I was so disoriented that I almost fell off the elliptical machine when I heard Leka say it.
Leka Devatha was telling her story on BiggerPockets Podcast episode 390 and I was working out while listening to the podcast. She was telling the story of how she was a relative newbie to the real estate world and this was her first deal.
She bought the house sight unseen (not recommend). She thought it was a cosmetic flip—but nope. The plumbing was bad. The electrical was bad. There was mold everywhere. There was dry rot. There was a basement leak. She went through 15 different contractors. Then listed the house at the absolute wrong time: Thanksgiving week. She finally sold it in February of the following year.
I have an active imagination, and I could see it all. I felt her pain. I could empathize with the sense of failure. Then she said it: “And I just came out of that feeling like a superwoman.”
That’s when I stumbled and got off the machine (you know, for my own safety). What? Did she say she felt like a “superwoman?” I rewound the podcast. Yep. That’s what she said: superwoman.
Everything was going wrong, and after she powered through it, rather than seeing this as a failure and reason to quit, she viewed this as a triumph. Superwoman.
We have a lot to learn from Leka and those who view “failure” like this.
More on overcoming failure from BiggerPockets
“Fail” is a small word but a big deal. Brandon Turner asks most guests on the BiggerPockets podcast, “What separates successful investors from those who give up, fail, or never get started?”
“Giving up” and “never starting” have the same result for everyone: You’re not in the game any more. And to be a successful investor, well, you have to be in the game. There’s no other way to play. The failure bit, though—that can sound like it’s terminal. Dead end. Game over.
But here was Leka Devatha saying she had waded through what I thought was “failure” and come out the other side wearing a cape and ready to take on the world.
If you are like most people and struggle with fear or failure, or have quit because you believe “failure” is terminal, there’s great news: “Failure” is not the end of everything. In fact, if you view it like Leka did, it’s fuel for success.
So who is Leka Devatha?
In her own words: “What I do is I fix and flip. I have a rental portfolio that is constantly growing. So I’m finding properties and BRRRRing them. I am now moving to larger multifamily. I’ve just done a contract of a 10-unit in Washington state. I am also doing fundraising for my first fund: a $30 million project in Orlando. Apart from all this, I’m on the board of a hard money lending company. It’s a FinTech startup out of San Francisco. And one of the best things that I do is host a monthly meetup where I bring amazing speakers to talk about real estate to the community. And that just gives me the most joy.”
Her story might sound like unattainable success, or maybe luck. The good news for us? She didn’t get to that success overnight. She got there by working through one problem after another, just like we can.
How she started
One of the funniest stories she told me happened when she was 18. She was living at home in India with her parents while attending school. I don’t know what she did (she won’t say!) but she got grounded so badly that she couldn’t leave her room after school. At all. So what did she do with her time?
Leka says, “I learned a craft, and I just sat in my room and I worked on that craft all day, all night. And eventually that craft became like a side business, all this while I was in college. And I ended up being featured in the local newspaper, having a huge sale of my product, and crushing it. I started taking classes and teaching this craft. And then I started making so much money that I was able to buy a car, pay my cell phone bill—take care of all my bills—when I was 18 years old. That was all me. I made something out of nothing.”
What was she making that cash flowed so well? Baskets. Baskets made out of bread mashed up with basic chemicals. Leka took punishment and bread and turned it into opportunity. We could take a page from that.
She moved to the U.S. in 2007 and got a corporate job with Nordstrom. Solid work, but after several years, the thought of doing it for decades was too much for her to bear. She wanted something new, so she took the plunge into real estate.
She says, “I was building my own house with a builder and I was designing cabinets and choosing tile and all these cool things. And I was like, wow, how fun would it be to actually go out and build a house? But I knew nothing about it. I didn’t know that was called real estate investing. I thought anything to do with real estate meant that I’d have to be a real estate broker.”
So Leka started searching the Internet for ideas. An ad for Fortunebuilders popped up, so she went and was inspired. As she puts it, “Like true entrepreneur I jumped off the cliff then opened my parachute. I went straight from being a Nordstrom corporate by day, to starting my own company, Rehabithomes, that focused on rehabbing old distressed properties. Eventually I realized I couldn’t do both jobs and give it my all. So I quit my corporate job and really took the plunge and did real estate full time.”
She hasn’t looked back.
Not that it was all easy. You heard about her first flip. Shortly after that, armed with confidence and some experience, she jumped into her next adventure: four flips going simultaneously—each of them over $1 million. Not everything went well.
Everything seemed to go wrong. One contractor got a brain tumor and left the country. One project’s hold time nearly doubled because of permit issues. One had a terrible contractor. And the fourth was miles and miles away from her home and other job sites.
Did she quit? Not Leka. She says, “I wasn’t going to let any of my investors down. And I hustled my way through those projects, and I never missed a mortgage payment. I never foreclosed. I made sure that all of their money was returned.
“Some projects, I made a profit on. Some, I made a loss on. Those four projects taught me so much about investing in general—and all the things that could go wrong. I think the biggest lesson learned was don’t over-leverage; stay within your means.”
As I was listening to her tell me this, I’m thinking, $4 million of hard money and private money—and it’s all falling apart. Yikes. So I asked her, “What was your inner narrator telling you during all this?”
She shot back without a pause. “You got this!”
The importance of mindset
That raises the question: Which came first, the reality of success or the mindset of success?
Mindset. Mindset leads to action, and that action leads to success.
She tells the story of a friend of hers who was starting in the flipping business about the same time she was. But he quit where she pressed on. The difference? Action. As she puts it, “I never banked on someone else to move those puzzle pieces for me.”
Leka says that while they were both promised connections with contractors by wholesalers or agents after their purchases, she didn’t wait. She forged ahead and began looking for her own contacts.
Him? He waited for the contacts to land in his lap. Were all of her contacts aces? Nope. But she was making progress, and he was sitting still in the water. Eventually that inaction sank him. Holding costs can be a profit killer, and inaction can be deadly for an investor.
But even action can lead to problems. “Not every one of your deals can be a slam dunk,” Leka says. Here’s the story of “deal 37,” as she tells it.
“I lost $65,000 on deal 37. You would think that by number 37, all deals would be a slam dunk. That you are never going to make a mistake. You’re never going to buy the wrong deal. You’re never going to fix it up wrong. You’re never going to sell it wrong. That you’re always going to be a success. And then, you know, reality strikes and it’s a big, big loss.”
Here’s where it gets really interesting. I asked, “If deal 37 failed that badly, was there a deal 38?”
Leka laughs and says, “It’s funny. The guy that brought me deal 37 is one of my most trusted wholesalers. Now, when I lost so much money on deal 37, I never went to him and said, ‘Hey, that was a really bad deal, and I’m never buying deals from you again.’
“I could have, but I didn’t. What I did say to him was, ‘Hey, that was a bad deal. And it was my mistake because I was the one that bought it. I comped it. I rehabbed it. It was all my mistake. But it’s okay. Let’s just move forward, forget that it happened, and there’ll be better deals.’”
She owned the decisions she had made and stuck with her wholesaler. It would have been so easy to blame him, get bitter, call it a failure and quit. But she didn’t. Then the same wholesaler came with deal 38.
“That turned out to be the best BRRRR I’ve ever bought,” Leka says. “I bought it for $238,000. If he had gone to his other investors, they would have bought it for about $300,000. But he gave it to me for $238,000 because he was like, ‘I need to make you money that I lost you on deal 37.’ So I bought it for $238,000, fixed it up for $20,000. All in, $258,000. It then it appraised for $375,000. To this day, it just cash flows like a king.”
Now it’s worth closer to $450,000 (while cash flowing). That’s a $192,000 upside on one house, not including cash flow. What would have happened if she had quit at 37?
That’s only a metaphysical question in her case because she didn’t quit. The question is for us: What will we do when things get rocky?
“I failed so much on my first project that it helped me succeed for the next eight years of my real estate investing career because I didn’t let that first failure crush me,” she says. “If it had, I don’t think I could have survived. A lot of the other challenges that came along, and I kept saying to myself, ‘If I survived that first deal, I can survive this. This is a piece of cake.’”
When asked about how to mitigate risk, Leka offers this advice. “There’s many ways to start investing. You don’t have to take on all the risks. Go find a JV partnership. Go find a seasoned investor to shadow, give them your money, or give them your deal. Offer to be their project manager, lend them your hard work, your hustle.”
Then she offered a suggestion I’d never considered: syndications. They can be done passively, but she suggests an active role. “Go be an LP on a deal and figure out all the makings of the deal,” she says. “Like, how is the deal set up? How are they underwriting the deal? What is the asset management? What is the exit strategy look like? You can do that for far, far less than $200,000. $25,000- $50,000 would get you into a deal. There are so many ways to do this.”
Lucky for her there are lots of ways to do real estate investing because she is, in her own words, “next, next, next!” Even after massive success in flipping (over 75 by now), she can’t settle into one groove.
Uncover your investing strategy
Everyone knows real estate investing can be a powerful way to build wealth and achieve true financial freedom—but because each person’s journey is different, knowing the first steps to take can be challenging.
Here’s how she puts it.
“I’ve had this conversation with Brandon Turner. I love learning curves and he’s like, ‘Don’t be afraid to not have a learning curve. Just stick with what you know.’ But my mental makeup is different. It’s like the minute I figure something out, life could be peachy. I could just rinse and repeat, but no. I have to go and figure something else out. So I’m always in front of a learning curve.”
Fact is, most of us have a learning curve of some sort. Even if what we’ve done in the past has worked over and over, it won’t work forever. So when change happens, we either shrivel, quit, or learn.
Leka’s number one way to learn: Networking.
She’s doing that now as she embarks on her newest venture: syndication. It’s so new to her, she says, “I don’t know what I don’t know. And that scares me. Right? Because if I know what I don’t know, then I’ll find a way to figure that out. But if I don’t even know what questions to ask, how do I ask good questions to get good answers?
“I could be projecting certain returns that are not coming. How do we deliver on that promise? And that delta is scary.”
How does she find the right questions? Networking is her answer. Find out who knows and learn from them. Surround yourself with people who do know the questions and/or answers. They’ll lead the way.
Advice for new investors
Leka’s parting advice for the new investor is simple (but not easy). You have to start. Start somewhere. Start anywhere, but you have to get started.
As she puts it, “For a lot of people it’s taking the plunge and doing that first deal. A lot of people have reached out to me over the last year, especially since the BP podcast aired. They say, ‘Hey, I want to do this. I want to invest in real estate. How do I get started? I’ve been listening to podcasts and reading books, but how do I get started?’
“People can take all the courses, read all the books, watch all the shows, but if you’re not practically doing something, then there’s no way to gain experience. I mean, look, it’s not easy. People make it sound like it’s so fun and it’s so easy and ‘I’ve done a hundred deals’ or ‘I own 1500 units,’ right? No. It’s not that easy. It’s going to take hard work. It’s going to take a hustle mentality. It’s going to take you putting in the work to get something out of it. But it is possible.
“I swear I am the living example of that. I didn’t grow up in this country. I didn’t come here with money. I didn’t have a lot of money to get started. And you know, I am where I am all because I put in the hard work. So if I can do it, so can you.”