FLTA Patrick | Real Estate


Real estate is a path – and a long one at that. To be fully equipped for its journey, having monetary resources is not enough. In this episode, Patrick McGrath shares his real estate journey and how he built and continually developed his organization, California RE Investors. Patrick also touches on organizational structures, the real estate market, the value of creating experiences, and more! Tune in now and learn which partnerships to make, which organizations to join or build, and everything else needed for your real estate journey!

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The Resources You’ll Need To Jumpstart Your Real Estate Journey With Patrick McGrath

I’m here with a really cool conversation. Before I jump into that, I want to make sure that you know everything we have going on in the Flip Talk universe. We have some amazing things going on with our website, FlipTalk.com. You can always go there and find some free resources. You can find out what we’re doing with events.

You can check out our Inner Circle Elite Mastermind community by going up to the top menu. Looking at our mastermind community, we have the offer there. Of course, we have some coaching, mentoring and all kinds of other cool stuff. FlipTalk.com is where you want to go. Stay in the Flip Talk universe and be up-to-date and in the know. I got my guest here, Patrick. Patrick, how are you doing?

I’m doing great, Don. How are you?

I’m doing good. It’s a pleasure to have a conversation with you. We did a little rundown on a couple of properties where we’ve done some transactions. As I know, flipping is not always beautiful.



FLTA Patrick | Real Estate


We may get into some of the trials and tribulations of rehabbing and stuff like that in the conversation. Before we do, let’s get a little background on you. Who are you and what brought you into real estate investing?

I’m originally from Northern California. My field partner recruited me right around the time of the crash in 2007 and 2008. We got started by acquiring foreclosure properties for investors. We did that for a number of years, and then we decided that rather than do it for investors, we would start doing it for ourselves.

I relocated to Southern California in 2015. I worked on my computer, so I could work from anywhere. We probably had done at least 300 properties over those 7 to 8 years, maybe 200 properties. We were cranking along. We’ve been doing maybe 6 to 8 properties a year. We got diverted and did some luxury fix and flip in ’18, ’19, and ’20.

We didn’t do a lot of units, but we were in higher-end properties and projects in Malibu and some projects in Austin, Texas. In April of 2021, I was introduced to a gentleman here in my office in Irvine. He had a large mortgage bank, but he had also done flipping in mass. He was buying 100 houses at a time back in the day.

He liked our business model and he offered to partner up with us and give us some capital to try and expand our business. We are one year down into that relationship. We ended up probably completing 25 to 26 houses in 2021. Right now, we have the same amount of 24 to 25 houses in the process. It’s been a year of growing things. That’s the background.

One of the things that I do know is you guys have tried to scale. That’s always been the goal. You and I have had conversations. I’ve also had conversations with your team about that constraint phase that Jerry Green talks about and making sure that you have your foundation in place before you scale. Have you guys felt like you put that foundation in place, or do you feel like it’s organized chaos?

I think we did it backwards. It was scaled before we worked on the foundation. Luckily up until now, the market has allowed compensation for various mistakes. We’ve certainly thrown away some money we shouldn’t have thrown away. We are working now on that foundation. We have a team of about eight people that work for the company in various positions like project management positions, acquisition managers, and lead managers. We also have a couple of VAs finally that are doing some work for us. We definitely ran before we walked.

FLTA Patrick | Real Estate

Real Estate: The real estate market has allowed compensating for various mistakes as certainly many have thrown away some money that they shouldn’t have thrown away.


I’m appreciative that you’re honest about that. Some people want to just talk about all the great stuff. It’s always good to let people know that for all of us at different points in our business, there are always those points of struggle and educating or even re-educating ourselves sometimes.

Not to be obsequious, but we met you in August or September of 2021 when we recruited your services. It was a little eye-opener for me in terms of how you do your business and how we want to do our business. I will say we have implemented a number of the things that you’ve advised us to do. I relied a lot upon my field partner, Diego. He’s been on your show. He’s a super guy.

What we’ve had to learn in the last twelve months is what you are really good at. Are you doing what you’re good at, or are you doing things you shouldn’t be doing that might be overwhelming to you? When you went from managing 6 to 8 houses to doing 24, 25 to 26 houses at a time, it was overwhelming. We had to hire project managers and start seriously looking at what each of us does well, what each of us doesn’t do well, and what we like to do. We’ve been working hard on that. We’re making some progress there.

FLTA Patrick | Real Estate

Real Estate: Start really seriously looking at what you do well, what each of your team members does well, what each of you doesn’t do well, and what you do like to do. Work hard on that, and you’ll start making some progress.


The hardest struggle that any entrepreneur has, especially when they’ve bootstrapped an operation to a certain degree, is letting go and handing things off. There’s a big fear factor there because what happens if it doesn’t work? I know that’s been a conversation within your team as well. What are some of the things you guys feel you do well as an organization?

We’re good at identifying properties that are going to be profitable. We excel at valuing properties accurately. Both in the acquisition phase and what the ARV is going to be on. That’s something Diego excels at. We have adopted using only general contractors now for our projects. None of this of the various laborers that we’ve had.

FLTA Patrick | Real Estate

Real Estate: California RE Investors is really good at identifying properties that are going to be profitable in the real estate market.


We’re following your model in terms of one fixed price, fixed time contract for work. Up until 2021, we averaged 109 days, start to finish, on any given house from the close of escrow on acquisition to close of escrow on resale. If we could turn our money three times a year, we felt that was pretty good. That number in the growth phase went up to 242. By using contractors, building in incentives for early completion and liquidating damages for delays, we’re back in the less than 120-day turn time, which is where I want to get us back to.

Two things I want to say about what you said. One, Diego is probably one of the fastest people I’ve ever met when it comes to determining the value of a property. He’s pretty darn spot on. He can look at a couple of things and make a quick determination. I’ve seen him make that quick determination on the rehab budget as well. I don’t know how good he ultimately is when you guys get into your project because I don’t see that, but he’s pretty quick with his numbers.

The other thing is the timeline thing you mentioned. We want to turn within 100 days as well and turn the money three times a year. The idea originally came from working with a JV partner. We were splitting the profit and he said, “I look at the annualized return or project-by-project return. If I can make 15% of my money on that project, we could turn that money three times in a year and that’s 45%. If I’m making 7% on my money and I turn that money 3 times in a year, that’s 21%.”

He gave me the quick math. I realized if we’re going, for, say 20% cash-on-cash return on a project, we turn that project in 100 days, and we turn that 3 times, that’s basically 60% on the money. If we’re borrowing 100% on that project, the return is infinite. That stuck with me from day one. That’s one of the reasons why we have the goal. Ultimately, markets change. A good way to get caught in a property is to take a lot longer than you need to.

Exactly. I’ve got four on the market right now in the Bay Area that should have been done on the 1st of March, 2022. Had they been completed on the 1st of March, they would be out of our hair. We would’ve closed. Now we’re looking at price reductions and a lot of competition. There are still good properties. That’s the only saving grace that we bought them.

Knock on wood, we’re not going to lose any money. We’re the same way. I think that’s one of the things that we’ve worked on well this 2021. As you know, we’ve been using institutional financing on our fix and flip. The goal is ultimately to find a good JV partner that provides all the cash, but because of our experience, we’re down to a small amount of cash that we have to put into each house. We’ve been averaging about 100% annual return on our side. I’m pretty proud of that. We have had some projects where we had to bring in some investor JV on larger projects. It allows me to pay them. If I’m going to make 100, I can pay them 30 on an annualized basis. It’s a win-win.

If we’re going to take a moment of vulnerability, what do you feel like you need to fix as an operation when it comes to being a rehab business?

We still need to be more efficient in our project management. We’ve got some loose ends to clean up. Everything going forward that we’re doing is being done on the system that we want to have in place. The contractor system is more systematized in terms of how we pay people. Honestly, we’ve seen a real slowdown in terms of acquisitions.

Be more efficient in project management. Clean up your organization’s loose ends. Click To Tweet

I know we talked about that a little bit when we were in St. Louis. Other people are even seeing the same thing. One of the things that we have to improve is our acquisition side. We had a great guy that was working for us. He’s no longer working for us because he has to shift to some family business responsibilities.

I’ve decided to get involved a little bit on the marketing side. I was totally hands-off on it and relied upon the people that were doing it. We weren’t tracking KPIs. We were operating without real good information about how we were deploying our marketing dollars. We’re right in the middle of trying to straighten that out and clean it up. In fact, I have an appointment with Andre. We met him in REI. He volunteered to walk me through what I should be looking at and get better at that. That’s something on my list. It’s been of major importance to me right now.

Do you know of REI BlackBook?


You should try to talk about Kevin.

Kevin was there, but there was another guy that was with Kevin. I’m sure his name is Andre.

He might have been. All of them are great over there. As far as this marketing goes, obviously, everybody is trying to figure that out on a regular basis. What’s changing? What’s ultimately going to work in today’s market versus tomorrow’s market, and what’s still working from yesterday’s market? Also, KPIs and understanding where the dollars are coming from are very important. Once the business gets that figured out, it becomes a matter of data decisions, not emotional decisions. Too many people deploy off their gut, and that’s what doesn’t work.

We had a quasi-strategy to it, but we weren’t measuring the results and knowing better about what we were doing. One of the good things about the association with the Inner Circle is that we’re going to be JV with some other members who have good acquisition teams in place. We’re going to co-deploy marketing dollars and then share on some of those projects. That’s a way of building up our volume right now.

What advice would you give somebody starting out? If somebody was getting started in this game, what would you tell them to do?

I would advise them to come to one of your events. I wish I had attended earlier in what we were doing, Particularly when the market was so hot. It’s like, “I want to flip houses. I want to do that. I’m going to get started.” It’s not an easy business. Even when you do the right foundation and systematize it, it’s a hard business. It takes a lot of effort.

I would advise preparing by getting some professional advice on how to get started and having the right amount of capital to work with or having a capital partner so that you can focus on the execution of the rehab and resale and not be overwhelmed with the finance. I know early on, one of my biggest stressors was cashflow and having the resources available to do what we wanted them to do.

It is one of the reasons why when somebody’s brands pick new, I suggest doing wholesaling first and getting a little bit of money and relationships in place and then go to rehabbing. Rehab is no joke, especially when it’s your first project. If you don’t have any money in the bank and experience, it can be the best thing or worst thing you ever did, and probably a combination of both.

We are going to make a significant investment in doing more wholesaling. That’s something we’re going to work on. We’ve got really good stuff. As challenging as 2021, we really did well.

I think that’s a component of the entrepreneurial mindset. It was a challenging year. You guys did have growth pains. There was definitely friction within your organization as far as people finding their lanes and their best seats. Ultimately, at the end of the day, you guys did have a tremendously good year and grew a lot from it. It’ll only make you better.

I’ll always say to my business partner here, “That house we bought in Oakland, we’re going to end up making $150,000 instead of $100,000.” There’s a common response. “Is that all?” I’ve had to get used to that. It is a joke, but it does keep me on my toes in terms of trying to maximize. There are two ways to make money. You do a good job and you catch the right market. You get some profit, also controlling your expenses and being efficient about how you run your business. I think that’s the area where we’ve been most efficient in the last twelve months.

There are two ways to make money: 1. Doing a good, catching the right market, and getting some profit and 2. Being really efficient about how you run your business. Click To Tweet

Are there any books or anything that you would suggest somebody read?

Several. I think off the top of my head. I just ordered a couple that were suggested at the last Inner Circle meeting. I don’t have them in front of me. There’s an author, a friend of mine. His name is Bill Wooditch. He wrote several books. One of them is Fail More. It’s all about creating experiences where it doesn’t go the way you want them to go, but you focus on learning from that experience. There’s another one that I just started. It was another suggestion from our Inner Circle group. I encourage people, you get all kinds of titles in your repertoire, but I probably could be better at remembering what the hell I’m reading.

Sometimes, life doesn't go the way you want it to go. Focus on learning from that experience instead. Click To Tweet

That’s fair. Sometimes we’re too busy to read. That’s why I do Audible, so I’ll listen to it in my car. Is there anything I didn’t touch on that you’d like to make sure we cover or do you have something to say?

No, I don’t think so, Don. I appreciate you having me on. I’ve never been on a show before. I’m probably not the greatest participant for your purposes, but I did get the memo on the black T-shirt.

A black T-shirt is a must. Tell everybody how to get ahold of you if they want to reach out to you.

You can reach out to me at Patrick@CVREI.org.

If you want to reach out to Patrick and maybe touch base with him, ask a few questions or if you’re interested in making some partnership with him in some way, shape or form, or some deals. I know he buys up and down California. I’ve wholesaled a couple of deals to you. One in Sacramento, California, and one in Southern California. We’ve done some business together. They’re actively buying, so make sure you hit him up.

Of course, if you got value from this episode, make sure you like, subscribe, and share it wherever you can. Reach out to me at Don@FlipTalk.com. You can find me on Instagram @TheRealDonCosta and Facebook. You can spot me about anywhere else out there. I can’t get my words out, but I think I got them out effectively. Make sure you go to FlipTalk.com and check out what we’ve got going on in the Flip Talk universe. Patrick, thank you for being with me. I appreciate it.

Thank you for having me, Don. I look forward to seeing you soon.


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