Dormers, Flips and Permit Tips with Rawley Pappas

Christian: [0:02] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is your host, Christian Nossum of the Awesome Nossum Group at Wilson Realty Exchange, Inc. And today I have my amazing, amazing co-host, my wonderful wife, Shannon Nossum. Shannon, thank you for co-hosting today with me.

Shannon: [0:19] Of course. Always happy to be here.

Christian: [0:21] And we have an amazing guest. I'll let you do the intro.

Shannon: [0:23] Yes. We have one of my favorite investors in Seattle, Rollie Pappas here. He is somebody who's mastered the art of balance. He not only works a full-time job, he has a family, but he also flips properties at the same time, and somehow you still have time to breathe. I don't know how, but we're looking forward to finding out.

Christian: [0:43] This is why you're on the show today, Rollie, because this makes no sense. You're doing six flips, you have a W-2, and you got a family.

Rawley: [0:50] Well, yeah, it can be chaotic, for sure. So cool. I'm super excited to be here. Thanks for having me.

Christian: [0:56] Yes. Yeah. We are pumped. Let's start from the beginning. So how did you get started flipping houses? What made you decide to jump into real estate, especially with the busy career you already had?

Rawley: [1:06] Uh, yeah, so I'm, I'm at one of the top two big tech firms in Seattle, so- Figured it out. You could probably, you could probably narrow it down to one of the two. And it's great. Like, uh, by way of W-2s go, it's a great one to have. Mm-hmm. But I'm a person that likes to do more than one thing.

Shannon: [1:23] Mm-hmm.

Rawley: [1:23] And discovered flipping. Honestly, don't even remember how. Hmm. But it kind of aligned with some of my skillsets and mentality. Like flipping, you gotta have hustle, you gotta have grit.

Christian: [1:34] Mm-hmm. That's

Rawley: [1:34] for sure. And it's also helpful to be very technical. And so those are things that I've typically excelled at, so I just kind of gravitated towards it and tried it out and had a lot of fun.

Christian: [1:46] That's awesome.

Shannon: [1:47] Yeah. What was it about flipping versus buy and holds- Hmm … that got you on the flipping side of the real estate investing?

Rawley: [1:53] You know, it was kind of a trial thing. Okay. I actually initially wanted to get into buy and holds. That was my original plan- Interesting … was to be a buy and hold investor, kind of BRRRR type thing. Mm-hmm. And actually, my first property was a buy and hold.

Christian: [2:06] Mm-hmm.

Rawley: [2:06] And I got into it, turned it into a duplex. Did all of the work myself. Wow. I was, I was the GC, I was the architect, I was the electrician, the plumber. And this was a studs out deal. It was my first deal.

Christian: [2:19] Oh my gosh.

Rawley: [2:20] I got in way over my head.

Christian: [2:22] Yeah.

Rawley: [2:23] And ultimately- Finished the project, it turned out great, and ran out of money.

Christian: [2:29] Mm-hmm.

Rawley: [2:29] And I couldn't do another one.

Christian: [2:31] Yeah.

Rawley: [2:31] And so-

Christian: [2:32] This is a very common theme in, uh, real estate is-

Rawley: [2:35] Well, especially in Seattle, right? Yes. Exactly. Yeah. It takes more time. It's a really expensive market here.

Christian: [2:38] Yeah.

Rawley: [2:38] Mm-hmm. So yeah, that first one really set me up well for flips though, because by doing everything myself, my hourly rate probably came out to only, like, I don't know, 15, $20 an hour- even though I added substantial equity to my house. But what I really got out of it was an education-

Christian: [2:55] Yeah … Rawley: and set me up really well to flip in the future. Mm-hmm.

Rawley: [2:58] Yeah.

Shannon: [2:59] Threw you straight into the fire there with that one.

Christian: [3:01] Yeah.

Shannon: [3:01] Wow.

Rawley: [3:02] Yeah, yeah. Worked out though. Yeah. So I still own that place today.

Shannon: [3:05] Wow.

Christian: [3:06] That's awesome. Yeah. Yeah. So how did you go from that, running out of money, to now having six full-on flips going, or Daddy Builds or whatever you got going on, six projects- Yeah … happening at the same exact time?

Rawley: [3:19] Yeah. Well, part of it was the power of partnerships. Mm. A lot of people saw what I was doing. They saw what the place looked like before we started. They saw… I mean, I only spent maybe $60,000 on that project. Wow. And it was a studs out deal. Yeah, that's insane. Um, separated the units, and they saw the end result, and I started getting approached for partnerships.

Christian: [3:42] Mm-hmm.

Rawley: [3:42] And so that's been a really great thing, not only from a, from a JV, like, financial perspective, but also for a lead source. That was, that was a very unexpected lead s- lead source that turned into a pretty good thing for me, was partners would bring deals to me and be like, "Hey, do you wanna partner on this with me as well?" Mm-hmm. And oftentimes they're really good deals because it's, it's like-minded people that are in real estate already. Yeah. They know how to spot a good deal.

Christian: [4:08] Yeah.

Rawley: [4:09] Yeah.

Christian: [4:09] Yeah, and sometimes it's just too overwhelming to do on their own, and they wanna partner with someone that they trust that could help them get through it, and it's a 50/50 split everything, work and probably profit, or however you wanna split it up. But that's, that's a huge deal, and that's… We've done the same thing- Yeah … power of partnerships.

Shannon: [4:27] It

Christian: [4:27] really does

Shannon: [4:28] help. How do you split your deals up- … if you don't mind me asking?

Rawley: [4:30] You know, I get criticism from some people. I give a lot of equity in my deals. Yeah. Mm-hmm. Typically, it's a 50/50, uh, equity split.

Christian: [4:37] Mm-hmm.

Rawley: [4:38] Yeah. Yeah. Yeah. Sounds

Christian: [4:39] about right.

Rawley: [4:39] I

Shannon: [4:39] have an- But you also aren't having to go find properties to… You're getting acquisitions coming to you, which is a huge time-saver.

Christian: [4:46] Mm-hmm.

Rawley: [4:47] A time-saver. I, I go out and find deals myself as well. Yeah. But yeah, that's a time-saver, and I mean, that's really the only way you can scale, is through partnerships. Exactly. Mm-hmm. You know, I mean, I could do it my own, but it would… I could do it on my own, but it'd take me forever.

Christian: [5:00] Mm-hmm.

Rawley: [5:01] Yeah.

Christian: [5:01] Yeah. So you did some in-house labor. And you run your own projects with your own team now, is that right?

Rawley: [5:08] Yeah, so by project two, I was still swinging the hammer.

Christian: [5:12] Mm-hmm.

Rawley: [5:12] And I know everybody tells you not to do that, and I don't know, it worked out for me.

Christian: [5:17] Yeah.

Rawley: [5:17] I, I wasn't really maximizing the cost of my time, but set me up to where now I really can.

Christian: [5:25] Yeah.

Rawley: [5:26] And so by project two, I started building out the team. And these aren't subs and GCs. These are people who work directly for me.

Shannon: [5:34] Oh, wow.

Rawley: [5:34] Yeah. I had to kiss a lot of frogs, for sure.

Shannon: [5:37] Mm-hmm.

Rawley: [5:37] I learned the importance of firing fast. I had, um, I had a couple of guys that just weren't in it. You know, they weren't really doing what they were supposed to be doing, and I held onto them for way too long. Yep. In fact, one of them even robbed me.

Christian: [5:51] Oh, gee.

Rawley: [5:51] Yeah, so he, he he robbed us for about $11,000 worth of tools and materials, and- Oh my

Christian: [5:57] God

Rawley: [5:58] found out later it was an inside job and the whole thing, so.

Christian: [6:02] That's crazy.

Rawley: [6:02] You know, there's, um, there's definitely some things you need to iron out when you go through those processes, and ultimately landed on a really good team. Had a few, I've got a few guys now that are, like, full-time with me. And on one hand, we're able to save a lot of money. We, we do about 70% of the labor of our projects, and we sub out, you know, the, the licensed system things like, um- Mm-hmm … electrical, plumbing. Sometimes we even do the plumbing ourselves. But- Mm … electrical, plumbing, drywall's a big one, 'cause that's the type of thing where you just need to be in it. Yeah. You know, you need 30 years- You gotta be a specialist of experience. Yeah. Yeah. It, it would cost me so much more to do the drywall in-house.

Christian: [6:42] Yep.

Rawley: [6:43] So yeah, the in-house labor's been a great thing, not only from a cost-saving standpoint, but also, have you guys ever heard that, that saying choose your hard?

Christian: [6:53] Mm-hmm.

Shannon: [6:53] Yes.

Rawley: [6:54] Yeah. So for me- It's a lighter lift for me to be in the details and taking on all the problems and the headaches and solving the problems myself than it is trying to work with GCs that don't have my best interest at heart, or that are gonna run away with my money, or that aren't gonna show up for two, three weeks. Mm-hmm. And, and I get that, you know, a lot of that has to do with just not working with the right GCs, and I definitely wanna start bringing more GCs into my business. But I really like the option to be independent if I need to be.

Christian: [7:28] Yeah.

Rawley: [7:28] Yeah. That's been a huge one for us.

Shannon: [7:30] Wow.

Rawley: [7:31] Yeah.

Christian: [7:31] So would you say that doing that first deal, that first project, that first full gut flip all on your own, did that set you up to be able to bring on guys on your own team, people on your own team? Because without that knowledge, would you even had known how to like manage them or what they're doing right or wrong or anything like that?

Rawley: [7:53] 100%.

Christian: [7:54] Yeah.

Rawley: [7:54] My, my main, my main guy, he's my foreman on my projects, maybe 50% of what he knows he's learned from me. But he's just one of these guys, has a fantastic attitude, found him at the right time. He's hungry. He wants to grow. He learns super quickly, and it's been a really great match. Like, I've been able to kind of help grow him, coach him, and he's, now he's running the crews for me. And when we need more labor, I'm not out there trying to find the guys now. Now I put that on my guys to go bring in more labor. Mm-hmm. And so we've got, you know, three, four guys that are with us all the time, but sometimes, like when we've got three flips going at once, we need to bring in more people too. And my guys have, the next day, they've got one, two, three guys, whatever we need. That's

Christian: [8:37] awesome.

Rawley: [8:38] Yeah.

Shannon: [8:38] Oh my gosh. How- So when you did this first project, how did you learn all this about construction? Do you have any kind of background before this?

Rawley: [8:46] Mm, yeah. Okay. Um, so when I was a child, I was placing foundations. Wow. So yeah. Whoa. I've, I've, I've got… It's- it's in my blood, for sure. Okay. Worked with my grandfather doing that. And then out of school, my first two years in my career, I was, I worked for a GC.

Shannon: [9:03] Oh-

Rawley: [9:03] Yeah … got

Shannon: [9:04] it. Okay.

Rawley: [9:04] Yeah.

Christian: [9:04] So you had some background in it.

Rawley: [9:06] You know what I didn't have was the technical knowledge of, like the install technical knowledge. I knew how to… I got the project management piece- Mm … from my, from my first two years of my career. Mm-hmm. Yeah. Which

Christian: [9:16] is a huge piece of it.

Rawley: [9:18] Helped a lot.

Christian: [9:18] Yeah.

Rawley: [9:18] Definitely helped a lot. Yeah. Yeah. That's awesome. Yeah.

Shannon: [9:22] Well, that's so impressive what you've been able to build- Yeah … and structure. I feel like it's really unique. Yes. I don't hear that a lot. Exactly. I talk to a lot of investors, and most of them just, like you said, go through the headache of having GCs and the difficult- the change orders, the miscommunications, the lack of sticking to the timeline, and I think you're right in that both are hard, and yours has more

Rawley: [9:45] control. Yeah. Control's important to me, for sure.

Shannon: [9:47] Mm-hmm.

Rawley: [9:47] It just seems harder to me to try to deal with the personality problems than the technical problems. And we're all different. Like, we all have different skill sets, right?

Christian: [9:58] Totally.

Rawley: [9:58] Mm-hmm. Yeah.

Shannon: [9:59] Yeah.

Rawley: [9:59] Yeah. Yeah.

Shannon: [10:00] So when you're doing these projects, I've heard that you pull your own permits and, and you get all that set up yourself. Can you tell me about that a little bit?

Rawley: [10:09] Yeah, that's another one that I think may have been a little controversial with some people. A lot of people disagree with my approach on that. But it comes back again to the control. Like, I'm a firm believer that as an investor and as the flipper, I need to own the plan. It's my plan. I shouldn't be dependent on a sub or a GC or an architect to put my plan together for me. Mm-hmm. Like, I need to be putting those pieces together, and the permitting portion is such an important part of that. That can make or break your deal. There, there's a saying, "Time is the killer of all deals." Mm-hmm. Like, it's really important to be able to move fast. And so I love the idea of being able to hand my plan over to an architect, have that person put my plan together in a way that I know will be approved quickly.

Christian: [10:55] Mm-hmm.

Rawley: [10:55] But architects are motivated by different things that we as investors are. Like, as an investor, what I care about is being compliant and moving fast.

Christian: [11:05] Yep

Rawley: [11:07] Architects are undeniably more knowledgeable in architecture than I am, for sure.

Christian: [11:13] Yeah.

Rawley: [11:14] But they tend to want to demonstrate that knowledge in the plan set that they put together, and oftentimes you'll get tons of unnecessary notes that end up overwhelming the city.

Christian: [11:26] Mm-hmm.

Rawley: [11:26] And what I'm really focused on is pushing that permit through as quickly as possible. And another thing with the architect is they've got a little bit of liability when they're taking on your plans as well, whereas me and the invest- as the investor, I'm liable. Like, even if I've got the architect taking on the liability of the plans, I'm still liable for my project. Mm-hmm. So I'm not really- Absolutely shoving off any liability- Yeah … by having an architect put that together. So I've found it beneficial to just spend five, six hours, put the plan set together, and save myself three to six months in permitting timelines.

Shannon: [12:01] Yeah, I mean, you're absolutely right- Yeah … especially in expensive markets like we're in. If you're using hard money, which I assume for some of your deals you are, you're waiting a couple months, and that's costing you a huge margin in your deal.

Rawley: [12:13] Yeah.

Shannon: [12:13] So it, it can be an absolute killer of your profit- Right … if you have to wait around forever or if there's huge corrections and then you g- you know, get stuck in a different review period. Yeah.

Christian: [12:24] So what did you do to learn the ropes of the permitting process? Because Seattle specifically is a pain in the butt to work with, can be And there's so much nuance to it, and there's so many little tricks and stuff. Where- how did you learn this?

Rawley: [12:40] Yeah. Well, not just in Seattle. Like, the surrounding areas as well. Totally, yeah. Um, I would argue that Seattle's actually easier to work with than some other cities.

Christian: [12:48] Mm.

Rawley: [12:49] It depends on the city that you're in. I'll start in Renton, which is where I started flipping.

Christian: [12:53] Mm-hmm.

Rawley: [12:54] That's a smaller city to where you can schedule a- an initial submittal review with the city.

Christian: [13:02] Mm.

Rawley: [13:02] And so what I did, and those were kinda some of my first projects. What I did was put my plan set together. In fact, my very first plan, I drew up in PowerPoint. Scaled it, you know. You know what I'm talking about? That's fun. Scaled the drawings out, and brought that in with the city, and I just said, "Hey. Here's my plan. I wanna push this through in what's called a subject to field ins- inspection process," which basically means that they're putting, they're putting everything on the inspector to come and make sure that everything's done instead of sending your plan set to the city engineer. That's where you get into trouble with timelines, because the city engineer needs to run all the calcs and make sure that your plan is gonna work. But anyways, scheduling that, that pre-submittal conference, you're in the room with the person who's gonna submit your plans, or who's gonna review your plans, I should say.

Christian: [13:52] Yeah.

Rawley: [13:53] And they're gonna tell you. Yeah. Like, you can just ask them. Like, "Hey, is this gonna work?" And they're gonna say, "Yep, that's great. Submit it. We'll turn that around in a couple weeks." Or they'll say, "Ooh, no, you're actually converting part of the garage into livable space, which means that you need energy credits and this and that." And so then you get to make the decision, well do I wanna go through this and wait, or do I wanna cut that part of my project and just push it through? Yeah.

Shannon: [14:16] Yeah. Oh my gosh, that's so smart. S- 'Cause yeah, you're not going in blind. You're getting to make informed decisions about how you wanna structure your plan.

Rawley: [14:24] Yeah, and I think that's, I think people often think that permitting is this black box, and they put their plan set together and then they submit, and they sit back and cross their fingers and then hope that they get approved.

Christian: [14:34] Well, I think that's partly due to over the last few years with the city of Seattle during COVID, it kinda was. It felt like it at least. You'd submit it, and then- Sure … you couldn't go in and talk to them anymore, and you'd have to, every time you wanted to chat, you had to go through their website, little tal- talk to us button there. They have that, they

Rawley: [14:49] have that chat feature.

Christian: [14:50] Yes. Yep. It was so hard. I've, I've

Rawley: [14:51] used and abused that. Oh

Christian: [14:52] yeah, totally.

Rawley: [14:53] Um- One thing that I'll say about Seattle that's great is that they're getting flooded with, with permit requests, right? Yes. Mm-hmm. I don't think they have time to talk to everybody.

Christian: [15:03] Mm-hmm.

Rawley: [15:03] But they publish on their website everything that you need to know to be to compliant. Yeah. So when I'm putting my plan together- I'm going on the website, they're called tip sheets, which is what they publish to their website, and I'm just going through those tip sheets. They, and they actually have an STFI tip sheet that you can go through, and they tell you line by line what they're looking for. Hmm. And when I'm putting my plan set together, I'm just making sure that it's compliant with what they're showing on the tip sheet, and I'm keeping my drawings as simple as possible. Like, simple is better in these cases. I don't wanna overwhelm the city. Hmm. I just wanna show them what the existing space was, what my proposed is, and in the tip sheets, they're telling me exactly what's important to them, and I'm calling that out explicitly on the plans.

Christian: [15:46] That's super smart. Yeah. I mean, it's really not hard. It's almost like the tip sheet is the playbook.

Rawley: [15:51] They're telling you exactly what they

Christian: [15:52] wanna see. Exactly. Yeah. So just learn the rules of the game.

Rawley: [15:56] Yeah.

Christian: [15:56] They're telling you exactly what they are. Follow the rules, submit it, make it simple and easy, and you'll probably get through quicker. I,

Rawley: [16:03] I think you have a lot more control than people realize-

Christian: [16:06] Yeah

Rawley: [16:07] on getting your permits approved. And just show them that you're playing ball with them. Mm-hmm. The city wants to work with you. I think that's another misunderstanding. I

Christian: [16:17] agree with that, yeah. And

Rawley: [16:17] so, like, like the STFI, just a quick example, they don't wanna see any load-bearing beams that are longer than 14 feet.

Christian: [16:24] Mm-hmm.

Rawley: [16:24] So when I'm putting my plan set together, I'm showing the load-bearing beams in the plan set, and I've got an arrow drawing to that beam, 13-foot, six-inch beam. And then the city sees that, they're like, "Oh, great. We'll just have the inspector verify that."

Christian: [16:36] Yep.

Rawley: [16:37] Yeah.

Christian: [16:37] Yeah. Yeah, and that, that 14 feet or under has saved us as well.

Shannon: [16:42] Oh, so many times.

Christian: [16:43] Yeah. Yeah. And it's, it's huge, and it's just one of those things, for us, when we… 'Cause we're not doing it the way you're doing it. We're working with architects, we're working with our GCs. We're doing it a completely different way, but that stuff that, I think that if we go through that STFI cheat sheet or tip sheet and start learning some of these things, we'll pick up some of these as well.

Shannon: [17:02] Well, yeah, 'cause there's quest- often when I'm going through a property, I'm like, "Oh, do you think they'd be okay if I did this?"

Christian: [17:08] Right.

Shannon: [17:08] And I don't know. And sometimes I'll ask the architect, they're like, "I don't know." Hmm. So that's not a great answer when you're trying to make a plan.

Rawley: [17:15] Yeah, your architect should know that.

Shannon: [17:16] They should. They should know. Do you have any tips or nuggets you wanna share with us about permitting?

Rawley: [17:21] Oh, yeah. So I think I mentioned this earlier, keep your plan set as simple as possible. I think I see, I see a lot of architects that wanna put all these general condition notes on their plans, and all that's gonna do is overwhelm the city. You don't need to tell the city what their code is. Hmm. What you need to show the city is that you understand their code and you're in compliance of that. Hmm. So simpler is way better with the way that you put your plan set together. Call things out explicitly that you know the city is, is looking for and that you know that's important to the city. Kinda like what I was talking about with that- Mm-hmm … 14-foot beam. Another thing that's really helped me, and this is kind of a combination of the in-house labor and the permitting, is when I go mutual on a house- Between the time you're pending and closing, I'm working with the seller to get in the house so that I can go in and prepare my as-builts for the, for the property so that by day one, I'm able to submit all of my permits. And then on day one, I've got a dumpster on site, I've got all of my permits submitted. The STFIs usually take two to three weeks to turn around, but I can pull other permits just to start work, and within 12 hours we're tearing that place apart. Wow. And so take advantage- Amazing … take advantage of that pending timeline to put your plan together. If you're gonna use GCs, bring GCs through the house while you're pending as well.

Shannon: [18:40] How do you like to create your as-builts?

Rawley: [18:43] Uh, you're not gonna like my answer.

Shannon: [18:45] That's fine.

Rawley: [18:46] Um, I go through with one of those laser measurers- Oh, okay … or a tape. Mm-hmm. And I just draw it out. Okay. I just find a user-friendly software, takes me about an hour and a half to two hours- Mm-hmm and I'm drawing the entire house out. I use a, I use a program called Chief Architect, super user-friendly.

Shannon: [19:02] Mm-hmm. Cool.

Rawley: [19:03] Um, and then I bring that home, and it's really easy for me. E- as investors yourselves, you understand the importance of spaces. Mm-hmm. And you really gotta get your layout and your spaces right. That's even more- Yep … important than the finishes. Totally. Finishes are

Christian: [19:16] super important. Absolutely.

Rawley: [19:17] Yeah.

Christian: [19:17] 100% agree with you. Yeah.

Rawley: [19:19] And so it's, it's really great to have your as-builts, take that home, and then I can spend the next couple of hours playing with the layout, and I'm able to look at the property- all up instead of room by room.

Christian: [19:32] Mm-hmm.

Rawley: [19:32] And so having that, having that ready is, is, is really helpful.

Christian: [19:36] That's a super great tip.

Rawley: [19:38] Yeah.

Shannon: [19:38] You just used a new app to do an as-built the other day.

Christian: [19:41] Mm-hmm.

Shannon: [19:42] Yeah. What was that called?

Christian: [19:43] Don't remember. QB something or other. And I basically went through, like I was doing a video, and as I'm doing it, it's mapping. And you can see, like, the- Isn't that cool?

Rawley: [19:54] Oh, yeah, I've heard

Christian: [19:55] of that … like, yeah. So I just did that- Yeah … through the entire house, and then within six hou- So then you upload it. Within six hours, they send it back completely done. So it's not, like, instant. Interesting. They actually review it and add, "This is a bedroom. This is a closet. This is a bathroom. Here's the shower." Like, it was pretty cool.

Rawley: [20:13] Have you tested it? How accurate is that?

Christian: [20:14] I haven't… So I went through and did it- I'd love to see it … on a house. It's a good question. Yeah … but I haven't, like, double-checked it. Mm-hmm. 'Cause I, it was, again, in a… This was actually before we even made an offer on the house. I just wanted to get the layout so I could try and play around with it. So I haven't double-checked the actual measurements yet, but-

Rawley: [20:30] Interesting … Speaker: I'm really curious to see- Okay … how that's gonna work. It could

Shannon: [20:32] be a big time-saver if it actually is accurate.

Rawley: [20:35] Total- Yeah, we'll see. Well, yeah, I mean, me putting these as-builts together, like I said, take me probably an hour to an hour and a half. Yeah. So yeah.

Christian: [20:41] And I think if you wanna do, like, the faster… The first one was free. It was, like, six hours. And then if you wanna do it faster or usually get that six-hour thing, I think it was, like, 25 bucks or something like that. It's like, that's so cheap for- Oh,

Rawley: [20:54] yeah … Speaker: your time is worth way more than 25 bucks. 100%. And even, even, like, if I were to have an architect put my plan together-

Christian: [21:02] Mm-hmm … Rawley: if I had the confidence that they would be able to push my plans through and get it approved in that STFI- Mm-hmm … I would gladly pay what they're charging. Yes.

Rawley: [21:11] But I don't wanna lose the time and the control.

Christian: [21:13] Mm-hmm.

Shannon: [21:13] Mm-hmm.

Rawley: [21:14] Yeah. Yeah. So.

Shannon: [21:15] Makes

Rawley: [21:15] sense. Yeah, the only other, I guess, tip that I could bring up is houses can be classified as a substantial alteration. And I think there's a misnomer there that substantial alteration means plan review. Substantial alteration does not mean plan review.

Christian: [21:30] Hmm.

Rawley: [21:31] We've got a- And what

Christian: [21:31] is a plan review for those that haven't heard that before?

Rawley: [21:33] That's when your, that's when your permit and your plan set goes to the city engineer- Mm … and they need to go through and run all the calcs and make sure that you're not adding- So it's

Christian: [21:41] a much longer permitting process. Y-

Rawley: [21:43] yeah, exactly. Yes. It's a mu- Yeah. Oh, yeah, it can take anywhere from three to six months. Yeah. But- That substantial alteration, at least in the city of Seattle, what that triggers is seismic retrofitting. Mm-hmm. It doesn't trigger plan review.

Christian: [21:56] Mm-hmm.

Rawley: [21:56] So knowing that, what I do is I just check the box showing that it is not a substantial alteration, because it's fairly subjective, and the city doesn't publish that anywhere. Mm. I'll let the city decide if it's- Yeah … if it's a substantial alteration. And

Christian: [22:08] if it is, they'll tell you.

Rawley: [22:09] If it is, they'll tell you. But I also know it probably will be a substantial alteration- Yeah … so I'm already submitting my seismic retrofit details with my plan set-

Christian: [22:18] Smart … Rawley: so that I'm not losing time going back to my engineer after the city bounces it back to me. Mm-hmm. Oh, okay. And then if they say it's not, do you still go forward with the seismic retrofit or no?

Rawley: [22:30] Yeah, but at this point I've got a pretty good idea of what will or won't be required for a seismic retrofit. Got it. But if I didn't know, I would still do it. It's cheap insurance.

Christian: [22:39] Yeah.

Rawley: [22:39] Yeah.

Christian: [22:39] Yeah. And it's time is money.

Rawley: [22:41] Absolutely.

Christian: [22:42] Yeah.

Rawley: [22:42] Yeah.

Christian: [22:43] So I know that you are a big fan of dormers. How do you use them in your flips? And well, first off, what is a dormer? Let's explain that first.

Rawley: [22:53] A dormer is where you're taking attic space where you have a roof line of your house- Mm-hmm … and converting it into livable space.

Christian: [23:00] So it's almost like taking the roof line that's normal like a triangle-

Rawley: [23:03] Yep

Christian: [23:04] and you're moving one side more flat, not totally flat, but you're-

Rawley: [23:08] Well, or ripping

Christian: [23:08] it out … Rawley: popping it out. Yeah. You're, yeah, you're ripping out that portion of the roo- of the roof and building a room in it. Yep, exactly. Yeah. So that's a normal dormer. Mm-hmm. Um, so how do you use them in flips, and why are they such a powerful tool?

Rawley: [23:21] Well, I'll start with why they're powerful, which is back to what we were talking about earlier, the importance of good spaces.

Christian: [23:27] Mm-hmm.

Rawley: [23:28] Sometimes… Well, I'll use an example of a project I have right now. Mm-hmm. I have a primary suite on a third floor that is maybe 14 by 11 feet- And-

Christian: [23:39] Which is not a huge bedroom, but not a tiny one either. But it's, it's on the smaller-ish, medium-ish size.

Rawley: [23:46] Yeah, I mean, I'd say for the neighborhood, I'd probably classify it as a medium-sized room.

Christian: [23:51] Yeah, yeah.

Rawley: [23:52] But now I gotta figure out how to cram a closet and a bathroom in there.

Christian: [23:55] Mm-hmm.

Rawley: [23:56] And so that would've really tightened those spaces way too much. Yep, yep. But I've got this roof line right next to me that I can just push out into, which we did, and we turned that into a bathroom. So now I've got 120 square foot bathroom.

Christian: [24:11] Nice.

Rawley: [24:11] 14 by 11, uh, room, and this massive six-foot walk-in closet.

Christian: [24:16] Wow. Wow.

Rawley: [24:17] So not only did we improve the spaces significantly, but we're able to do so, it cost me about $100 per foot to build a dormer, but in the neighborhoods I'm working in, we're trading at anywhere between five and $700 a foot by the time we sell. So it's a great ROI. Yeah. That's, you know, a 5X plus ROI. Mm-hmm. And so not only are you adding value to the place by the spaces that you're adding, but you're also adding square footage to the house, which also adds value to the house.

Christian: [24:45] Totally. Yeah.

Rawley: [24:45] Yeah. So it's a great tool. Yeah.

Shannon: [24:47] Yeah. Yeah. Especially for a primary, 'cause primaries and kitchens sell homes.

Rawley: [24:51] Absolutely.

Shannon: [24:52] So you're getting even more bang for your buck- Yeah … if you're adding a primary suite to a house- Totally … that wouldn't have had it. So- Totally … amazing.

Christian: [24:58] Yeah. Super smart. Um- And you don't have to expand the footprint of the house. You're just going with what's already there. You're just popping it up.

Rawley: [25:04] Oh, yeah. It'd probably cost me double if I had to expand the footprint.

Christian: [25:07] Yeah. Yeah. To add the same amount of square footage.

Rawley: [25:09] And the time. And

Christian: [25:10] the

Rawley: [25:10] time.

Shannon: [25:10] Yeah. How m- how long- Yeah … was the permit time to get a dormer?

Rawley: [25:12] Uh, this one that we're doing was included in the STFI.

Christian: [25:16] Wow.

Rawley: [25:16] Yeah.

Shannon: [25:17] Oh, my gosh.

Rawley: [25:17] Yeah. So you can get a dormer approved in an STFI p- permit as long as it's under 200 square feet.

Shannon: [25:27] Oh, okay.

Rawley: [25:28] Yeah. Um, couple other things. You can't just take an attic that doesn't have any livable s- square feet on that floor anyways and just pop the top and call it a dormer. Ah. That's really a third story addition, right? Yep, yep. Another thing to look out for with the dormers in getting fast permit approvals is you're adding load to the house now, um, that you need to trace down all the way down to the basement. Mm-hmm. And- To the

Christian: [25:55] foundation … Rawley: to the foundation, exactly. Yep, yep. And oftentimes in Seattle, we have these basements with beams supporting the whole house. Mm-hmm. Well, if you're adding load to those beams in the basement, you're automatically gonna be triggered to tran- plan review. Ah.

Rawley: [26:11] So one thing that I would suggest, if you're gonna try to get a dormer approved quickly- Build your load paths out so that you're missing those beams, and you're tracing your load directly down to the foundation instead of resting on those beams-

Christian: [26:24] So if you're on

Rawley: [26:25] a second- and call that out in your plan. Yeah, exactly. Call it out. Say, "No beams are, are carrying additional load." Mm-hmm. So that the city sees that you're not adding that load, that then you don't go to plan review.

Christian: [26:35] That is huge.

Rawley: [26:35] Yeah. And

Christian: [26:36] then- That is, this is, I think, probably the biggest tip for anyone that wants to build a dormer. This is insane that you even figured this out, so congrats. Well done. Super smart. Thank you. 'Cause I never heard anyone else say this before.

Rawley: [26:46] Yeah.

Christian: [26:47] But basically what he's saying, to, to dumb it down for myself — Oh,

Shannon: [26:51] really just for me Dumb it down

Christian: [26:53] for me … is you're taking the second story or m- maybe even third story dormer that you added, you're taking the load that is, like the weight that is holding up the new roof structure-

Rawley: [27:05] Exactly

Christian: [27:06] you're taking that all the way down, straight down to the foundation versus piggybacking or l- going on top of the current foundation or f- current, uh- Beam … load beam from the floor below.

Rawley: [27:19] Yep.

Christian: [27:19] And that's how you get away with, you know, you, not get away, but that's how you get

Rawley: [27:24] around- Yeah, the city's telling

Christian: [27:24] you you can do this e- exactly. Yeah. Yeah, which makes sense, though- You're not ga- … from a building view … you're

Rawley: [27:27] not gaming the system-

Christian: [27:28] No … you're just

Rawley: [27:28] working with the city.

Christian: [27:29] And it makes- Yeah … sense from a structural s- point of view as well-

Rawley: [27:33] Right … ' Speaker: cause you don't wanna add that extra weight to something that wasn't built for that originally- sometimes. Well, and oftentimes it's just fine. Like, those beams can handle that load.

Christian: [27:44] Mm.

Rawley: [27:45] But the city's engineer now s- now needs to make sure.

Christian: [27:47] Yeah. Mm-hmm.

Rawley: [27:48] And that's time.

Christian: [27:49] Yeah. Mm-hmm. Yeah. So don't do that, just go straight all the way down to the foundation from that second or third story, and don't worry about it. Yeah. You're good.

Shannon: [27:56] How much time do you think that saved you in permitting to go that route?

Rawley: [28:00] At least three if not six months.

Shannon: [28:02] Oh my gosh.

Christian: [28:03] Per time you do it.

Shannon: [28:05] Incredible. Yeah.

Rawley: [28:06] Yeah.

Shannon: [28:06] Speaking of working with the city- Mm … part of being your own GC and part of working with your permits is inspections.

Rawley: [28:12] Yes.

Shannon: [28:12] Talk about how you navigate those.

Rawley: [28:15] That's another big misunderstanding. The inspector is not the enemy. Like, uh, for me, what I've learned, and a little bit of this is just going through a few of these houses, but you learn what's important to the inspectors.

Shannon: [28:28] Mm-hmm.

Rawley: [28:29] And just make sure that you're either meeting or exceeding what they're looking for. And so that's what I, I'll, I'll give you an example. When you're doing your fire blocking, and you know what I'm talking about, those aerosol cans with that orange foam that comes out- Mm-hmm … basically when you're running your electrical, your plumbing, you have penetrations in all of your studs and your floor plates, all of those need to be sealed with fire blocking, especially if it's a vertical penetration. Horizontal penetrations need to be sealed every 10 feet. Well, what I'm doing with my teams is I'm having them seal every single penetration, not just every 10 feet. Mm-hmm.

Christian: [29:03] Mm.

Rawley: [29:03] And when the inspector shows up, I'm just, "Hey, you know, I know it's only every 10 feet, but I didn't wanna accidentally miss one, so we just filled them all." And when the inspector shows up, I'm showing him all the things that I know he's going to be looking for. That's

Christian: [29:17] smart. Mm-hmm.

Rawley: [29:18] And, and just getting ahead of any objection that he may have. And a lot of that is just knowing what they wanna see. And they, it takes a project or two, I'm sure… Actually, you know what you could do if you haven't done a project before? Most cities offer a consulting service from an inspector. You could actually bring inspector on your site and ask him whatever questions you want, or just ask him to kind of walk you through, tell you what they're looking for. You could get ahead of it that way. In my case, I just went through a project or two and just kind of picked it up. Mm-hmm. But what I've learned is, like, like I said earlier, these inspectors are not your enemies. They- Yeah … they want your project to be successful just as much as you do. Mm-hmm. Know what's important to them, be compliant, exceed what they're looking for, and they're gonna remember that. There was a city that I was flipping in, I, I don't wanna say which city 'cause I plan on continuing to flip in that city. But, um, the inspector showed up and he was like, "Oh, it's you, Rollie. Hey." I said, "Hey." S- I'm sitting outside with my, with my permit and my plan set and he, he says, "Is it good?" I said, "Yeah, it's good. Why don't you come take a look?" He goes, "Nah, you're good," signed it and walked back to his car.

Christian: [30:24] Wow.

Rawley: [30:24] Yeah.

Christian: [30:25] Yeah.

Rawley: [30:26] 'Cause they know. Yeah. They know that you're, they know that you're totally compliant with what they wanna see.

Christian: [30:30] Well, and what I'm hearing here- Wow … again, it's I'm hearing the same thing over and over. Understand the rule book, understand the playbook- Yeah … understand what the game is, what the rules of the game are, and just abide by 'em. And do it a little bit more than maybe they necessarily need or wanna see, and make it simple for 'em, and you'll get through permitting quicker.

Rawley: [30:49] Totally. That fire blocking example that I gave- Mm-hmm … cost me an extra $7 of material and maybe another $20 in labor. Totally worth it to fly- Yeah … past the inspection.

Christian: [30:59] Exactly. And it's also safer. Like-

Rawley: [31:01] Totally. The house- Why not? … is better for it.

Christian: [31:03] Exactly.

Rawley: [31:03] Yeah.

Christian: [31:04] Like, if it's that cheap to do, why not just do it?

Rawley: [31:06] Yeah. The only other thing I'll say about knowing the playbook is sometimes, in my case I haven't come across this yet, but sometimes it may make sense to go into plan review. Mm-hmm. Maybe you need to make such a substantial alteration and you're chasing this much higher ARV, that it's worth the holding time and the costs and all that. Yeah. But I'd much rather go into that with my eyes wide open than to be surprised by it.

Christian: [31:31] Totally.

Shannon: [31:31] That's what I was gonna say. Yeah. You can't properly underwrite if you're not sure which- Totally category you're gonna be in. It's such- Mm … a different holding cost.

Rawley: [31:37] Yeah.

Christian: [31:39] All right. So what's next for you? What else are you gonna do? You got your six projects going on right now. How do you plan to scale?

Rawley: [31:48] Well, you know, partnerships, that's been a really big one for me. I've been very fortunate where I have some fantastic partners, and I wanna continue to do a ton of stuff with those partners. The in-house labor's been a good thing for me.

Christian: [32:04] Mm-hmm.

Rawley: [32:05] But three projects at a time has been my sweet spot for the in-house labor. In fact, I'll say it's easier for me to do three projects than one-

Christian: [32:13] Hmm … Rawley: because I get efficiencies out of those projects. Totally. Yeah. That makes sense.

Rawley: [32:17] And sometimes if I'm only doing one, I bring in my drywall or I gotta s- find something for my guys to do in the meantime. Mm-hmm. So anyways, a little side rant, but I wanna start working with more GCs, but in a way that works for flippers of course- Mm-hmm … um, and more partnerships. And while I'm going, I'm making sure that I'm allocating a portion of what we're making so that we can invest in multifamily.

Christian: [32:41] Nice.

Shannon: [32:41] Yeah. Mm. There you go.

Rawley: [32:42] Yeah.

Shannon: [32:43] Yeah. That sounds exciting.

Rawley: [32:44] But f- yeah, it is. But for the time being, I'm just so passionate about the flipping and the construction that I feel like the luckiest guy in the world just to be doing this. So- … the idea being, get into multi- multifamily, get some passive income, but I'm not gonna let go of this active part because it's just- Yeah it's fun.

Christian: [32:59] You're

Rawley: [33:00] too good at it.

Christian: [33:00] You are too good at it.

Rawley: [33:02] Thank you.

Christian: [33:03] Yeah. You know your stuff, and it's- Yeah … I'm super impressed, um, from doing everything that you're doing, having a W-2, while also learning the playbook, managing your own crews. And doing numerous jobs, numerous projects at the same time. Like, it's super, super impressive. I'm, I'm very shocked and, and- Mm … in a good way, at how well you're doing.

Rawley: [33:24] Well, thank

Christian: [33:25] you. So good

Rawley: [33:25] job. I appreciate, I appreciate you saying that. Can I, can I just say, like, what the ultimate advantage superpower is? Yeah.

Christian: [33:32] Mm-hmm.

Rawley: [33:33] Have an amazing supportive spouse.

Christian: [33:36] Uh, yeah.

Rawley: [33:37] My wife, Fabiola, who you know, is, she's my ride or die- Yeah for sure. Aww. Not only that, she takes on all the design of our projects. Smart. And she is very, very talented. I'm very happy to let her take that on, and the houses are so much better for it, and sometimes she'll tell me, "No, we need to do this on the design side." I'm like, "No, we need to save the money." Of course, she ends it, we end up going with what she wants to do on the design. And you know what? She's probably right. She's always right.

Christian: [34:03] Yep.

Rawley: [34:03] And, and she is very, very talented at it, and having that supportive spouse, there's, there's no way you're gonna be able to do this. Like,

Christian: [34:10] you actually just teased us about the episode that h- we just did that is basically talking about working with your spouse or getting your spouse to come- Mm-hmm on board with working with you in real estate investing.

Rawley: [34:22] Yeah.

Christian: [34:23] Um- It's

Rawley: [34:23] huge.

Christian: [34:23] Yeah. It's

Rawley: [34:24] huge.

Christian: [34:24] Which is very huge. We have people ask us all the time, "How did you get Shannon on board? 'Cause I know she didn't used to be, and now she 100% is. How did that work?" So- Yeah … yeah. You can definitely- Yeah … uh, check out that episode if you haven't heard it yet. Nice. Yeah.

Shannon: [34:36] Well, your wife does a great job on the design. It looks beautiful.

Rawley: [34:39] Yeah. Thank you. She's-

Shannon: [34:40] Congrats to her … Rawley: she's very, very talented. Yeah.

Christian: [34:43] So if people wanna connect with you, Rawley, how can they do that?

Rawley: [34:46] Well, I need to do better about posting more on socials. I'm going to start doing that, but, um, Instagram is probably the easiest way. Rawley_Pappas, R-A-W-L-E-Y underscore P-A-P-P-A-S.

Christian: [34:58] Perfect. Yeah. And we'll link to that in the notes as well. Thank you, Rawley, so much for joining us today on the Awesome in Seattle podcast. This was great. Thank you. I think everyone that's listening and/or watching probably learned a ton.

Shannon: [35:10] I did.

Christian: [35:10] I know. I learned a lot. We learned a lot, and we already knew some of this stuff, and I, like, just expanded that knowledge even more- Next level … which is- Yep. Thank you … amazing. So thank you so much for coming on, spending your time with us, sharing everything that you're learning. Um, really, really appreciate it.

Rawley: [35:24] Oh, thank you for having me. This was a ton of fun.

Christian: [35:25] Awesome. Well, thanks. All right. And we'll see you next time. Thanks.