Welcome to episode 7 of Crushing it in Real Estate! We are super excited to have “rising superstar” Elisa Covington on the show! Elisa is the founder and CEO of Transform Real Estate and has been actively doing flips in the Bay Area in the past 2 years making at least 6 figures on each deal! She is an active speaker in the community speaking at various meet up events, sharing her knowledge and expertise among investors. Join us this week as we deep dive into Elisa’s approach to successful real estate investing!
[0:01] Intro: Hey everyone, and welcome to another episode of Crushing Real Estate with Bryan Pham, where we interview real estate professionals around the industry. If you enjoy this episode, please subscribe to the show and leave a very positive review. We released an episode every single Sunday, so stay tuned. Enjoy.
[0:19] Bryan: Hey guys, welcome to another episode of Crushing Real Estate, today we have a very special guest, her name is Elisa Covington. Elisa is a founder of Transform Real Estate. She left her nine to five job and now makes $100,000 at least per deal in the Bay Area. She’s also a speaker around various real estate clubs, offering information and mentoring other people. Elisa, can you please introduce yourself? Tell us who you are.
[0:49] Elisa: Sure, hi, Brian, thanks for having me on the show. I’m a house flipper in the Bay Area and I’m pretty new in the business, I have been only doing this for about two years, but in the most interesting, most challenging and empowering two years of my life and I love what I do.
[1:10] Bryan: Wow, just a little bit of background like Elisa’s been killing it. Like her reputation in the Bay Area flipping community has totally skyrocket and everybody that I talked to you knows who she is and always seek out Elisa for advice, like she’s doing really well right now.
[1:26] Elisa: Thank you so much for the kind words.
[1:28] Bryan: Definitely. Elisa, how did you get started into real estate?
[1:33] Elisa: So, long story short, I started by purchasing my first home and did some house hacking and then purchase my first rental property. So, I remodeled both my first home and the rental property and in the process, I realized that I really enjoyed the rehab process where I get to design the layout of the home, and then picking up finishing materials, create a beautiful home for the next buyer, that’s how I decided that house flipping could be a career for me.
[2:11] Bryan: Wow, how long ago was this?
[2:14] Elisa: My first home? My first home was in 2012.
[2:19] Bryan: 2012, how’s the market back in 2012?
[2:23] Elisa: It was really, really good time to buy. I wish I bought more at the time, it was pretty much at the rock bottom of the real estate market, I was able to–. So, my first home actually appreciated by like 80% in four years’ time.
[2:46] Bryan: Wow. That’s amazing. This is all in the Bay Area, right?
[2:52] Elisa: In San Francisco, yeah. My first home and the rental are both in San Francisco, one in the South of Market, another in South Beach of San Francisco.
[3:04] Bryan: Okay. Wow, that’s amazing. Before you got into real estate, what were you doing before for your nine to five?
[3:11] Elisa: I worked for Verizon; I was doing online advertising pricing strategy.
[3:18] Bryan: Okay, that’s really cool. I mean, when you first got into real estate and your first got into your first foot project on your own, right, did you have any mentorships? How do you seek out help?
[3:31] Elisa: So, I started by going to a lot of networking events and I talked to a lot of experienced investors and new investors, it was a really good way for me to to build my network and I was able to find my mentor.
[3:50] Bryan: Wow, that’s really great. I mean, what kind of questions did you ask people in order to find your mentor? Because I get that question a lot, when people come to my real estate meetup, it’s like, I want to mentor, I want to mentor but I realized that most people don’t know the right questions to ask like, how did you vet now? What kind of questions did you ask these random people to find your mentor?
[4:12] Elisa: I just went to like, when I went to networking events, there are usually guest speakers. If I like what they talk about, if I’m interested in the strategies that they use, after the event, I usually talk to them and also follow up with a phone call or with an email to keep the connection going.
[4:40] Bryan: Okay, great. I mean, that’s a really good approach to finding a mentor. I think that in most cases, right, people have trouble having mentors to accept them. Did you offer the mentors any value of your time, any, was it a two way street type of thing, where you offer them like hey, let me help you find the deal and in turn, can you mentor me through this deal or how would you structure it?
[5:07] Elisa: So, how it worked was, my mentor is a great guy, John Piper, he’s a big name. He’s the most genuine person I know, one of the most genuine persons, people I know. So, he was just really, really kind to offer his time to a lot of new investors, and he mentors, probably 10 people at a time. And it’s all free mentorship, he wasn’t asking anything for return. When I found my first deal, I just asked him if he could partner with me on the deal, give me some advice and guidance in the exchange of part of the profit and that’s how it worked.
[6:00] Bryan: I think, yeah, honestly, that’s the best approach too. I do something similar too, whenever I want to work with people that I admire, always come to them with the deal and say, hey, I want to see your style, let’s partner up and we’ll split the profit, like, I’m down to put some skin in the game and learn as much as I can with you, I like that a lot. So, let’s jump forward to your first deal, I know you did a video on this recently, so this is definitely a refresher. Can you walk us through your first deal and like what kind of numbers were you looking at, where is the property and how’d you find the deal?
[6:34] Elisa: Sure, it was a deal in San Jose, it was an older home, that’s over 100 years old, in maybe Park area, downtown San Jose. So, a lot of home buyers that are looking in that area really like the older homes. And so, the home value in that area is actually higher than the rest San Jose. I was able to purchase the property for a million dollars, about 100,000 into it but it took a little longer than I thought. And also, the budget went up as we went along and when I finally sold the property, after about six months, I think and I made about $80,000.
[7:29] Bryan: That’s not bad on your first deal
[7:32] Elisa: It was a lot of stress, though. I made less than what I expected and also took longer, the process was painful, made a lot of mistakes and got taken advantage by the contractor. It was not the best experience, but I did learn a lot.
[7:54] Bryan: And you’re talking and you’re saying this experience did not tear away from real estate, ah, look at all the bad experience?
[8:00] Elisa: I think it was ooh, oh, thanks to my mentor. If it wasn’t for my mentor, I probably would have lost money in the deal and also not want to touch–
[8:12] Bryan: Real estate ever again. That’s really good then. I mean, always think of this way is like you never quite lose anything, you just get smarter. You get smarter, you actually make money, you still get smarter, you always have something.
[8:30] Elisa: You really need to always learn from your mistakes and then grow stronger.
[8:36] Bryan: Okay, let’s talk about your mistakes, what kind of mistakes did you make?
[8:41] Elisa: On this deal? I think it was the contractor selection, my contractor was not the best. So, he was kind of, after the project started, he tried to get more money out of the deal so said some items that we talked about earlier was not loaded and then he tried to tell me that parts of the house were not permitted, were not legal, but they were. And I had to hire a structural engineer to look at the structure, based on his request. And the structural engineer was actually his buddy and that’s how the project was delayed. He also took on so many projects at a time so he couldn’t finish by the time frame that he told me. It’s very typical that contractors do that, they delay projects, and they the budget just gets more and more.
[10:04] Bryan: Yeah, it just blows up and you’re like, wow, how did all this happen, I was so optimistic two months ago.
[10:11] Elisa: It’s very difficult, especially for new investors, because you don’t know what you’re doing. You don’t know how to manage contractors, or how to make sure that budget is, includes everything. I just didn’t have the experience.
[10:29] Bryan: Okay, so knowing what you know now, how do you find your contractors for your projects?
[10:36] Elisa: So, I have a really good contractor now, which I found through a referral, I think if you can find someone through other people, through people that you know, and trust, so usually they do good work, that’s why people you trust like them. Also, I have the pretty good bonus system with my contractor, if he finishes work before the deadline, then they get a bonus per day but vice versa, if they delay the project, there is a penalty.
[11:11] Bryan: That’s really smart. I like that a lot too. That’s something that we started implementing in our projects, the bonus structure, a similar story to you, like contractor, he was doing the wrong work or they walk off or using contractors like three times during a project to like, wow, that hurt. That’s pretty cool. I mean, how do you usually structure, how do you usually decide how you’re going to pay a contractor? Like, do you pay them for labor, or do you pay for material up front? How do you manage?
[11:44] Elisa: Every contractor is different, so with my contractor, it’s all inclusive, so, labor and materials. If you want to do something more expensive, then we’ll have to add the difference. But yeah, I like this, because I don’t have to worry about how much I’m spending on materials, how much I’m spending on labor and I also don’t have to go to the store to shop for rough materials.
[12:15] Bryan: Yeah, that’s, wow, you definitely found the hack to flipping, really cool. In terms of how do you manage this contractor, do you guys always in constant communication, or calling, texting or do you just trust him completely, just handle it and make it look nice?
[12:33] Elisa: It depends on the face of the project. And, yes, we have a lot of communication, in terms of what’s expected, what I want to be done to the house. And after and then the next phase would be after the rough inspection is all done, we’re putting in finishing materials. That’s when, I like to pick out finishing materials myself, like the backsplash, floor colors, that kind of things. So, that’s when I’m a little more involved.
[13:10] Bryan: Okay. Wow, that’s really cool. I mean, that sounds like you have everything in place. I’m like, getting you really inspired just listening to you right now here for the podcast.
[13:21] Elisa: You want to run this efficient business, but you also want to have a good work life balance. You don’t want to be on the job side all the time.
[13:32] Bryan: I absolutely agree with that. I mean flipping can easily be a full-time job. It really brings a lot of stress to you, so this is like the side of things where I think most people get into real estate don’t realize. But once you understand the system and the game you play correctly, like give you the work life balance that you want, you know? Yeah, definitely. So, let’s talk about how you keep yourself motivated.
[14:00] Elisa: So, I think the way I feel motivated is I go to a lot of networking events, surround yourself with very successful, other investors like yourself, and when you just meet with other new investors, or experienced investors and learn about what other people do, listen to podcasts, like this one and read about other real estate strategies, then you become smarter and you feel motivated.
[14:39] Bryan: Definitely. Do you practice any morning routines, affirmation, meditation, I know like real estate, a lot of people–?
[14:49] Elisa: I’m not a morning person, so I don’t really do those things. But I do work out every day, so that helps to destress.
[15:04] Bryan: Yeah, that seems to be a common theme among everyone I interview for the podcast. I’m like, how do you guys destress? They’re like, oh, we all work out. That’s the best time we have to meditate too. That’s really good. So, let’s let’s jump into your best deal and what is the best deal have you done in the last two years and why were you so right about it?
[15:28] Elisa: It’s actually my last, the last property I sold in Cupertino, my first deal in the high-end market. The sale price was over $2 million. Yeah, so it was a little scary, putting so much money into one project but then it turned out really, the result was really good.
[15:54] Bryan: Okay. I mean, what was the purchase price for that one?
[15:58] Elisa: I bought it for 1.75.
[16:00] Bryan: That’s pretty high.
[16:05] Elisa: My deals are around $1 million. But this, because it’s in Cupertino, it’s very desirable, up school district, so I decided to splurge a little bit and put in about 130,000 into the flip and sold the house for 2.375.
[16:25] Bryan: That’s pretty good, congratulations.
[16:28] Elisa: Thank you.
[16:28] Bryan: I think I saw a post of it on Facebook. That’s cool, congrats. So, most of the podcast is to help people get started into investing and obviously flipping super, super popular. Can you talk a little bit about how you get your deals, like how do you find these off market deals or deals like coming your way and create your pipeline?
[16:51] Elisa: Yeah, so I find deals all through real estate agents. So, they, I build a good network off agents, when they come across fixer uppers, usually off market pocket listings, they help me and then they just make deals happen.
[17:12] Bryan: That’s just crazy. And how do you find these like agents to call and reach?
[17:17] Elisa: When I was starting out, I was just using Redfin, I was just going off of the active listings on Redfin.
[17:26] Bryan: That’s amazing.
[17:28] Elisa: You can do it more strategically; you can go to agents that have a lot of sales. When I was starting out, I didn’t know that much. I just, I went the really simple route.
[17:42] Bryan: That’s really simple.
[17:45] Elisa: Yeah everybody has access to Redfin.
[17:48] Bryan: Okay, well, that’s really good. I mean do cold call, do you email them, how do you reach out to them?
[17:54] Elisa: Yes, I cold called a lot of agents.
[17:58] Bryan: Okay, hundreds of agents?
[18:00] Elisa: Yes.
[18:01] Bryan: You’re talking about 10 or 15 a day?
[18:03] Elisa: Yeah, at least.
[18:05] Bryan: Okay. Do you call 15 agents, or do you call 15 until all 15 pick up?
[18:11] Elisa: I call, the 15 is 15 agents who I talked to and agree to work with me in my network. A lot of agents don’t pick up.
[18:26] Bryan: Or like super angry. They’re like, how did you find my number? I’m like, don’t you want to work with me? I want to pay you. That’s really cool, so I mean, you call hundreds of agents and now I’m assuming you work like a handful of agents that you now, trust, is that correct?
[18:47] Elisa: I worked with a lot of agents, actually, I’ve worked with more than a dozen agents in all. I’ve worked, a couple of agents I’ve worked with repeatedly but most of them are just one off deals because it’s very hard for even the best agents to come across fixer offers, they don’t come across those all the time, like once a year, need a big network, in order to have a constant deal flow.
[19:20] Bryan: Yeah, I agree. It sounds like you have every piece of the puzzle. I love it. I love this.
[19:30] Elisa: Working progress. It’s, I still have a lot to improve.
[19:35] Bryan: Yes, that’s really good. Let’s talk about your real estate goals. What do you, where do you see yourself at the end of next year and where do you see yourself five years from now?
[19:46] Elisa: Sure, I think this year is going to be my first seven figure year.
[19:52] Bryan: Wow, congrats.
[19:56] Elisa: That’s the goal, financially. In terms of business growth, I’m trying a little different things this year, like I mentioned, I did the first deal in the higher high end market and out of the two, two out of the three deals I have in the pipeline are not in the South Bay. So, my usual territory is in the South Bay and those two deals are one is in the Peninsula and another is in San Francisco so that’s a different area. And with the deal in Peninsula, I’m actually adding 300 square feet, burning part of the garage, so that’s something I’ve never done before and to be interesting. And the house in San Francisco is in the high-end market again, it’s going to be over $2 million.
[20:54] Bryan: Wow, you’re killing it. I love it.
[20:58] Elisa: Just trying something new, trying something different so I can learn different things.
[21:02] Bryan: Definitely. I think when it comes down to starting out, a lot of people always ask me like how do I run comps and houses? And a lot of times I agree with them, there’s so many different techniques, that different flippers use, a lot of flippers only use Redfin, a lot of flippers use like recent sales and MLS, how do you run your comps?
[21:23] Elisa: The first step is I use Zillow, so, on Zillow, I don’t look at the estimate or whatever they have an estimate, but I use the map they have, where they show, you can see all the recent sales in the neighborhood and I check out those, probably within a quarter mile radius, and make sure all the comps I use are off the same school district
[21:55] Bryan: Oh, school district, that’s your criteria.
[21:58] Elisa: And also, you want to make sure that comps you use are in the same small area, there are no major like train tracks separating them or freeway. So, if there are freeways or mains, busy streets, then it could be a very different neighborhood.
[22:19] Bryan: I absolutely agree with that, that sounds really cool. I mean, how recent, dealing with those recent sales like this is the last three months, six months, year?
[22:28] Elisa: I like comps that are very recent, like within the last two months, two, three months. And only if I can’t find comps that are very good comps, that are recent that I go out a little further. I was off the dip in the market last year, I go out a little further, I wouldn’t look at comps that are from early 2018 because that’s when the market was at the peak, so I go out a little further to the summer of 2017 or went earlier to make sure that the prices are not too much higher than what it was back then.
[23:13] Bryan: Okay, well, those are really good tips, even I never thought of that, thank you.
[23:18] Elisa: When you don’t have enough comps, you just have to be creative. You also want to make adjustments, houses that are a lot bigger or a lot smaller to see if the numbers work.
[23:30] Bryan: Yeah, definitely. I know like, for myself, flipping in Oakland always have a lot of trouble finding comps because the housing Oakland or like new, owned, different sizes, some people don’t have parking. So, it’s not as simple as like other areas, I totally understand, like the importance of like, going all the way back to 2016 or 17. Look at the 23:56 [inaudible], what did it sell for before? I need to know. Yeah, definitely. What real estate advice do you have to give someone that’s just starting out in real estate?
[24:12] Elisa: Get started as soon as possible.
[24:14] Bryan: Start as soon as possible.
[24:16] Elisa: The sooner you get started, the sooner you start learning and you get on the track, though. Yeah, I wish I started earlier than I did and also take massive action. Really, in the beginning, there’s no way around, you just have to put in the dirty work.
[24:35] Bryan: Agree. So, your tips are to take action and start earlier but a lot of people face that fear and is like, wow, it is a lot of money to be involved, a lot of money to be–
[24:49] Elisa: It’s very scary for me too. When I was starting out, it was really difficult to make an offer, home prices are so high in this area, it’s usually around $1 million so, a lot of money is at stake and when you have a good mentor who can guide you and run your deals by, then you can reduce your risk by a lot.
[25:15] Bryan: Agree, I mean, how easy it is for you right now to like put an offer in a deal that you haven’t looked at yet? And would you make blind offers without looking at the houses or do you always have to drive out there?
[25:29] Elisa: I do that all the time. Most of the time I make offers site unseen, but subject to a short contingency. A lot of times because the market is competitive, if you have to go out there to look at a property or making an offer, you waste some time. Like, a lot of properties I make offer on, I don’t get, probably 80% of the properties I make offer on, I actually get them. So, by making offers without seeing them, I save a lot of time.
[26:07] Bryan: Okay, that’s good. I mean, let’s say for example, that you get a contract accepted, what are the first five things that hit your mind, as like, okay, I need to have my contractor ready, I need to get all my hard money ready, I need to get all my insurance ready, like, what’s the first five thoughts you get when you get a house under contract?
[26:28] Elisa: You pretty much touched on everything. Yeah, that’s pretty much it. If you want to, like add square footage, then you probably want to have the architect ready, even before you own the house, you want to be able to start as early as possible to save time, so when you finally own the home, you can just start to work.
[26:58] Bryan: Oh, wow. That’s really cool. I was just wondering if we had different approaches. My results are not your results. So, like, what am I doing wrong?
[27:13] Elisa: It’s also, the market that you work in, you are probably focused in the East Bay, right?
[27:21] Bryan: Yeah, East Bay.
[27:22] Elisa: It’s a little, it’s very different. I’m scared to go to the East Bay.
[27:27] Bryan: I can only afford the East Bay.
[27:33] Elisa: Like with smaller profit margin, that’s usually the case. When you are playing with bigger numbers, the margin, you expect to be bigger too, because there’s more risk.
[27:44] Bryan: Yeah, definitely. I agree with that. Okay, do you currently own any rental properties right now?
[27:51] Elisa: I just started an Airbnb in San Jose. So, it’s working really well, I’m really glad that, so it’s a single family home I bought for 625, 25,000 and the unit in the back, so it’s a, the master bedroom actually has a separate entrance in the back, it divide the single family home into two units, bedroom, one bath in the front and the one bedroom, one bath in the back. For two units, I’m getting about over $8,000 a month. That’s really amazing compared to like, if I were to do a regular, unfurnished long-term rental, get $4500 a month.
[28:47] Bryan: Okay. And you rent out each of the bedrooms individually, right or is it the entire house?
[28:53] Elisa: If I rent out the entire house and for long term, probably $500 a month.
[29:00] Bryan: Okay, wow. That’s sounds like Airbnb is a place to be.
[29:05] Elisa: Yeah, it’s pretty cool. I like it a lot.
[29:09] Bryan: Okay, wow. That’s really good. So, I guess as we’re ending the podcasts, if you were to start over in real estate, what would you have done differently?
[29:22] Elisa: Like I mentioned, I would start earlier. I think the market a few years back, the market was going up like crazy and if I was able to take advantage of that momentum, that would have been awesome. But the first thing to me is to build your network, your network is your net worth, when you have a network of agents that you work with, a network of real estate, other real estate investors that you know, was that you learn from, it really can help you a lot in the process.
[30:03] Bryan: Okay, wow. Do you have any like mastermind groups that you do with anyone, in terms of mentorship?
[30:11] Elisa: Not currently, but I do like a lot of networking events around the area that I go to, like three or four of them a month, usually.
[30:28] Bryan: Okay, that’s really good. Nice, I guess the last question is, what’s your favorite book?
[30:36] Elisa: I like the, in terms of real estate investing, I like the book, The Millionaire Real Estate Investor?
[30:42] Bryan: Oh, yeah. That’s a good one.
[30:45] Elisa: Yeah, it really covers so many different aspects of the business, about everything from that one book. I highly recommend it.
[30:56] Bryan: Okay, awesome. And then Elisa, how can we find out more about you?
[31:01] Elisa: So, I have an Instagram account where I share tips and tricks, before and after photos, project updates and you can follow me there @transformedrealestate. Also, a Facebook page, the same transformedrealestate and I have a company website, transformrealestate.com.
[31:26] Bryan: Awesome. Appreciate your time, Elisa, we learned a lot today. Thank you for having you on the show. I appreciate your time. Thank you.
[31:35] Elisa: Thank you so much for having me.