
Welcome to the Real Estate Investing School Podcast! Want to start investing in real estate but struggling to get creative? You’re not alone. A lot of people think single-family home investing is dead, but Felipe is here to prove...
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A
What's up, guys? Welcome back to another Real Deal episode. We're gonna dive into an awesome deal today with the whole purpose of how you can extract some info and go replicate the same process. This one's gonna be a good one because it's something that I've done a lot in the past and kind of use this strategy, but this guy is a master at it. So today we have Felipe Mejia. I had to ask him make sure I pronounced it my. The silent J in there. That's right. But he's a killer. We actually just met a couple weeks ago at a real estate mastermind. Super impressed by this guy. We were in some breakout sessions together, but he has a goal right now of helping create 100 millionaires or multi millionaires through real estate. So he's like, all in on this goal. It's. It's so fun to watch. You also own a company and you start a company called REI Call center, which we'll dive into in the long form show. But so cool what you guys have built. And he eats, sleeps, and breathes real estate investing. And he does it in a unique way and. And is definitely financially free through real estate. So, Felipe, dude, welcome to the show. Brother.
B
Brody, it's so cool to be here. Thanks for having me on. Thanks for taking. Taking the time. Tell your assistant that she is awesome. She's a rock star, that I messed up the time. So apologies to her, but I'm so glad to be on here.
A
Dude, we're. Hey, we're gonna do this. It's funny because we had your business partner as well. Later today, we're gonna to interview him and you guys both showed up at the same time. Like, do we just do this together? And like, no, there's too much gold in here with the two of you. So we got to separate you guys out. But, dude, this show's fun because it's. It's quick and dirty. We just talk about one deal that you've done and. And you're giving me a few that we could jam on. And I'm like, yes, for sure. Talk about this one. This is going to resonate the most with the listeners. So give us just kind of like a reader's digest version what this deal is, and then we'll dive into how you found it, how you funded it, and then how you forced it and got creative with it so that people can listen. Listening can go replicate it and build some financial freedom.
B
Awesome. So let's go. 30,000 for view. What I look for is value Add single family homes that I can convert into duplexes with two living separate living spaces within the same home. I look for a couple of different key aspects that we're going to, that I'll let you dig into once we get into it with a minimum cash flow of $1,000 per roof. So every single family home that I buy has to give me 1000 bucks in cash flow or more. And this strategy came because, like I said in the show notes, or might be in there, my parents, when they got divorced when I was 11, the judge basically told my mom, you have 30 to 45 days to create an income that covers your mortgage, or we have to separate you from the kids. So I know that's like, there's a lot to dig into there. So let's get right into it.
A
Yeah, man. No, that's awesome. And it actually reminds me, one thing that's super cool is you employ your mom right now. Like, she manages your properties, which I thought was super awesome. And she's like a hustler too, right? Didn't she?
B
Oh, my gosh.
A
So tell them what she does to make a little bit extra cash above and beyond just what you pay her.
B
Brody, you're making me red. Okay, so my mom. My mom's a G, bro. She is like, she's been a hustler since like, like growing up in Mexico, out in like, the country, you know? But anyways, so what my mom does is so she's picking up, let's say, all the tenants rent, right? Like all 20 something of them. Let's. Every month, it just happens that a couple of tenants, I would say between average 2 to 4, 2 to 5, are late on their rent just because it falls outside of the check. I don't know, Mismanaged. But what my mom will do, See, she's slick, bro. She'll go get the money for the rent out of her bank account and she'll pay me. But then she charges on time. On time, but she charges the tenant a late fee. So she will front their rent money to me, and then she'll go on the back end and charge them an extra hundred dollars to. Per weekend to. For herself, right? Like interest, if you will. And I'm like, mom, in my business model, I have a late fee for my company. And she's like, you have your rent money? And I'm like, well, yes, technically I do. But you know what, mom? Never mind. That's fine. We'll go with it. So she follows the late fee. She gets it. It's Hilarious.
A
That's awesome. Hey, the bright side for you is you don't have to worry about late payments. So it's a win. Win. I guess.
B
Yeah, I guess so.
A
Well, dude, so jumping back into it, that's really cool. I didn't know that that was the whole backstory on how you got started in real estate, and that's what inspired that. So. So you guys, is that what your mom did? That was the first property and you kind of converted it. And then.
B
So what happened was in the divorce, the judge awarded my mom the house, but with the house came a 980 mortgage payment. So the judge said, I will award you the house, but you don't have an income. Because in our culture, right or wrong, the men work, the women stay home. It's just culture. And my mom didn't have an income at the divorce. So the judge said, you can have the house, but it's going to get foreclosed on. So you have 45 days to show me that you can have income. Or we have to separate the kids. You got to sell the house. Like, it's a whole mess, you know, around. Around the world. We know that keeping a house can keep a family together. Right. It's more success statistically on the kid if there is a household that's. That's strong. Anyways, so what my mom did was we had a basement, and with her last couple of dollars that she had saved up, she used to hide money in the. The sun visor thing of. Of the truck that we used to have. So she used to like stick hundred dollar bills in there, and she took all that money out. It was like her life savings. And basically she made the basement. She added three bedrooms, a small kitchen, and a bathroom. And what she did was she went out to construction sites and told the people there, hey, I have rooms for rent.
A
And.
B
And she was able to get $400 per room, times three was like 1200 bucks, roughly, that she was bringing in. So she was able to show the judge by the end of the month that she had a steady stream of income by converting our basement, if you will, and the garage into living space. If you could call it living space.
A
Yeah, yeah. No, it's, it's. It's that hustle culture. I love it. And that's. So to give living listeners an idea, how many times have you done that now? And how many properties do you own that are single family houses that you've converted into duplexes that also. Cash flow, a thousand dollars or more per month.
B
Yeah, so 20, 21, something like that. I have three right now under rehab. So between 20 and 25, let's say. But basically the top rents for about 2,500, 22,000 to 2500. And then the basements rent for about 18 to 22. So typically I'm cash flowing over 1400 bucks, but minimum, I won't take less than a thousand bucks for one of these houses. Cash flow clean.
A
That's awesome. I love it. I love it. And I, I like, I mean, you guys can do the math on that, right? And you can start to realize like, hey, that doesn't take very many of these deals to make six figures a year plus right. Of passive income. And, and I'm a huge fan of the quality over quantity type method and getting like good margins and, and good cash flow. And I think a lot of people are against single family houses because they're like, oh, you can only cash flow a hundred dollars a month. And it's like, well, I don't know how you're investing in single family houses, but like that's. That there's a better way to do it. Right? So yeah, I love that you're doing that, dude. That's awesome. So maybe just talk about. I know this is. A lot of your deals are a lot the same and I love you have your buy box down. Like, it's very specific and your criteria is very specific. Even when I ask you, you know, you're like, boom, boom, boom, boom, boom. I'm sure that helps you find these deals and have other people help you find them because you're so clear on what is that you want. Is that right?
B
Oh my gosh, yeah. And like I sometimes even like think back or even even like I still have sometimes limiting beliefs where I'm like, am I doing this wrong? Should I be doing something else? But Brody, I'm a very boring real estate investor. I look for very specific things in my market and I've just like capitalized on that over and over and over again. And as long as it keeps giving me the golden egg, I just keep buying it. So I look for a single family home that has a minimum of three bedrooms, one bath upstairs with what I like to call a wall to wall basement and garage. So block to block, left to right, all the way across has to be empty. In the basement there has to be. We're going to go into the details here. There has to be the washer and dryer hookup has to be downstairs. The electrical panel has to be downstairs. And there has to be the same square footage upstairs as there is downstairs. So I literally just copy and paste what the builder did upstairs, downstairs. And the reason the washer and dryer have to be downstairs is because that gives me cold water, hot water, and black water waste. So other people might see a washer and dryer. I see a bathroom. When I see the electrical panel downstairs, typically that tells me there's still going to be about six to eight spaces left on the electrical panel. So I'm able to add the. The stove, refrigerator, plus all the electricals that I need downstairs. So I'm never repurposing or. I'm sorry, I'm never restructuring the basement, if you will, with different codes and things. I'm just repurposing the existing utilities and electrical that's already down there, if that makes sense.
A
Yeah.
B
And that's it.
A
Are you finding. Are these basements, like, are they empty or are you moving walls around or are they unfinished or.
B
Yeah, so most of the time they're empty. They're just two car garages and a half basement or half or. Yeah, like a. I don't know how to explain it, but basically, if you think of a house 1500 square feet upstairs, I have 1500 empty square feet downstairs.
A
Okay, so you convert the garage as well.
B
All of it? Yeah, yeah. After the podcast, if you have a couple seconds, I'll show you to you on. On video.
A
Yeah, yeah, absolutely. And we'll. We'll turn this into a YouTube video and we will add the. The video clips to it and the pictures to it because I'm sure people want to. To see that visually. So cool, dude, I love that. Do you leave the garage doors or will you frame that out?
B
Great question. So I frame it out. Then we put insulation dry on the inside. Drywall insulation, wood. And then from the wood out, we put wood, more insulation. There's this osb, then like this plastic covering and then vinyl siding.
A
Okay, cool. So it looks probably like normal when you've seen it. And then. And with that, too. Do you typically pull permits? Is it required to pull permit on it? Just question.
B
Yeah, great question. So. So the permits are going to be a, E, like a window, an egress window. There's a certain size that I have to buy. There's. It has to have a closet for the bedrooms. Wastewater has to be going to the city, all the right stuff. So I just follow everything to code and the video. We don't go and pull codes. When I've called the city, they said Are you restructuring the house? Like, are you taking down walls? Are you moving beams? I'm like, no, I'm literally adding a 10x12. A 10x12 in a bathroom. And they're like, is there already water and electric downstairs? I'm like, yes, it's used as a washer and dryer. She's like, are you adding water lines? I say, no. So they're like, okay, well then what do you want a permit for? Are you adding to the house? I'm like, no. They're like, okay, then you don't need a permit.
A
Yeah, that's awesome. That makes things a lot, a lot easier. I've done this a few times as well. That's why I'm super passionate about it. Just. Just diving into it. Like, it's. We kind of started with like, getting creative. And how did you force these deals? And how do you force these deals? And I kind of like that we're not even talking about one specific deal because I know a lot of yours are the exact same, but like, dude, that's how, that's how you force it. That's how you got creative. Is taking. Because a lot of people probably look at the house and are like, hey, this isn't gonna cash flow. Or maybe this is only a cash flow. A hundred dollars a month, like, it's not worth the down payment going into this, right? That's. That, that's like the mindset of a lot of people are like, oh, the market, you know, it's so high, it's not gonna work for what I want it to. And you're able to look at it through a different lens and be like, no, I can get creative. I can do these things and it's going to make me a thousand plus dollars a month.
B
Exactly. And it's what I tell everyone, even like on my social media or in my mastermind, I tell them, like, try to look beyond just what's there. Like, most people would see a washer and dryer in the basement and they're like, okay, cool. There's a washer and dryer. So I'm like, no, I see a bathroom that's a value add, right? Because it's got, it's got hot water, cold water, and waste. Because the, the. The. The washer has to get rid of the dirty water. When you see an electrical panel with more spaces, like, you don't have to pull a certain permit to get a new electrical panel because there's still space there. Obviously get a licensed electrician and all that. So you have to like, look beyond what's just there and what can be and utilize the space accordingly to what your market is asking for. In my market, there is. There's not enough rental units for the type of tenants that I'm looking for. So I. My inbox is full with. And I can say this, literally hundreds of people that DM me anytime I post a house or a basement that's ready for rent.
A
Yeah, I love it. And it's new. You just rehabbed it. So it's fresh and people love living in new places. It creates more of a demand. What give us talk about how you fund these for a second and go into maybe a little bit on just the rehab budget. Do you have the same budget set aside? Yeah. And how are you. How are you paying for all these? What type of loans are you taking out?
B
Yeah, absolutely. So I wish that I could give you some like, sexy speech here, Brody, about how I do like this amazing financing. But when I grew up, we were just taught to work hard. The difference I think in my culture and the Latino culture is Hispanics are some of the hardest workers in the room, but some of the poorest when it comes to statistics. And I realized it's because of lack of financial education. So I say that with, I put both those two together, I save up 20% down and bought my. My second rental property. My first one I actually saved up and bought cash. But my second rental property, I put 20% down. And as I was growing equity in my rentals by putting 20% down plus the market appreciating, then I put a line of credit on the equity. I then use that equity to buy the next deal. And when the deal prior to reaches a certain evaluation based on appreciation and loan pay down, I then refinance, not cash out anything personally. I just cash out the debt of the line of credit and then move on.
A
Yeah, I love that, dude. And like there's even probably an easier barrier to entry if anyone wants to go in and house hack and put three and a half percent down, live in the upstairs and then convert the basement and then it kind of helps start the process. Get it going, dude. And I like. So our Brandon turn talks a lot about like the stack, right? Well, you'll buy a property, so you buy a single family house. You sell it, buy a duplex, you know, that appreciates. You sell it and you buy a 4 Plex. You sell it and buy in, you know, a bigger apartment. What you're talking about is something I call the steamroll versus the stack. And I think it's way better than the stack, like, hands down.
B
Oh, Brandon.
A
Yeah, I said it. Call him calm. Let's go. But I think it's way better because you still get to keep the asset. Like, what you're talking about is diving into pulling a line of credit, taking out money, but still keeping the asset. Yeah, you pulled the equity out of it, but you rolled that into another deal and you didn't kill your golden goose. Right. You still have that producing. That's still cash flowing. And then that steamrolls onto the next one, onto the next one, on the next one. And we have this entire graph. I'll put it. We'll add it on here for like the YouTube video, but shows the difference in, like, the stack method as opposed to, like the steamroll. And the cool thing with the steamroll is aside from pulling out equity, pulling out equity, pulling out equity. Like, that adds up that thousand dollars a month. The next property, now it's 2,000, now it's 5,000. And you give that six months, and that's enough to be a down payment on another one, and it just starts to really, really steamroll. So I love that you touched on that. So good. So next question, I guess, kind of the. The last one for you with that. Well, I really quick. What do you normally spend on. On your rehab?
B
Oh, yes, Sorry, I didn't answer that. So regarding the rehab, typically I'm staying within 25 to about 35, 40,000 if I'm doing a really high end. But I don't want anybody that's like, oh my gosh, there's no way I could rehab a basement for that. I have a direct connection with my. My subs. I don't even have a contractor. And most of the time, these are people that already live in my houses. My uncle does all my framing. One of my tenants does all my tile. I get very cost effective. This should cost somewhere between 40 and 60,000 for most people, depending on your area. Now, obviously in Hawaii, like you, you're probably looking at about a million. A million? I'm just kidding. I don't know what you're looking for out there. My mom, like, yeah, like, to start. No, for us, it's. I can do it for right about under 30 grand. Adding three bedrooms, bathroom, kitchen, tile floors.
A
Yeah. That's awesome. And you have it down to a science, it sounds like. I love this strategy because anybody can do it and anybody. Yeah. And it's just. It's so clear and concise. It's awesome. How do you. Any tips on how to find these deals? And maybe they're just kind of black and white and they're out there. But like, what could you tell listeners? Say they get their buy box down, they kind of know what they want. Like, how do they go find these deals?
B
Yeah, so the first thing I would say is don't overcomplicate it. Don't get. I feel like a lot of people can get lost in the analysis paralysis or the social media facade of like, oh my gosh, you have to do all these things before you can find a deal. Most of my properties, if you put them on an Excel sheet, Brody, they're. They're not deals. They don't work as they are. So you have to look beyond what's just there and capitalize on the mistakes of the listing agent or the appraisal or whatever. Right. So most of my homes that I buy, man, say, oh, 1500 square foot, three bedroom, one bath with an unfinished basement. So in my eyes, I'm like, wait a minute, I'm actually buying a 2600 square foot house because I'm going to convert the basement. I'm going to, I'm getting it half off if the price per square footage in my area is, let's say a hundred dollars or something. And I'm buying a six. Like, you see what I'm going here? Like, you have to look for the value add. And that can be an unfinished basement or a, a bonus room that can be converted into another master. Right? Or washer and dryer room that can be moved and that created into another bathroom. So look for value add in the properties not just as they are.
A
Yeah, so good, dude. I think too many times people are like, the only way to get a good deal is to find it. Meaning, like, when I acquire the deal, I have to get it for under market value. And so that's all they look at is like, well, what did I pay for it? Either that or they bank on appreciation, you know, which isn't the best strategy in the world. But this is another way where you're like, hey, it doesn't matter. Like, and in fact, like, I'll say this all the time. I will overpay for a property and multiple times I've overpaid for what it'll actually appraise for. And people don't get it, they don't understand it. But you're like, well, if you look at this side of it, you can actually make money because the financing terms are this. Or I'M going to get creative and do this with it. So.
B
So, yeah, Brody, let me, let me tap on that real quick. I know, I know we're on time, but that, that's huge. I have also paid market or over based on what I know that asset can do. And this goes to knowing your market. If you know your market and a realtor comes in out of nowhere, been in the game for six months, and lists a property you can take advantage of, their ignorance isn't the right word. There's a word there. You can take advantage of that and be like, oh, I know that area rents for this much, or that's a coveted area. Like, know your market, stay on top of it. And. And then the last thing is know your buy box. If you know exactly what you buy, there's no more emotion to it. If it fits, the buy box, checks off, all the markets, buy it. That's it.
A
Yeah, I love that. Take the emotion out of it. What? What Kind of like, you having done this for a while now and obviously being financially free through real estate and getting, getting rolling and working hard and like, and I know you, like, you worked hard, like, you used to move furniture and like, you know, you had a kid and it was like, throw it on their back and just these long, long hours and days and like, you're different now, right? Your lifestyle is completely different now, but kind of going through that journey, all of your real estate. What, what would you, what advice would you give to people? Like, what. What have you learned? If you're just kind of summarize it all and just say, hey, this is my advice. This is what I've learned from these strategies, from these deals. What would you say?
B
Oh, man, there's a hundred different clickbait things that I could tell you or Twitter tweets that you could tweet. But if I could be honest, what I have learned in the last, let's say I've almost been investing for a decade, which is weird to say out loud. I would say that the biggest and best lesson that I've learned is pick your partner the right way, like your spouse, like, who you're going to do life and business with. Be very specific, strategic about who you take with you, because I would still be in the back of a box truck unloading, unloading people's furniture in the type of neighborhood that I live now if it wasn't for my wife. So that would be my biggest lesson learned. Like, pick your spouse.
A
Like, yeah, be picky, dude, that's awesome. I was not expecting that. That's super cool.
B
I could have gave you, I could have gave you other answers like don't over, you know, learn to market and learn to find off market deals or learn to do like. I can give you all that stuff that's on social media. If I want to give you something deep for your, for your, for your listeners that I think really is going to give them value, it would be that.
A
I love that, dude. I love that. I know that's like your, your, your wise, your family and, and spend time with your kid and being home, you know, for lunch for most people it's home for dinner. For you it's home for lunch every day. I love that. But cool, man. Well, I, I think yeah. So much gold. People need to go back and listen to the last 20, 20 minutes over and over again and go out and apply it. What is the best way for people to connect with you if they want to follow up with you, ask you more, more detailed questions, all the good stuff or just follow your.
B
Yeah man. Mostly on social media and I answer all my DMs. Felipe Mejia Rei.
A
Really simple, sweet, awesome brother. Well, I'm stoked to continue our friendship and thanks so much for jumping on and dropping some, some bombs. Thanks guys for tuning in and we will catch you next time.
Podcast Summary: Real Estate Investing School Podcast
Episode 232: REAL DEAL: Getting Creative with Single-Family Homes
Release Date: January 30, 2025
In Episode 232 of the Real Estate Investing School Podcast, host Brody engages in an insightful conversation with Felipe Mejia, a seasoned real estate investor dedicated to creating financial freedom through innovative strategies. The episode, titled "REAL DEAL: Getting Creative with Single-Family Homes," delves into Felipe’s unique approach to investing in single-family homes by converting them into duplexes, resulting in substantial cash flow and long-term wealth.
Felipe Mejia is a passionate real estate investor with a mission to help create 100 millionaires and multimillionaires through real estate. He recently founded REI Call Center, a company aimed at scaling his investment strategies. Felipe’s dedication to real estate is deeply personal, rooted in his childhood experiences during his parents' divorce, which compelled his family to generate income through real estate to stay together.
Notable Quote:
"I have a goal right now of helping create 100 millionaires or multimillionaires through real estate. So he's like, all in on this goal."
— Brody [00:50]
Felipe discusses his primary investment strategy: purchasing value-add single-family homes and converting them into duplexes. This method involves adding separate living spaces within the same property, thereby increasing rental income and ensuring a minimum cash flow of $1,000 per roof.
Key Elements of the Strategy:
Notable Quote:
"Every single-family home that I buy has to give me $1,000 in cash flow or more."
— Felipe Mejia [02:14]
Felipe shares a poignant story about his mother, who played a crucial role in his entry into real estate. Faced with the threat of foreclosure during his parents' divorce, his mother ingeniously converted their basement into rentable living spaces, generating the necessary income to keep the family home.
Notable Quote:
"My mom added three bedrooms, a small kitchen, and a bathroom. She went out to construction sites and rented out rooms, generating $1,200 a month."
— Felipe Mejia [04:54]
Felipe employs his mother to manage tenant relations and late payments, enhancing operational efficiency. Her proactive approach ensures steady cash flow and minimizes the risk of missed payments.
Notable Quote:
"She’s slick, bro. She’ll front the rent money and charge the tenant a late fee, covering any delays."
— Felipe Mejia [03:21]
With over 20-25 properties under management, Felipe details his process for scaling his portfolio. Key factors contributing to his success include a well-defined buy box, strategic property selection, and leveraging equity through lines of credit to fund new acquisitions.
Notable Quote:
"I’ve been able to capitalize on my buy box over and over again, keeping my investments consistent and profitable."
— Felipe Mejia [06:39]
Felipe outlines his funding approach, which emphasizes saving for substantial down payments (20%) and utilizing equity lines of credit to finance additional purchases. This method allows him to reinvest without depleting his capital, maintaining continuous cash flow from existing properties.
Notable Quote:
"I save up 20% down and use lines of credit on equity to buy the next deal, never cashing out personally."
— Felipe Mejia [14:05]
Managing rehab costs efficiently is a cornerstone of Felipe’s strategy. By leveraging family connections and skilled tenants for construction tasks, he keeps renovation expenses significantly lower than industry standards.
Notable Quote:
"I can do rehabs for under $30,000 by using my own connections and minimizing contractor costs."
— Felipe Mejia [17:50]
Felipe emphasizes the importance of understanding the market and identifying value-add opportunities beyond the property's current state. He advises investors to look for properties with potential hidden value, such as unfinished basements or additional living spaces that can be converted to increase rental income.
Notable Quote:
"Look beyond what's just there and capitalize on the mistakes of the listing agent or the appraisal."
— Felipe Mejia [18:19]
Challenging conventional wisdom, Felipe discusses the benefits of overpaying for properties based on their potential to generate income through creative financing and strategic improvements. This approach allows for continued asset retention and cash flow generation, avoiding the pitfalls of constantly selling assets.
Notable Quote:
"I have also paid market or over based on what I know that asset can do. If you know your market, you can take advantage of that."
— Felipe Mejia [20:12]
Felipe shares his most valuable lesson: the importance of selecting the right partner, particularly a spouse, who supports both personal and business endeavors. He underscores that having a supportive partner is crucial for long-term success and stability in real estate investing.
Notable Quote:
"Pick your partner the right way, like your spouse, who you're going to do life and business with."
— Felipe Mejia [21:41]
For listeners eager to learn more or seek guidance, Felipe encourages reaching out through his social media handles. He remains accessible and responsive, ready to assist aspiring investors with their real estate journeys.
Contact Information:
Episode 232 of the Real Estate Investing School Podcast offers a comprehensive look into Felipe Mejia’s innovative strategies for maximizing returns on single-family home investments. By converting properties into duplexes, leveraging equity financing, and maintaining disciplined cash flow goals, Felipe exemplifies a successful path to financial freedom through real estate. His personal journey and practical advice provide valuable insights for both novice and experienced investors seeking to enhance their portfolios creatively and sustainably.
Listen to the full episode here.
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