Trust, Partners & Raising Capital with Leka Devatha

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is your host, Christian Nossum, with the Awesome Nossum Group at Wilson Realty Exchange, Inc. And today we have an awesome guest with us but first, let me introduce my co-host.

Shannon: [0:14] I'm Shannon Nossum. And you didn't see me because you were listening. I was doing a cute little thing our daughter does- … um, to welcome herself. Yes. So yeah, we are so excited to have this guest today. We've been wanting her to come on for a while, and we are so stoked to talk to her.

Christian: [0:29] Yeah, and today we are talking all about building real relationships in real estate, which is kinda hard to find. There's a lot of fakeness going on. And then also, how to find the right partners, how to raise capital ethically, and how to build trust that actually lasts.

Shannon: [0:47] Yes, and our guest today knows a ton about that. She's a powerhouse investor, a flipper, a true connector in the Seattle market, and co-host of Real Estate at Work with me. Her name is Leka Devatha, and she is here with us today. Thanks, Lekha.

Leka: [1:01] Oh my gosh, I am so excited to be here, you guys. Thank you so much for having me. I had to literally beg them to have me. And so here I am.

Shannon: [1:13] Lies, lies, we had to beg you.

Christian: [1:16] All right, so let's jump right in. So you've raised millions of dollars in capital. You've flipped few hundred homes, and you've built a huge presence in the real estate community, not even locally, but nationally and worldwide.

Shannon: [1:30] She's so famous.

Christian: [1:31] She is. No. She was co-host of the BiggerPockets Conference. She's a big deal. If you don't already know her, you need to look her up, start following her, and watch any video you possibly can find. They're all over the place because she's brilliant. But what would you say your f- personal philosophy around building trust with partners is?

Leka: [1:49] It's so simple for me. It is you do what you say you will do, and your investor comes first every single time.

Christian: [1:57] Mm-hmm.

Leka: [1:58] Whether it's their money, their time, whatever they're investing with you, I think the most important thing for me is that they feel like they are taken care of, and you can do that by over-communicating.

Christian: [2:13] That's a really good point. Yeah.

Shannon: [2:14] Yeah. They always come first.

Christian: [2:16] Mm-hmm.

Shannon: [2:17] What advice do you have for aspiring investors who feel like they don't have any money? I hear this all the time. People wanna get started, they want to invest, and they just don't have any capital. So what can they do? How can they do deals without having capital?

Leka: [2:33] Okay, so that is one of my favorite questions because I want to empower new investors, rookies that don't have capital, that don't have a lot of deal experience to come do this, 'cause we can. Mm-hmm. And the first thing that they need to understand is how can they provide value with not having any capital, 'cause capital is a huge amount of value. I always find passive investors that have hundreds of thousands of dollars that wanna invest in real estate, and it's easy for them 'cause they have the money already. But a lot of newer investors or rookies, they don't have that capital. And so for me, I think it's like what do you have that you can bring to the table? And that is, it could be anything from project management, taking photos, talking to contractors, talking to subcontractors. And then just, you know, if you're good at tech, using tech to build tools for someone else's business, running to projects and making sure things are going on time, scheduling inspections. There's just so much. If they can't find a, an investor partner that is already doing a deal, then go find wholesalers. Go door knock. There's so many resources. Just create content, you know? Content that is value-add. There's so much information that is out there, but maybe it's not being delivered in the right format, and maybe if you can crack the code on that, then there's your niche, you know? So I just think that now more than ever, there's 100 different ways to make money in real estate and also gain experience by just providing value first.

Christian: [4:09] Yeah. I'll say this, I mean- You're so right … a lot of times investors, we just don't have time.

Leka: [4:14] Right. Yeah.

Christian: [4:15] So someone that might not have money, maybe they have time.

Leka: [4:18] Yeah.

Christian: [4:19] They can share that time with us to take stuff off our plate, and that can really help- Big time with us. Yep. Like you said, going out to properties, doing all the legwork that we don't have the ability to do all the time.

Leka: [4:31] Exactly.

Christian: [4:31] It's huge. It's huge. All right, so you host, like Shannon said, Real Estate at Work every single month basically in the Seattle area. Huge Seattle area networking investor meetup. You are also one of, if not the best connector that I have ever met. What are some of the things that you do to nurture re- these relationships before ever asking someone to be a partner or to invest with you?

Leka: [4:57] Um, I think Real Estate at Work has just really proven to be an amazing platform because that is where hundreds of people come to connect every month. Mm-hmm. I started the meetup back in 2018, so for so many years we, we've consistently done it. And then once I think I met you and Shannon- Mm-hmm … honestly, that was, like, the true partnership, um, 'cause you guys are so good at putting on an event that I can just focus on bringing on speakers and, like, you know, focus on that part- Mm-hmm and how to provide value. And then just doing that consistently, I am able to come in front of people, and then also doing deals for 10 years in the same city, you get to meet a lot of people- Yeah … connect with a lot of people, kind of weed out the good from the bad. Mm-hmm. And I'm a huge proponent of just- Giving space and stage to the good people in investing, whether that's vendors, lenders, escrow, title, contractors, wholesalers, flippers. Like, I'm all about I have worked with this person and my experience was stellar- Mm-hmm … and that's why my community needs to work with them, or I have worked with this person, this person has absolutely murdered something- Yeah … and so no one should work with them.

Christian: [6:14] Yeah. Yeah,

Shannon: [6:15] that's a good point. Yeah, after a long time you do have those experiences, and I've seen you have them. Yeah. Sometimes we've had them- Mm-hmm … where you work with a GC or an architect or something and it just does not-

Leka: [6:24] Pan out … Shannon: go well. Yeah. And you do want to tell other people- Yeah … what to avoid- And save them … so they don't have the headache … save them from the headache.

Christian: [6:31] Yeah.

Shannon: [6:32] For sure.

Leka: [6:32] Absolutely.

Christian: [6:32] Exactly. Let's talk about partnerships. So whether it's a GC, a JV, or a money partner, how do you personally vet someone before working with them? What are the steps that you take?

Leka: [6:44] Yeah. So for me, referrals are a big thing.

Christian: [6:46] Got it.

Leka: [6:47] I- Makes sense … if it's a general contractor- Mm-hmm … my crazy tip, which works for me every time, is instead of going out and finding a general contractor that I've never worked with, I go out to my network and I ask my fellow investors or the subcontractors that I work with, amazing electricians, plumbers, mechanical people, who they like working with.

Christian: [7:10] Mm-hmm.

Leka: [7:11] Who is the GC that pays them on time, that shows up to work, and those are the people that I then go and hire. So just a ninja tip for anyone looking for a general contractor. In terms of investors- Mm-hmm … um, if it's a passive investor, honestly, it doesn't matter because- Yeah, they're just giving you money they're passive. Yeah. They are… They understand. They've seen your paperwork. They understand the, that they're lending to you and there's stipulations. And so it doesn't really matter. Like, I've never had an issue with an investor. Mm-hmm. Um, and then general partnership, I feel like if it's someone that… You have to interview. I am also a big believer that you meet the person a few times- Mm-hmm … and that's when you kind of understand who this person is, what their goals are, does it align with you, and then you take that next step. But I also tell people, like, if you're partnering with someone new, do one deal with them and make sure you go from the s- very beginning to the very end because when you go full circle with someone, that's when- When things are hard is when the true partners emerge. Yeah. If your partners can actually come and provide strength in those hardships, then that's who you wanna continue that relationship with.

Christian: [8:26] Mm-hmm.

Leka: [8:26] So, like some of the general contractors I worked with, my main general contractor, I worked with him on over, we counted this that day, we worked on over 65 homes.

Christian: [8:35] Wow.

Leka: [8:35] What? Between my flips and then on- Wow … on the brokerage side, like getting things prepped for listing. Yeah, we worked together on over 65 homes, and that takes a lot of trust- Mm-hmm … and relationship and that bond. And so we both work hard towards that.

Christian: [8:52] Mm-hmm. Yeah. And during that time, I guarantee you had to solve a lot of very difficult problems.

Leka: [8:57] Correct.

Christian: [8:58] And that's when, again, you see the true colors really shine for someone.

Leka: [9:02] Exactly.

Christian: [9:03] Because that's, that's when, you know, when they're faced with a lot of, uh, hardship. They're, they're gonna-

Leka: [9:09] Exactly … Speaker: potentially shrink away or step up.

Shannon: [9:11] Or step up. Exactly. Like when we, like when we ordered the food for Real Estate at Work- Exactly on the wrong day, and we had to- Thanks to someone.

Christian: [9:18] Whoops. That might have been me. It was,

Leka: [9:20] it was fabulous. And we turned a negative into- Yeah … a major positive by ordering the best pizza in town.

Shannon: [9:25] People loved the pizza. It was fine, but- That's great. Yeah. Yeah. I mean, real estate deals have way more hardship than pizza. Pizza. But

Leka: [9:32] exactly.

Shannon: [9:33] Let me throw a rogue one at you, though. So you do a lot of partnerships. Yes. Why do you… You're fully capable of doing deals on your own.

Leka: [9:40] Yeah.

Shannon: [9:40] Why do you choose to do partnerships?

Leka: [9:43] I think it's more fun. A lot of time, it's because someone new wants to partner with me, and, and I wanna teach them through experience, so it's always fun to do those and empower new investors to come in, learn the process. And a lot of the people that I partner with are now doing super huge deals on their own, like, you know.

Christian: [10:02] Mm-hmm. Mm-hmm.

Leka: [10:03] A lot of people that just go off on their own, and they, like, either do a flip or a large development deal, so that's always exciting. And then in terms of investment, I think we work in a city where my average deal cost is a million dollars.

Christian: [10:19] Yeah.

Leka: [10:19] Totally. And so with that comes holding costs, taxes, insurance, unforeseen rehab costs. And so I always make sure that- I am not over-leveraged in terms of, like, I have the capital for all the unforeseens and the holding costs, but then that down payment comes from another investor. Mm-hmm. And it's typically an investor that wants to learn on the process, because as you know, I don't have, like, a teaching course or, like, any of that. The way I teach is bringing someone on and then, like, showing them through actually doing a deal. Mm-hmm. And so it's great for them too. Partner, make money, but also learn in the process.

Christian: [10:58] Yeah. Yeah, and that's by far the best way to learn, is just do it.

Leka: [11:01] Do it. Just do it.

Christian: [11:02] There's, there's so many books you can read, so many videos you can watch- Yes podcasts you can listen to. Until you actually take action-

Leka: [11:08] Right … Speaker: you're not gonna really learn it. No.

Christian: [11:10] Yeah.

Shannon: [11:10] Also, as investors, I feel like there's a lot of big decisions that have to be made, and they're high stakes. And to be able to have someone who's in that with you to- Yeah … chat through all of those and kind of be together in that, it's, it can be lonely sometimes. So I, I- Oh, yeah … it's nice to have, have a partner, especially for the people who are doing their first deal, it's-

Christian: [11:27] Mm-hmm

Shannon: [11:27] Yes … can be really scary to make those choices, so. Um, speaking of scary, we all have horror stories from real estate. What are some red flags that you avoid for potential partners? If you see something, you're like- Yeah "Yeah, I am not partnering with that person."

Leka: [11:40] Ah, luckily I haven't had a knock on wood, like, a bad investor partnership.

Shannon: [11:47] Yeah.

Leka: [11:47] But I think it's like sometimes, not sometimes, always things go wrong, right? When you buy a house to flip, it's not like buying new construction where you know there's a lot, your architect has a plan, you get the permits- Mm-hmm and then you build to s- to plan.

Christian: [12:03] Mm-hmm. Mm-hmm.

Leka: [12:04] This is, you are literally opening up the walls and working within the confines of four walls, so a lot can go wrong. Everything from structural, to sewer, to roof, to mold. Like, the possibilities that can go wrong are endless. Yeah. Mm-hmm. And so you always want to have a partner that understands that it's not going to be rosy, there's all these ups and downs, and doesn't penalize you for it. You know? Mm-hmm. Someone that understands that there are things that can happen in a real estate transaction that are so out of our control. Like when COVID happened, or like, you know, interest rates shot up. Mm-hmm. But it's no one's fault, it's the general economy, so. Yeah.

Christian: [12:45] Yeah. Just- It is what it is.

Leka: [12:45] It is what it is.

Christian: [12:46] Yeah.

Shannon: [12:47] Yeah. So when you structure these partnerships, you find the right person, how … What's your go-to format? Do you like to create LLCs? Do you like to do JV agreements? And how do you split that equity? Does it matter how much money they put in or how much effort? How do you like to make those decisions?

Leka: [13:03] So when I partner with someone on a deal, it is truly that they are passive. They can come and do as many walkthroughs of the project as they want. They can, yes, have some say on design, but it's mainly my choice, my GC, the way I run the project so that, A, I can show them how to do this, 'cause I've had tons of experience doing something, but also it's so that my GC doesn't get confused on who the boss is. And so they, they have one person that they take orders from and that's it. The way I structure these is I typically give my investors a promissory note, and they are sometimes on the deed, but mostly not. And then it's either debt or equity. If it's debt, it's a straight up interest rate that they get for the loan term.

Shannon: [13:54] Mm-hmm.

Leka: [13:54] And the term is either a year to 18 months.

Shannon: [13:57] Mm-hmm.

Leka: [13:57] Nothing shorter, because, you know, you can't predict real estate transactions. Yeah. But having said that, if something gets done in six months or seven months, then they get their capital back, but there's no prepayment penalties. If we structured it through equity, it's a little bit more high risk because they don't get paid until I get paid. Mm-hmm. And so they do get more of the equity, maybe 15%, 20% of the deal based on how much money they put into the deal. So then, yeah, it's just, you know, based on debt or equity that they get paid.

Shannon: [14:31] That makes sense. Cool.

Christian: [14:32] Yeah.

Shannon: [14:32] That's nice of you to share that because I feel like a lot of people conceptualize, like, oh, you can partner with people. But the logistics of doing that and how you- Yeah … actually structure things are the next step that I don't think a lot of people get to. They just think- Yeah … "Hey, you and I should do a deal", and then they don't actually figure out what, what that looks like. What that looks like. Mm-hmm.

Leka: [14:49] Correct.

Christian: [14:49] Yeah. All right, let's talk about raising money because this is the thing that, especially in a higher priced market like we have here- Yeah in the Seattle area, a lot of times you need to have some money partners on the side.

Leka: [15:01] Right.

Christian: [15:01] I mean, we've definitely used them numerous times. You- Yeah … clearly have as well. When you're going to start a new project or a fund, what, what's your approach? How do you go about it?

Leka: [15:11] Um, yeah, so typically I just, you know, talk about a deal that I have on social media. Mm-hmm. And in all honesty, I already have, like, a line of investors- Yeah … wanting to partner with me. Yeah. And it's more that I can't find the right deals to partner with them, rather than not having enough capital, uh, partners. Mm-hmm. But I am very transparent on, hey, this is the deal. This is how much I'm buying it for. This is what the wholesale fee is. This is my rehab budget. I am quite, um, tight on just how I underwrite the deal. I don't overshoot-

Christian: [15:52] Yeah … Leka: just to make the deal work 'cause, you know, we've all done that in the past, and the market was great, and it worked out. Mm-hmm.

Leka: [16:01] But now more than ever, I just think it's important to underwrite deals effectively. And so that's what I show my investors. And if they're okay, you know, getting a smaller profit margin just so that they can experience the deal, then great. And if it's a nice, juicy, fat deal, then I'm always offering equity partnerships because that's when the investor can truly make money.

Shannon: [16:26] Mm-hmm. Mm-hmm.

Leka: [16:26] I once made 65 grand for an investor that was just passive in five months.

Christian: [16:35] Wow.

Shannon: [16:36] Wow.

Leka: [16:36] And they were just my… They were my equity partners on a deal in Bothell, and I crushed it.

Christian: [16:42] Yeah. Awesome.

Leka: [16:43] And so they got a huge payout at the end of it. Nice.

Shannon: [16:46] Wow. That's great.

Leka: [16:48] Yeah.

Christian: [16:48] Wow. So what advice would you give to someone that is thinking about trying to raise some funds on their own?

Leka: [16:56] I would say just make sure that you have the experience behind it.

Christian: [17:01] Mm-hmm.

Leka: [17:01] You need to have a proven track record. This is super important for me, is that you have d- done deals consistently and have actually made a profit. And-

Christian: [17:12] You would think that that would be a given. It is definitely not a given.

Leka: [17:16] I've seen it.

Christian: [17:16] I've seen it a lot- I have, yeah, I do … unfortunately- Yeah … where people are doing deals, but they're not making any money.

Leka: [17:21] Mm-mm. Or very minimal.

Christian: [17:22] Very, very minimal. Yeah. It's like, why are you doing this?

Leka: [17:25] Because, like, even if things go really wrong- Mm … like my Ballard project- Mm-hmm … and how my architect screwed me over, like things got really wrong-

Christian: [17:33] Yeah

Leka: [17:34] and I still made a massive profit.

Christian: [17:36] Yep.

Leka: [17:37] But that's, that's the kind of experience you need to have in order to go out and raise money, someone else's money. And I also say this. Um, I have 100% track record with my investors. I've never lost anyone money. Mm-hmm. And so for me, it's important that someone, when someone borrows money, that they're giving it their best shot, because not every time can you pull out a home run. There's gonna be times when due to unforeseen- Yep … circumstances, like, you are going to lose money. Mm-hmm. But if your investor sees that you worked really hard and you did everything you said you would do, then they're okay with the result, because they know- Yeah … that when they're investing with someone else, things can go wrong, they can lose their money.

Christian: [18:22] Mm-hmm.

Leka: [18:22] But as long as the investor is actually doing everything they say that they would do, you're fine.

Shannon: [18:28] Yeah. Exactly. So let's pretend for a moment that I have loads and loads of money and I don't know what to do with it. 'Cause I totally would spend it on deals if I had that. Let's pretend I wanna be a passive investor. What should they look for when they're looking to invest their money in someone else's deal?

Leka: [18:44] Ooh, great question, Shannon. Um, like I said, experience is everything. Don't go invest with a no-name person that doesn't have social media, that's hiding in the basement. Yeah. Make sure to invest with people that are putting themselves out there, that if they have a lot more to lose if they lost your money in terms of credibility, name, community presence, that And that's important to me. Like, for me, it's not about making an extra few thousand dollars on a deal. I'd rather my investor walked away and say- Okay, we didn't make a lot of money on that deal, but boy, I learned a lot- Yep … and she gave it her all.

Christian: [19:26] Mm-hmm.

Leka: [19:26] And so find investors that have that community presence and that are in- on social media, like showing their work, walk their projects, walk their properties. If they say they own multifamily, walk their multifamily. Talk to their property manager. Mm-hmm. You know, like- Mm-hmm … talk to their contractors. Talk to referrals, people that, you know, maybe lenders. Like, if you look at our market, like there's interest, there's certain lending. Talk to the companies and be like, "Hey, I wanna invest with someone that borrows money from you. Do they pay on time? Have they had any issues? Do they get their projects done on time?"

Christian: [20:03] Yeah.

Leka: [20:04] That they're not constantly extending-

Shannon: [20:06] Yeah … Leka: loans, right? There's so many ways to vet someone. Do your due diligence.

Christian: [20:12] Yes.

Shannon: [20:12] That's a great idea to talk to the lender. I would never have thought of that- Yeah … but that's brilliant. 'Cause they know the inside scoop- Exactly … on what's happening with that project. How much over budget is it? How much over time is it? Exactly. What did it sell for? Yeah, they know everything.

Christian: [20:25] Yeah, and be very, very wary of people. Like- And

Leka: [20:28] picky.

Christian: [20:29] Yeah, super picky- Yeah … because you're giving your money to someone else, and you're- Right assuming and trusting that they're gonna do what they say.

Leka: [20:36] Yeah.

Christian: [20:36] And if you just randomly saw some post on a Facebook group asking for money for a deal that seems too good to be true, probably is.

Leka: [20:44] Yeah, exactly.

Christian: [20:44] As, as they say, trust but verify.

Leka: [20:48] So true

Christian: [20:49] Yeah.

Leka: [20:49] So true.

Christian: [20:50] Okay, are you ready for a lightning round?

Leka: [20:53] Yes, sir. I was born for this. Qui-

Christian: [20:55] quick answers-

Leka: [20:55] Watch me bomb

Christian: [20:57] it. Quick answers, supposedly only. Could be long, but let's go quick. Okay. All right, Shannon, you go first.

Shannon: [21:02] All right. Favorite book that changed your mindset?

Leka: [21:05] Atomic Habits.

Christian: [21:06] Mm.

Shannon: [21:07] Mm.

Christian: [21:07] Christian loves that book. Good one. I do.

Leka: [21:09] Yeah.

Christian: [21:09] This is not gonna be a quick one. What's the worst deal you ever did?

Leka: [21:13] Oh my God. I did a deal in North Carolina, my very first out-of-state flip, and I lost 150 grand on it. I've lost money on three deals in my life, and that was one of it. It was the worst deal ever. It spanned over two years. Geez. And if it wasn't for my brother that lived, like was boots on the ground- Mm-hmm um, I would have never seen the, the end of that project. But- Wow … it is done. I lost the money, and I've moved on from it. And thank you for bringing it back up. You're welcome.

Shannon: [21:44] Okay, one habit that's made the biggest difference in your success.

Leka: [21:48] Moving the needle constantly and every day.

Christian: [21:52] Mm. Love it. All right, last one. If you could go back in time-

Leka: [21:56] Yes … Speaker: and give yourself some advice before you ever did your first flip, what would it be? Find a way to hold everything that I bought.

Christian: [22:04] Yeah.

Leka: [22:05] Wow. Yeah. That would've been- That's a good one … so good.

Christian: [22:08] I know.

Leka: [22:08] I mean, yeah. I wish we could still…

Shannon: [22:11] I, yeah, I wanna do that still.

Leka: [22:14] Yes. Yeah.

Shannon: [22:16] Well, thank you, Leka. That was so incredible to just hear about how you structure your partnerships, giving us an inside scoop on, on how you do your deals. Mm-hmm. It's always fun to learn from you. Yeah. You're such an incredible, especially just as a female investor. Yes. There's not a ton of us. Sorry, Christian. I know. We appreciate you. But, you know, Leka is a great mentor to me- No, that's true. Yeah … especially to be able to look up to another female investor. Yeah. So it's nice to see and hear about how you are able to be so successful. Yeah. So thank you for hanging

Leka: [22:44] with us. I

Shannon: [22:44] mean,

Leka: [22:44] thank you both for always being such a positive, like you have the best outlook to life. Aw. And you guys are such y- you know, wonderful people to have in the community, and you're always like- Thank you … so pleasant and happy. And everybody loves to be around you. Mm-hmm. And yes, this is, like I'm really excited that there's another strong woman in the community, but also- Yeah … having a great guy behind- Yeah you know, like I've seen him just like go to bat for you or-

Shannon: [23:10] Mm-hmm … Leka: order food for real estate work even though it was for the wrong day, but- Yep. … you know, just help out. Um, so I really appreciate- Yes … both of you, and- Thank

Leka: [23:20] you … you're the best things that happened to the meetup. Aw. Woo. So

Shannon: [23:23] thank you.

Christian: [23:24] Thank you. You're welcome. Thank you. All right, so if you're listening, and you are thinking about wanting to partner or raise funds, obviously you're wanting to take notes, but also if you're wanting to do something with Leka-

Leka: [23:35] Yes.

Christian: [23:35] You should definitely reach out. What's a, what's a good social media way or best way to reach out to you?

Leka: [23:40] Uh, you can find me on LinkedIn or Instagram. My handle is… Or just find me by my first and last name. Yeah. It's Leka Devatha.

Christian: [23:48] Yeah. All right. She has a big presence, so it won't be hard. You start typing Lekha, and it will just pop right up. So thank you so much, Lekha, for joining us today on The Awesome in Seattle podcast. This was great, unlike any episode we've done before, so thank you so much. And if you have not subscribed or started watching our videos on YouTube as well, which is als- also a really good way to watch this content, please do so. Uh, that's it. We'll see you in a couple weeks on another episode of The Awesome in Seattle podcast. See ya.