Donovan Adesoro, a Fund That Flip Account Executive located in Houston, Texas. After deciding he was done with the 9–5 grind and started making waves on social media platforms like Twitter and Instagram in the real estate space, he found community at Fund That Flip and has since grown his business at an impressive rate. He's only 25, and his story and booming portfolio as a developer and real estate investor will inspire anyone thinking of making a significant career change to dive head-first into the world of real estate investing.

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Brendan: Welcome back to another episode of Real Estate Investing Unscripted. I'm your co-host, Brendan Bennett, VP of Sales at Fund That Flip and with me is your other co-host, David Duggan, Director of Sales at Fund That Flip. What's going on, David?

David: Not a lot — happy to be here. This is what, episode number three? Now, this is the second solo flight for you and I.

Brendan: We haven't burned it down yet. So I think you know, we'll take that as an early win. You know, couple podcasts recorded. Couple should be aired by now. No one's told us to stop so I think, you know, we got a good mojo going here.

David: I love it. I love it. Yeah. Last week we had Nik Scoolis on from Zonda. Really good content. So if you're listening and you haven't checked that out, you should go do it. A guy with the data, right. And that's what we like, the guys that can bring the good hard facts to us. So you know, we're not out here spewing simply opinions.

There's some concrete information to back that up and it's all about, kinda the housing market where we're headed and some of his predictions for 2023. And I really enjoyed that conversation. I think it was really good stuff.

Brendan: Yeah, I agree. I think to your point, David, a lot of the people that we work with, they're real estate investors by trade. Like, you know, they're not fly-by-night kind of guys. So whether real estate's up, down, or sideways, they're bullish? And it might change a little bit. So getting Nick's take on how to factor in data into the different conversations of how people should pivot, and obviously different.

Take that information at different levels. But yeah, super, super interesting to get that run down. I think you know, that podcast brought a ton of value to our listeners, and I think this week in a very different lens brings a ton of value to our listeners as well. We have the unique opportunity to bring someone on who is not only a sales member from Fund That Flip who knows our products extremely well, but he's also someone that uses those products on the other side of the fence as a developer. So I'll let you roll out the red carpet for our guest, but super excited to get him.

David: Yeah. So I will gladly do the honors here of bringing in our guest. It is Donovan Adesoro, I think I got it right. That's correct. Right, Donovan?  

Donovan: Yes, sir. 

David: All right, cool. 

Donovan: Thanks for having me on. 

David: Yeah, absolutely. So really excited about this one. I think Donovan is way too humble about his early success in life.

And, he's one of the most hungry and driven young professionals that I've had the opportunity to work with. He's an account executive at Fund That Flip. Runs our Texas market. He's based in Houston, but really interesting and eclectic background. Former engineer, by trade.

He's got a nice Twitter following 12,000 followers on Twitter. He's no stranger to podcast. He's been on some podcasts before, including the Bigger Pockets rookie podcast. He is a, like I said, engineer turned developer at the ripe old age of 25. So, Dono. Glad to have you on, man. Welcome.

Donovan: Absolutely excited to be here and appreciate that pretty big intro there. I don't think I can live up to it, but thank you anyways.

Brendan: If you wouldn't mind just, you know, we hit on kind of the main bullet points. And again, David said, podcast, this isn't new territory for you. Give us your, like 30 to 60 second. Just who are you, what are you about? you know, let the audience know who we're talking to.

Donovan: Yeah, I'm from St. Paul, Minnesota originally. Um, so very cold, just like up there in Cleveland, ended up going to Tulsa, Oklahoma for school. The reason for that; they gave me the most scholarship money, so I was like, Okay, I'll go there. Did petroleum engineering there and then ended up in Houston with my full time job.

Graduated in 2019, so that's when I started my full time job was that summer. And then pretty quickly realized that I don't, didn't think I could see myself there for 40 years, you know, until retirement. And just like everyone else, I think we're all kind of told that that's kind of what you do is you work hard, get into school, then you get that full-time job and you sit at it for 40 years.

And I, it just didn't, didn't make sense to me. So started looking at other ways to make some sort of income and found BiggerPockets like everybody else. And, and at the time, dead broke with my 30 grand in student loans. So I was like, okay I can't really just go and buy rental properties, so I need something that's kind of a cost efficient way to, to get into it.

So got started by house hacking with a a 0% down loan. A plug for the listeners here, anyone in Texas can get this 0% down loan on one to two units. So yeah, I got that on a duplex, this was in 2020. And then from there I was like, okay, this is great. How do I stay in it? and then as I was trying to figure out ways to kind of stay in real estate, I came up with the idea to just start developing 'em just because the margins on flips were pretty thin here in Houston.

And so basically just scrounged my way and asked as many people as possible if they would partner with me on that first build. And then once I got it, then just kind of leveraged that to get the others. So that's the a quick summary.

Brendan: There you go, man. Yeah, I think the house hacking piece is a lot of people's wedge into real estate and investing, especially younger people that are getting into it. Right? Obviously like different stages of, you know, family or personal circumstances makes house hacking easier or more difficult just depending on where you're at.

But you know, a lot of the people at Fund That Flip in the office are doing house hack and they're learning and it's like I think the BiggerPockets you guys call, like real estate investing on training wheels, right? Cause it's like you're occupying the house, so you have the ability to then manage and make some revenue on.

You know, your worst case scenario is you sit 50% vacant, but you still live in the house and like you might pay what?  rent would normally cost. Like that's your absolutely worst case scenario. But then you can build all these other foundational building blocks and knowledge and resources. So, I think the really interesting thing that, you know, I'm sure we'll get into a little bit more is not many people go from house hacking to developing and the timeframe that you did.

Right? So you went from, you know, Cause I house hacked back in 2018 and like, you know, I bought a couple a couple duplexes every six or so months since then. But like, you went, indexed super high into the new construction right away. So What was kind of like your initial step into the development side and like what got you rolling on on that? 

Donovan: Yeah, it really wasn't anything intentional. Um, I think, Anyone who listen to bigger pockets, they're all about the Burr strategy. You know, buy. Rehab, rent, refinance, repeat. So I was trying to find essentially deals where that model would fit and in Houston, and for me, because I didn't have any contracting experience.

When you figure it, I guess factor in the hard money loan, the origination fees, and then the GC in Houston, at least, it was a little tight just because I wasn't maybe sourcing my own deals. So I was just trying to find 'em on the mls. looking at new construction because that's where the margins looked more reasonable.

And I knew I was gonna make so many mistakes, which I did. and that, that margin and new construction was what made me feel comfortable to kind of pursue it was like knowing that it's gonna make a bunch of mistakes that I had some, some buffer.

David: Can you tell us a little bit more about that, Donovan? Because I think in what we do, right? We work with a lot of people that start in rehabbing and move to development, and I think there's a lot of the unknowns. There's, they don't know what they don't know about moving into development. Oftentimes it's different construction crews, there's an angle that you have to work with the city and understanding the approval and the permit process. Can you tell us about that and what that transition was like and what some of those learnings were for you?

Donovan: Just to be clear, I had no idea what I was doing either. So I don't want it to make it seem like I did. but my whole thing was I feel like I'm willing to go and find the people with the answers. So same way. Anything else or starting anything else new is like, who can I talk to that's done it.

So for me, you know, my reservations with the city and the permitting and you know, the approval process, my whole, I guess, solve for that was to go talk to an architect and the civil engineer, which  is people who you need in Houston at least, well actually probably across the nation, the civil engineer is the one that actually has to stamp the plans before you submit them to the city.

So if you like, just go straight to him, you could just Google someone and just ask questions. But that's what I, that's kind of how I solved that, was by just talking to someone who's already been through it thousands of times.

David: Were you, were you doing your builds in Houston proper or are you like in some of the outer suburbs? 

Donovan: No, we're in, in Houston, Houston proper. We're probably just like 15 minutes south of downtown where all the kind of 20 plus are. It's like concentrated area. It's like two zip codes.

David: That's interesting in working with people that have done new builds in cities, right? City's smaller than Houston; Cleveland, Pittsburgh, Columbus. It always seems like they deal with more challenges the bigger the city versus like, you go to the burbs and you're, you know, it's more of a mom and pop shop when you go down to City Hall and and get your approvals and permits, do you feel some of that in working with Houston? Just like the size of the city kind of slows you? 

Donovan: Oh, a hundred percent. Yeah. I mean, you talk to people who build just outside of Houston and they're like, Oh yeah, we don't. I have inspections, I get approvals in two weeks. You know, they're finishing a house in a month where it takes me six. So, yeah, you definitely feel that. I would say the nice part about Houston is that we have no zoning, so it makes it a little bit easier to just go, you don't have to, I'm not really, you know, if you're in Cleveland or anywhere else in the nation for quite frankly, you're, you're looking at the zoning map to make sure you can build what you wanna build in Houston, because I know that there's no zoning.

You can build a duplex buy right anywhere, single family duplex, anywhere. so that made it a little bit easier. but then just to touch on something that I think scares a lot of people off is, we're building infill lots. And so by infill meaning there's already usually a house next door house on the other side of it.

So it's not like we're bringing utilities, you know, having to put in sewer pipes and and whatnot. So I think a lot of the risk is taken out when you're building infill because a lot of that unknown. Taking care of like water lines, sewer lines, electricity, gas, et cetera.

Brendan: what I'm interested to get in a little more detail on too, So, so you're building you're building duplexes for either yourself to hold, for, to sell at, at retail price. Um, I know you have some partnerships, you have some private money, and I wanna get into the private money and the partnerships, here in a minute, but like, Again, our conversation with, with our last guest that was very economics heavy; he was talking about how the current market is adjusting, how people approach their projects, their strategy. So like, take us back like six months ago versus current state. What's changed about how you're approaching your development deals, your land deals? Like are, are you still doing a decent amount of volume?Are you starting to slow down? Are you taking like a wait and see approach? Like give us the inside the investor brain look of how are you interpreting the market and the headlines that are coming out. 

Donovan: Yeah, so we actually, or I guess I kind of decided to make a pivot about a year ago in terms of the size of duplexes because what I was, what we were noticing, well, we were seeing is that our larger duplexes, we originally started out, started out with, which were three, two, each side. Those originally I underwrote or I guess planned to sell for like 350.

This was when we just started. Now those are going for like 420. Um, and so my whole thing was I want to be somewhere in the ballpark of the median price for the city.  like average sales, like that's the price I wanna target. So as we were, I guess, breaching that threshold of the median sales price for Houston last year, I decided to pivot almost everything to a smaller version of our duplexes, cuz you can reduce the square footage.

Now I can sell it for less and still make my same margin. So, All the like 15 new, new builds we've started, like this year, have all been 1800 square feet instead of 2300 square feet. And that's allowing me to, to target the same median sales point, like 360, 3 70 now. which I think is still reasonably affordable even in this kind of higher interest rate environment.

and so I think what I'm starting to see now is a lot of people who had had built bigger. 3000 square feet duplexes. So 1500 square feet aside. All, all their product is starting to sit right now because they're having to sell for 500, 500 in Houston is, you know, massive. And so they're starting to really feel it. Now, you make more money that way, don't get me wrong, but for me it wasn't more so just about the dollar mark as about the, the percentage. So my percentage is still gonna be higher even though I'm building smaller, the dollar amounts a little. But you know, my, my comfortability and being able to sleep at night still, still there.

Brendan: And you're, you're also trying to optimize just like. Time, right? Cause like time really goes into your total project costs. It goes time kills deals. When it comes from like, you know, are, are you gonna make the profit? Are you gonna be able to refi it with the lender and the timeframe that you want? So like, building this kind of median price point duplex with the square footage kind of in the sweet spot, it probably shortens, the timeline. If you're going to sell a retail, it's not gonna sit on the market as long. You're not waiting for the perfect buyer to come through and, and purchase. Is there some legitimacy to that of like trying to like kind of hit that sweet spot in the middle, both for refi exits with appraisers and then also retail buyers?

Donovan: Definitely. one of the things we wanted to make sure to do this year was to get some, some sales on the board while the market was still hot. So, you know, we've sold field properties over the summer. Now I have my comps built in that I can build to now cause we're building the same exact product.

So now, like whenever our, the lender's calling me for their appraisal, you know, appraiser's calling you to schedule a time. and so I say, Hey, by the way, we also built that one just down the street, the exact same floor plan. I don't know if you wanna take a look at it, but could be helpful. And so the last 10 appraisals we've gotten have come in at or above my number because they're using my comps that we've already established.

So makes me feel a lot more comfortable going into new builds and then repeating the process as well. Like you said, there's. Some quicker turnaround because we're, we're building the same exact floor plan, so less engineering, less money spent there. Um, the city's already seen it, so hopefully they can improve it quicker. Doesn't happen like that, but that was my original thinking, 

David: Are you building everything like in a certain pocket of Houston? Are you all within, you know, a call it a square mile or a one mile radius of each other? 

Donovan: Yeah. I'd say about like maybe. Two to three miles. But yeah, there's like two zip codes where it's actually the zip code where I bought my duplex I live in currently. Um, so it makes it easier to, to get to all the, all the pro projects pretty quickly. But yeah, it's a concentrated area because I wanted to make sure I had the comps available, just, you know, to underwrite the deal basically. I didn't want to go in and build something and not know what it was gonna sell for or appraise at on the back end. 

David: I love that you said something there that resonated with me because obviously we work with real estate investors all day long and some of them have really aggressive strategies and want to go after those high dollar numbers cuz they think that's the best. And I'm not saying it's not right, it, it works for them.

But I do think there's some value in eliminating some stress from your life and doing what's comfortable for you and being able to sleep at night. And it's pretty cool that you figure that out at 25, kind of what's working for you, at least for now, and you know, is within your comfort zone at, at 25. I was trying to figure out, you know, how to get car insurance and how to tie my shoes right? And you're building duplexes. That's pretty cool. 

Donovan: I appreciate that. But there was a ton of a ton of luck here, right? I mean, we had a raging two year bull market that made the, the numbers work pretty well. But um, again, even the high appreciation, that's not what I was banking on. We were actually building to rent all of these because my goal was just refi about half the money out, which was a pretty conservative strategy.

Um, now obviously the increase in the market made it so that refi all the money out plus some, so it was just like a charity on top. But yeah, it was just, you know, be conservative so you can sleep at night. That's my whole, whole thing. 

David: Very cool. So I want to, I wanna segue here just a bit, Donovan. So we talked about. What you're doing in development and kind of your, your path to get there. You started as an engineer, right? And so like I can kind of make some ties to that and, you know, development, engineer to account executive selling loans, that's not a, a typical transition.

So tell us, how did that happen, right? Like, what was that process like of moving from your day to day job by trade as an engineer to your role at Fund That Flip. 

Donovan: Yeah. And just to be clear, that engineering did not help and whatsoever in development. I know how to get oil outta the ground. I don't know how to build houses or anything. But yeah, like I mentioned, you know, working at a big corporate Fortune 500 company, there's just a lot of, you know, politics and, come in and you just gotta sit, even you, you finish all your work and they're just like, Okay, you can't leave because it's just doesn't look good. And so just a lot of that where I was just like, I'm ready to, to do something new. and I was posting on Twitter about my journey, doing developments and just trying to help people who are interested because I couldn't find anything when I was looking, getting started.

So I hope to be like a resource for people if possible. And then as I mentioned, I had made a tweet that like, hey, looking to potentially switch jobs or go into like investment banking, I had no idea what I wanted to do. I just knew I wanted to get out of the job I was currently in and get a DM from a guy named John Andrews.

He's like, hey, there's an opportunity to kind of do something kind of along the lines of what you're doing already, except we're gonna be for like your development on the side. When I was working at my engineering firm, you kind of had to keep it on the low because they didn't want you to like, not focus on your job, which, you know, I’m more than capable of doing both.

But either way. So anyways, John and a guy named Pat, they come down to Houston and we go to get dinner at some steak. I think it was just, I thought it was just a dinner just to chat and kind of see what they're about. next thing I know, we're halfway through dinner. John's, I guess pitching a job offer, and I didn't really realize it at the time.

Um, he was just kind of telling me about the role. I was like, Oh, yeah, I kind of like that. I could see myself doing that. and then, yeah, we just kind of went home like it was nothing. And the next day he, he calls me and said, Hey, so like, do you want the job? I was like, Oh, absolutely. Yeah. Yeah, without question. You know, you could be able to work at a small company with a bunch of other super smart people who are doing, you know, doing the business that I'm in, who I can relate to. Um, it was just, it was an absolutely no brainer for me.

Brendan: Yeah. So for for a lot of people listening, if we have any active or former borrowers listening, the name John and Pat, probably ring a bell. John and Pat have been on, the sales team and really like strong pillars for Fund That Flip since we got started in the early days John since maybe 2015 and, and Pat since 2017, 2018.

So no, no better two guys to send than, than those two to come talk to you, Donovan, and get you on board. I do think the really interesting thing, that you mention is like you were looking for a place to work that wasn't in a completely different vertical from what you were super passionate about. Right. You're really passionate about real estate. You're like, I would love to find a job that was some way related to that. Right. And I think, you know, it's, it's the very thing that brought me to Fund That Flip originally. Right? I got started in house hacking. I was working for a general contractor locally, and I was learning a ton, but I'm like, Man, I really wanna roll up my sleeves and really learn the finance side of the house and like understand how this works at scale.

And when I came to Fund that Flip, I assumed I would be one of the few people that, kind of has that really strong passion for real estate that jumped in. And then, to my surprise it's like, The majority of people that work at Fund that Flip are super passionate about real estate.

And the reason they came to work at Fund That flip is because of that passion, right? So, I mean, we obviously have people that are just very skilled and talented individuals that will post for the job and maybe they don't have a real estate background. Um, and those guys bring a ton of value to the company for, you know, showing a different perspective.

But I think a lot of that core culture of who Fund That Flip is and who our people are, it comes from that like, hey, like, you know, we walk the walk as well as individuals and. To a different scale, right? We have, we have investors doing some pretty crazy projects at, at a pretty crazy scale. but we at least have, can have like the the correct amount of empathy for what they're going through on the job site. You know, what, what the project looks like. So I think you, speaking to why the job really appealed to you is, is super important, like indicative of the culture at Fund that Flip.

Donovan: A hundred percent. Yeah, I can't beat it.

David: Donovan, how do you see like the ongoing, I guess like, relationship between your day to day job at FTF and the development stuff you're doing. Like, is there kind of a symbiotic relationship there that, kind of mutually benefits one another?

Donovan: Yeah, a hundred percent. I mean, one of the things like, again, just talking to borrowers in Texas and in Houston, you get a feel for what they're thinking about the market. You get a feel for where they're building, where they're staying away from. Um, and I can give them my feedback too. It's like, Hey, I tell them the same thing I told you guys, like, Hey, I'm not really building anything huge right now because it's gonna sit in Houston just depending on what the price point is.

So it's super symbiotic. It was stuff that, like the meetings I'm going on now are meetings I was doing for free when I was engineer. So like when I was working from. I would take my lunch break and go meet some investor locally in Houston, you know, for free and have to pay for lunch, you know?

So now I get to do that and that's part of my job. So, super symbiotic and then like Brendan said, I think the biggest big one is empathy. I think that's the reason why a lot of the borrowers kind of put their trust in me because they know, it's like, okay, he knows. the draw schedule's super important, right?

Like, am I gonna get my draws in a reasonable amount of time? I'm gonna have to wait a month. Do I have to send you invoices? all the pain points that they have. I can, they know that I can like, I guess, relate to them and it makes it easier for us to communicate, knowing we, you know, come in sitting on the same side of the table.

Brendan: Yeah, I think that's huge. I mean, Real estate investing in general is, while there's a ton of technology that's coming to this space in the last five, 10 years alone, it's still very much a handshake business. And we all understand that it's part of the core reason why we have territory managers base in every location where we originate.

And I think that that magnitude gets turned up even more when the person that you know is shaking your hand over dinner or at the job site. Is also developer themselves. Right. And like I honestly, you know, Donovan, you're kind of very unique in that sense. We don't have a ton of people that are as active developers like you on the Fund That Flip staff.

We have people that own some rentals and things of that nature. But I think like you're in a very unique position where, you have seen a lot in a short period of time in your personal investing career and can share that kind of experience, empathy, and just knowledge. The big thing that our investors, that when we talk to 'em, they just want to know that like we understand them and we understand their goals, their methods for achieving them. And you know, given that you're doing that independently, I think it speaks volumes to them on the other side. 

Donovan: Yeah, think it, like I said, definitely mutually beneficial. Hopefully I can provide them some value and, you know, they're providing me a ton of value, so it's been great.

Brendan: So Donovan, I'm curious, we're gonna transition a little bit to talk about your fundraising partnership and like lending strategy. So, you and I have talked before off the podcast. You're like, Hey, like Brendan, my goal is I wanna put $0 in to every deal that I invest in, or as minimal as possible.

So like, obviously Fund That Flip, we have a, lender side of the business and a borrower side of the business. You kind of have that same dynamic just on a smaller scale with the products that you're working with. Walk the listeners through, you know, what you look for in a private money lender, how you come up with those agreements and how you decide is it debt or is it equity? Cause I think that's a big differentiator that's important. 

Donovan: So far I've basically only have done like equity investments with private investors. and yeah, so to clarify, a lot of people who are want to get started and they're brand new, they're like, Well, you know, how did you get started if you don't put your own money in?

And I guess to be clear, me and the investor are partnering, so someone's bringing the money, right? Me and the investor are now one entity, right? We're coming under the same LLC, so the money's coming from somewhere. It's just in my case, I'm taking a smaller percentage of the ownership in exchange for not putting as much money in, but still doing the work.

So that's, that's the way our agreement typically works. But we'll split anything from like 60/40, 70/30 in the investor's favor. That's kind of how it originally started. Now that I've done a few, it'll maybe change a little bit, to be more, reasonable. but that was, where I started because I wanted to make sure the investor was, again, they're putting the money in.

Um, I wanna make sure they're well taken care of, wanna make sure they make a bunch of money so that they want to come back. so that's my, I guess advice to people who want to do something similar is you need to make it very clear what the advantage is for the person putting the money in. You wanna make it very easy.

So have a presentation, make sure you think of everything. How can this deal go wrong? What happens if it goes right? How am I gonna guarantee you that you're gonna get your money back, you know, safely? I think that's really what most people wanna know. At the end of the day, it's like, Okay, how are you gonna not lose my money?

Like, you know, you may promise me the world, but like, how are you gonna make sure you don't lose it? So that's a big one. 

Brendan: Yeah, the equity piece is super interesting and I think, Donovan, even if you're not leveraging the debt piece that much, I, you know, a lot of our borrowers, a lot of people that we work with, like they have some level of private money at their fingertips and some way or another, based on your experience with either debt agreements, Looked at, but maybe not pursued or, you know, debt structures from other people that you've heard of, what's that process typically like? Because like debt's obviously a cheaper function, but it's typically harder to get someone to build a trust and get them on there. There's a little bit less upside in a debt partnership. there's also less downside in a way because, you know, strictly, it's a principal repayment with some interest. So like, how do you do it?

Donovan: Yeah, I typically see flippers or developers may have a partner, uncle, dad, friend, mom, whoever say, 50K, 100k. I don't really want to do the work because I'm out here doing other investments. A lot of times they're making so much money elsewhere, they're like, hey, I just wanna put this money to work.

And so they'll say, Hey, I'll give you 100K and just give me, 115k back next year. Usually some sort of agreement like that. Sometimes it's handshake, A lot of times it's some sort of agreement, like a promissory note. like you personally guaranteeing I will repay. You know, 115 grand back, in a year.

The thing with that is like a lot of those investments aren't secured by a property. So that's what I like about, you know, investing on Fund That Flip credit investor website is, each property, each loan is secured by a property, right? So, and you got someone else underwriting it, the whole company's underwrote it, you know, rather than this, you know, handshake agreement where, Yeah, I hope John pays me back.

you kind of actually have some more security, I would say with the investing on a credit investor website like Fund That Flips opportunity. 

Brendan: David, I think, you know, you and I talked about this a little bit before jumping on the podcast too, where, a lot of people that end up hitting our site to do private money, are private money lenders that are local to whatever geo they live in. If it's a, you know, a Cleveland guy investing in Cleveland, a Houston person investing in the Houston area, that's what they know.

They, they've met borrowers at meetups, they've met them independently. Have to build trust over time and then, the reason why they end up coming to our site is they're like, Man, I'm just kind of tired of chasing down, you know, construction updates. I'm tired of chasing down interest payments. Um, I had a couple NODs or foreclosures I had to go through.

And to Donovan's point, they don't always have that first lein position. Sometimes it's in the form of a unsecured, promissory note. So I think yeah, the, the big benefit and kind of the principles that Fund that Flip was founded on is like we wanted to be the broker of borrowers doing great deals in, in a variety of locations and private money lenders that want action on those deals without wanting to do all the work.

Right? So like, we're kind of putting, we're the matchmaker, right? We're putting the borrower and the lender together. Um, cuz otherwise, like Donovan, you would have to go out and try to make those relationships on your own and, and build trust over time.

Like you said, you know, you're a 25 year old guy with a couple years of experience. Um, there's, there's some investors that are like, Hey, I need to see a 10 year wrap sheet before I start to invest in that deal. Right? Whereas like with Fund That Flip, we go through the process and say, Hey, you check the boxes, you know, we verified your experience.

We feel really good about your prospect of finishing this house and then we raise money on your behalf, which I think is just a really cool concept.

David: To your point Brendan, I mean, how many of the guys or gals on our platform were in those shoes of the private money lender where maybe they just had some deep pockets, right? Big retirement plans and they were getting approached by local real estate investors and that's what got into it, right? So at some point, Novice investors and they got pitched an idea by a local real estate investor and it worked out. But I mean, how many times are those, those loan docs just kind of whipped up on a Word doc, Right? Two page Word doc and, could be a little flimsy.Or maybe they're pumping a bunch of money into attorney fees to have those whipped up.

I think, you know, the people that get to our platform are, are kind of that, that next level of sophistication, right? They've done it a few times in private lending. They want something that's a little bit more. Sticky, You know what I mean? Something that's a little more formal. Right. Or at least a way to diversify their platform, as they kind of graduate from just like funding an individual fix and flipper.

Brendan: Yeah. And I think the really interesting piece and like Donovan you know, kind of going off of your example of if you wanna raise money in Houston, you know, you're looking for Houston guys, I know the Houston real estate. Um, you mentioned that you invest in the zip code that you lived in.

That's a lot of private money lenders think they're like, Hey, I know this zip code I wanna invest there. When you have someone else, like Fund That Flip kind of in the middle the ability for us to really service that loan, keep an eye on the project for you, it allows a Houston investor to have exposure in Cleveland, have exposure in Florida, have exposure in the Carolinas that are on fire, right?

And like, they can sleep peace at night. Like knowing that someone is watching their investment and making sure that the borrower is, is advancing construction consistently. And, you know, not, not to just mention this for our, our investors, but for our borrowers too, right? So like where, where else could our borrowers have access?

You know that number of accredited investors at any given time, like we, we kind of put all the, the nuts and bolts together for those guys.

David: Donovan along those same lines, I want to ask you right, cuz we've been talking about the investors on our platform and kind of where a lot of them originated from. What about you when you were getting started with development? How would you approach new investors? How did you go about building that initial capital stack, whether it be debt, relationships, equity relationships, and going out and finding those investors? 

Donovan: Definitely wasn't easy by any means. So as you can imagine, I think when I got started, you know, 24, no experience, no money, no real anything, you know, your project sounds good, but like, catch me on the next one is basically what majority of them said. Like, Hey, that sounds good.

I'll take the second one. I won't be the Guinea pig, but I'll, I'll do the second, third, fourth. I was like, Yeah, okay, it makes sense. but again, I was going on all these different Facebook groups. So like one of the, one of them was like BiggerPockets. One, one of them was Apartment Investor, it's a Facebook group.

but what I specifically did was target people who would make posts investing out of state because if they were willing to invest out of state, they were comfortable with like not seeing the project daily or something, or like they were willing to maybe relinquish control. So I would, you know, DM these people private messages.

These people said, Hey, I got this opportunity in Houston where we could potentially build these duplexes, and at the time we could do it for like 50 grand outta pocket when the land was pretty cheap. And so a lot of 'em were like, again, same thing, like, sounds good, but no. And so I probably got through like 40 or 50 of those and finally got this one doctor in New Jersey that I finally DMed.

And he was like, Okay, that sounds good. Let's set up a call. Like I sent him the presentation as I did the other 40 people who were like, No, thank you. so I just thought, Okay, here I, here I am sending it again. I know he is gonna say no, but I'll send it anyways. and then he was like, You know, I'm interested and let's set up a call.

And then again, like his questionnaire, his kind of vetting process was like, Okay, so like, what do you do? Or like, why are you capable of executing on this? And like, how are you not gonna lose my money? And like I said, my whole thing was that's, that's basically what my whole pitch was. I just, I didn't really say, Oh yeah, you can make this bunch of money.

It's gonna be great. It was, Here's all the ways that I thought of that you could, that we could get hurt, that done something to mitigate, right? So if we can't sell it, we can refi. Here's what the cash flow would look like on the refi. If we can't build it, you own the land. Free and clear. The land's probably not gonna Cut 50% in value in, you know, a year or so, right? So like you still have the money maybe just sitting, parked in the land. It's probably gonna be appreciating, Houston's a growing population market. I put the data on there to show, like, people moving here, it's unlikely the land's gonna decrease in value in the next one to two years.

so yeah, that was the whole call and the whole pitch was basically, you know, here's all the ways that I don't think you're gonna lose money and. Even he was like, Okay, I'm in. And I was like, Oh, okay. Um, you know, then I was kind of shocked because I was like, What do I do now? Um, but yeah, you know, once, once we got that first one going, then I kind of leveraged that to say, you know, explain to him other people who are interested, Hey, I already have someone who's interested and who's doing it with me, so if you don't wanna do it, no problem. So, that made it easier.

David: I love that. I want to get on my soapbox here for 10 or 15 seconds and go back to something you said. You basically presented this guy with a deal and you shot holes all through your own deal and you provided solutions. Right. 

Donovan: Yep. 

David: I love that because it. That's how a lender's gonna look at it, right? Like that's how an underwriting team or an analyst is going to look at a deal. They're going to shoot holes through it. So if you're going to somebody and you're saying like, My deal's perfect, it's the best deal ever. It's foolproof. There's no way I can fail. Like that's BS, right? There's always a way you can fail, and I think it gives you more credibility if you're saying like, Yeah, I've already thought of all the potential ways this could go wrong, but here's why I think it won't. Here are some potential solutions. Like that's gotta make people feel really good. 

Donovan: Yeah. So that was definitely a big piece. And then like you said, lenders do the same kind of underwriting or analysis on it, so you, it makes it easier to get that, that first loan, you know, when you're newer, don't have as much experience or. introducing yourself to a new lender, and you again, poke holes in your own deal and provide solutions, kind of gives you a little bit more credibility, like, Okay, I think this guy will repay me, which is kind of what the lender is hoping for.

David: so I kind of want to take it that direction, right? Cuz you, you went through that whole grind of finding your private money investors, right? Whether it be equity or, or private debt, right? and that is a grind, right? That's, that's oftentimes where a lot of people get star. But now you're to the point where you're bankable.

Or you can go to lenders that have some sort of experience requirements like we do, right? Most lenders say, Hey, we, we wanna see a little bit of a track record before we're gonna lend you X amount of hundreds of thousands of dollars. Right. So you've gotten to that point. You've had an opportunity to work with some hard money lenders now as a developer, what do you look for in a hard money lender? and, how have you used them to scale your business? 

Donovan: The first couple duplexes, like I mentioned with the doctor who was my first investor, the first loan we did with him was through the bank. now again, the bank is cheap, but oh man, was it slow. I think it took us like four months to close on that loan. And so like, we were sitting there, permits approved, we're just sitting there, four months.

I was like, Hey, update. And you're like, Oh yeah. waiting on my boss to approve it, or it was, it was literally months of that. the timeline is key. Like if you can close in under a month, like you're a godsend, you know, compared to my first lender. So that was huge. you know, like Brendan mentioned earlier, would like to, now that we've have, you know, a track record would like to use as little of my own money or as high as higher leverage as possible, the bank.

You gotta bring like 30%, 35% down. And you know, if you're trying to do multiple projects, that's a lot of cash, you know, kind of tied up between the deals. so that was a big one. Another thing is, like I mentioned earlier, you know, empathizing with the borrowers on the, the draw process, it's like, okay, the, the bank requires invoices for every single little thing, or at least the bank that I was using.

And so that, that makes it very inefficient, right? I mean, you know how contractors are. And keep invoices. Goodness gracious, have you met these guys? So it's like, you know, I think someone like Fund That Flip, who kind of understands the business. We know it's okay. just once the it's complete, we're gonna pay you for it.

It's like, okay, great. That's how it should be. so yeah, those are the main big items for me. It was like the time, the leverage and then just hopefully like ease of draw process. Like, okay, here's what I've got, sending me the money in a week or so, that's, all I need.

Brendan: Yeah. I think that's the feedback we hear from a lot of our borrowers, right? It's like, it's, it's pretty simple. It's not easy, but it's simple. They want reliability, they want speed, and they want scalability, right? They want to know that, can I get money quickly when I need it? They also wanna know, Hey, are you guys gonna be there a month from now when I have another deal?

And they're also say, Hey, I'm only doing five deals right now, but I want to be doing 20 deals. Can you guys scale with me as I grow? and again, Donvan, I think I'll put this question on you cause I'm kind of curious. So you've used other hard money lenders in the space that are pretty similar and structured like Fund That Flip.

So like, you know, obviously you might be a little bit biased here, but I'll plug it anyway. how do you view that Fund That Flip kind of matches up to, to what's asked of us from the borrowers. 

Donovan: Top tier for sure. again, the biggest thing, it's like the, the draw process. Like, so one of the. Big lenders and people who have used them will know what I'm talking about. They require a notarized lein reliever for every single draw. So I have four, luckily I only have four loans with this lender.

Which would, it would be less, But again, so they have a notarized lien waiver. So imagine having to send your contractor, get a notary out there for every single construction draw you want. It's like across four loans. Like I'm, you basically paying multiple times a week in some cases for a draw, then you're still waiting for the draw to be sent to you when you can finally track the contractor down to get it notarized. So again, that, that's been a huge, huge pain. the other thing too is the limiting right, you know, Fund That Flip. It's not gonna limit you if you have the cash, the experience, the liquidity, the expertise, the execute the deal. Some of the other lenders who it might have a little bit of a easier draw process or reasonable draw process.

I think they limited me at like five loans. They said, Hey, we have five loans in that same zip. We don't, we don't want to have anymore there. And so then I have to go find another lender after I've kind of went through the entire process of getting vetted and whatnot. So, like Brendan mentioned, the scalability and then just the ease of the draw process of just make it simple, I just wanna be able to understand it, are two big things where Fund That Flip wins by long shot. 

David: No bias whatsoever, but I think you're on to something there, right? Cause  I think where we have earned business in the past, and, and built really good relationships with developers, or Rehabers or anybody doing real estate is you know, they're working with some other shops that are good shops, right?

I'm not here to drag anybody through the mud. They, you know, good loans, they're mostly reliable. They're, you know, good terms, but there's always that pitfall in scalability, right? Whether they are gonna ask you to put too much into the deal, they're gonna limit you on your construction draws by just making it a pain.

They're gonna take a long time or they're gonna limit you by number of deals or total dollar amount capacity. If you're trying to scale your business, that's gonna jam you up, right? So, shameless plug, I know a lender that won't do any of those things. And yeah, look, as long as you're doing what you need to do as a borrower, right, which is execute on your project and, make your monthly interest payments, when those kick in, then like, yeah, we're never gonna put a cap on you.

We're gonna help you scale up and grow your business to whatever that number is that you want to hit in a given timeframe of, of projects, right? So I think that's our purpose here. And I'll get, I'll step down off my soapbox now.

Donovan: No, you make a, make a good point again. One thing I wanted to add that just came to me was like some of the lenders will do a percentage complete draw schedule, which is completely awful because it makes you have to, it effectively makes you put more money into it. And what I mean by that is, let's say I pour a foundation, foundation's costing me 35 grand or so.

but the bank or the lender in this case was like, Hey, you're only actually 15% complete, so we're only giving you 15% of the money. So instead of me, A draw for 35 grand, I get a draw for 20. It's like guys, like I see what you're saying, but  you guys know what concrete costs, like, I promise you, I'm not lying here.

And so just something like that. Right now, I gotta front the other 15 grand to pay the contractor. And so the lender may say they're not, you know, they're giving you max leverage, but when it comes down to it, you actually put in more money into it and it's not as great as you might have thought. So that's another thing to keep in mind as well.

Brendan: that's why we brought you on today, man. You're full of really good insights, both from the sales side of Fund That Flip, but also as a developer. So don't wanna keep you too long. You got some, some loans to sell and some houses to build. But wanted to you know, really thank you for coming on.

I think this episode has something for everyone, whether you're an accredited investor, if you're, someone a young professional looking to get into real estate, you kind of shared some really valuable nuggets of how to do that. And then also that people are just new to Fund That Flip and kind of wanting to know how the other half lives on the developer side.

So again, appreciate you coming on with us.

Donovan: No thank you guys. It's been a, it's been great. I guess you can reach me at @Donovan651 on Instagram and Twitter at @donovanbuilds. Shoot me a dm.

Brendan: Awesome. And then Donovan, last thing really quick for you, for the people in Texas, How, how can they get ahold of you and how much money do you have to lend to those guys in Texas? 

Donovan: We have at least a billion dollars that I want to lend In Texas alone. So yeah, yeah, you guys gotta help me get there for the listeners. Um, and also I want as many accredited investors investing in the Texas deals cuz you know that they have came through. I've looked at them personally, our underwriting team has looked at them, so invest in our Texas deals as well of, of course all of the other Geos. But show some love our way as well.

David: Awesome Thanks again, Donovan. for Brendan, I am David Duggan. Thank you for tuning in with us. Again, if you have capital to deploy or if you need funding on a deal, hit us up at fundthatflip.com. You can find us on Instagram, on Facebook, on Twitter, on TikTok. I don't have TikTok. I don't know who runs it, but I know there's good, good content on there.

We got some quality content on the TikTok for those of you on there. And for real estate investing unscripted for Brendan Bennett, I am David Dugin signing off. See you next time.