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Flipping Houses in Texas & California | Real Estate Investing Strategies

By September 8, 2025Real Estate Pros Show

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Show Summary

In this conversation, Steven Lee shares his journey from academia to real estate investing, discussing the challenges and learning experiences he faced while transitioning from wholesaling to flipping properties. He emphasizes the importance of networking, adaptability, and understanding regional differences in real estate markets, particularly between Texas and California. Steven also highlights the complexities of property appraisals and financing, and concludes with insights on future opportunities in the industry.

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    Investor Fuel Show Transcript:

    Steven Lee, Ph.D., D.C.J. (00:00)
    one of the things where finance and my education background served me well is I, at least in the Pampa, Texas area, I managed to reverse engineer the formula that appraisers use to appraise properties.

    So that way there’s no surprise now. A lot of times deals fall through because the appraisal doesn’t work, right? In a post 2008 world, you can’t just window shop appraisers anymore. You’ve got to go through the lender and you’re just at the mercy of the appraisal. Well, that’s what my broker kept telling me. Well, we’re at the mercy of the appraisal. And for me, that was unacceptable. I found, so one of the appraisers that I met with, cause you always show up right to the appraisal.

    Dylan Silver (00:20)
    Raise on.

    It’s true.

    Hey folks, welcome back to the show. Today’s guest is an investor based out of Pampa, Texas with an education background and now focuses on flips. Please welcome Steven Lee. Steven, welcome to the show.

    Steven Lee, Ph.D., D.C.J. (02:29)
    Hey, thanks for having me, Dylan. Appreciate it.

    Dylan Silver (02:31)
    It’s great to have you on here. We were talking a little bit before hopping on here about Texas and comparing it to some other places. But before we get into that, how did you get into the real estate space?

    Steven Lee, Ph.D., D.C.J. (02:43)
    Yeah, I had wanted to diversify for a while, not in terms solely of investments, but what I did, I wanted to bolster job security. I wanted to do all these things. And I had taught real estate for several years, taxes, ⁓ different areas within finance, personal finance. And I went from teaching for about 20 years in college, grad school, et cetera, ⁓ to investing in real estate.

    I started with one coach who taught me how to wholesale. And then I moved into ⁓ a different coach that taught me how to ⁓ market, do online courses to make them and market them. And then I moved, I kept moving on to different coaches and I basically had to fumble my way through and figure out what works for me. And it was about a two year process.

    Dylan Silver (03:39)
    Let’s walk through the wholesale to the next asset class I started out wholesaling to. Walk me through some of these deals and walk me through what it was like starting out ⁓ in wholesale.

    Steven Lee, Ph.D., D.C.J. (03:47)
    Mm-hmm.

    Yeah, so I mainly helped my coaches ⁓ with deals and various aspects. And it’s so different compared to academics. So you learn, especially if you go through, let’s say a finance program and you learn all pro forma, you learn how to do all these things. But it’s so interesting when you actually get into it and do it, because just like every other field, right, every other industry, there are key differences.

    And people will say, well, I know that’s what’s in the textbook, but that’s not how it’s done here. Or you have all these regional differences. So worked on wholesaling for a while. ⁓ For me, the hardest thing about wholesaling, I think, was the selling aspect of it. And that’s a minimum amount that I have to do now because I’m now doing flips. ⁓ But I went from wholesaling into ⁓ sober living and Section 8 rentals.

    And then I just thought, you know, there’s got to be an even better way of doing this. So I wanted to get paid on the front end as well as on the back end of doing flips. And the way to do that is to swing your own hammer. So I do my own work and I don’t do the specialties, right? But I do my own general contracting work. And that way I do rehab loans and on the front end of the rehab loan.

    Dylan Silver (05:04)
    It’s rainin’.

    Steven Lee, Ph.D., D.C.J. (05:17)
    my rapid gain realty, is my flip company gets paid by my rental company, depending on whatever state it’s in.

    so I’m able to, yeah, go ahead, sorry.

    Dylan Silver (06:12)
    I want to ask you

    about ⁓ being your own GC. I actually worked closely with an investor in DFW Dallas, Fort Worth Metro, who I believe had some roofing experience in his background, but really just impressed me to the nth degree with his ability to manage these sites from top to bottom. And I said, wow, you know, how did you learn how to do all of this?

    And it’s basically, you well, I didn’t know how to do this initially. It started out as a roofer hired someone I saw, well, you can subcontract this out. You have to find the reliable people. What was your background in construction really? And how did you do this?

    Steven Lee, Ph.D., D.C.J. (06:51)
    I didn’t. Yeah.

    I didn’t have one. So I have a friend that does this with me and he has, so I have the financial background and knowledge and he has the construction background knowledge. So it works really well. So I teach him like as an example,

    one of the things where finance and my education background served me well is I, at least in the Pampa, Texas area, I managed to reverse engineer the formula that appraisers use to appraise properties.

    So that way there’s no surprise now. A lot of times deals fall through because the appraisal doesn’t work, right? In a post 2008 world, you can’t just window shop appraisers anymore. You’ve got to go through the lender and you’re just at the mercy of the appraisal. Well, that’s what my broker kept telling me. Well, we’re at the mercy of the appraisal. And for me, that was unacceptable. I found, so one of the appraisers that I met with, cause you always show up right to the appraisal. You don’t let them.

    Dylan Silver (07:26)
    Raise on.

    It’s true.

    Steven Lee, Ph.D., D.C.J. (07:49)
    Just like for rehab loans, whenever you’re getting the rehab hold back funds released to you each tranche, don’t just let the inspector, you don’t leave a lock box and let the inspector go and just look around. You need to be there to provide context, to let them know what you’re doing. Otherwise they just have to guess based on what’s there. So it’s invaluable for you to show up, right? Just like when you’re at a job site and the subcontractors are gonna show up, you show up. ⁓ And so, yeah, and so for the appraisal,

    Dylan Silver (08:15)
    It’s beautiful.

    Steven Lee, Ph.D., D.C.J. (08:18)
    He walked me through how to do it he said, well, we use a multiple regression formula and my ears perked up because that’s what I would teach in real estate. And so I had had statistics all the way up through financial econometrics. And so I asked him to send me what he had and he did. And I used that and reverse engineered the formula that they use, at least that he uses. And so now I know how to do it because he’s been really great with answering questions, right? Because I expressed interest and curiosity in these types of things. ⁓

    Dylan Silver (08:47)
    I want

    to pivot a bit and ask you what was the growth process like and was it very intentional going from wholesaling to rentals to flipping? And I’m a wholesaler, selfishly I want to know, and I’m also a realtor, but I want to know selfishly how to go from being a wholesaler to then being in the rental space to then maybe doing flips or vice versa.

    Steven Lee, Ph.D., D.C.J. (08:54)
    Ugh.

    Mm-hmm.

    Yeah, it was painful. It’s the answer. ⁓ I’m finally now just like on the on the upswing, right? And things are walking and clicking in place and things are working out really well. But it was like I said, it took me about two years to figure everything out and find out what worked for me. And sometimes people do it really quickly, ⁓ which is frustrating for everybody else where it takes longer. But you have to stick with it. You have to.

    what we call on LinkedIn, a bunch of us who are entrepreneurs, we call it getting your reps in. So you’ve got to go through the reps, just like if you’re in the gym, you’re not going to build the muscle and develop the physique you want if you don’t do your reps. It’s same with people in sports. And so doing the fundamentals and doing them over and over over and over again is really important. And also recognizing opportunity.

    and being cautiously optimistic and exploring, being flexible is really important. I had an opportunity, the way I got into sober living, I had done the sober living program, went through that. And around the same time, I had an opportunity that was presented to me where a nonprofit, ⁓ they couldn’t get their own building.

    So they wanted me to furnish the building and we worked.

    something that we basically worked out an arrangement where I would bring the building and then they would cover all the forward costs. And then I would give them a buy option with the inside of a 30 year lease. And then they turn around and they licensed the beds. have license agreements with the people that come in ⁓ and a shared living space. So I was put in contact with a friend. So it’s networking, that’s very important.

    Dylan Silver (11:34)
    Huge,

    huge. say for a lot of people that are heavy on the education background, some of this stuff is not necessarily intuitive, because you would think that you would have to have as much book knowledge as you possibly can in order to do, you know, commercial real estate deals like the one that you’re a larger real estate deals like the one that you’re talking about. But so much of it is just, it’s a it’s a contact sport, you’ve got to be out there, you’ve got to be meeting people. And in my experience,

    If I could do one thing differently from the beginning, it would have been to be less kind of cautious about being in rooms or maybe I felt a little bit ⁓ outgunned. But really, I think I would have been welcomed in a lot of these rooms because it would have been a breath of fresh air. And I now feel like on the opposite side, I would love to see more young people and old people, anybody really, who has the mentality, hey, how do I get my rental property? How do I get into my first flip?

    Can you teach me X, can you teach me this? And I would love to tell them.

    Steven Lee, Ph.D., D.C.J. (12:35)
    Yeah, yeah, you’ve got to be teachable. You have it brings with it a certain level of humility, I think, and realizing that you still have so much to learn, because in real estate you do. I don’t even know if it’s possible to know everything. Probably not in real estate. Probably not. Even even if that’s what you dedicated your life to doing, to studying real estate, there’s just so much. And it’s interesting, too, because everybody that I think that’s honestly what makes a professional

    Dylan Silver (12:51)
    Probably not.

    Steven Lee, Ph.D., D.C.J. (13:04)
    a professional is the willingness to always learn and learn. It’s not, it’s not like you at first, I think you have to mentally say, okay, I need to realize I’m not the expert in the room. I am out guns. But I think that approach it’s better if you assume that you’re out gun going into the room than assuming that you’re the cause what are you doing there? Right? If you, if you know the most, right. Then a lot of successful people would tell you, well, then you need to surround yourself with different people.

    who are better than you, who know more than you, right? Because you’re the average of the five people you spend the most time with is the same. So I think it applies here too, yeah.

    Dylan Silver (13:41)
    No question.

    I want to pivot a bit here and ask you about Texas, California. I know that you’re involved in both markets. You mentioned Pampa and I said, well, I have another Texas town that I have not heard of and I’m a Texas realtor. Shame on me. But also active in the California area as well. How is it being active in both markets? And also how are you looking at deals maybe in California versus in Texas?

    Steven Lee, Ph.D., D.C.J. (13:52)
    you

    Yeah, it’s really hard. Even though, and I wouldn’t even chop it up statewide, even though that’s ⁓ the way we normally do because all the rules are different. Like most states use the NAR forms if you’re going to get a realtor involved, right? They use the National Association of Realtor Laws. In California, it’s CAR. So it’s the same forms, but they’ve tweaked them, right? Because California usually doesn’t do anything, doesn’t fully agree with anything that goes on federally. They want to do their own thing.

    And so they want to make their own tweaks, right? So like California by itself, I don’t know if you knew this, California has its own version of the EPA. Yeah. So it’s, mean, California wants it’s very hands on. And so it’s, I found that it’s more helpful to think about it in terms of region, because each region can be completely different. The third state that I’m involved in currently is Wisconsin. That’s where my sober living home is.

    Dylan Silver (14:45)
    Well…

    Steven Lee, Ph.D., D.C.J. (15:45)
    And that’s where I’m also doing a flip remotely because I’ve got a general contractor there and a realtor there and so on. ⁓ and each, it’s just so hard because each area is so different in terms of its inventory, in terms of the seasonality, in terms of all the rules, ⁓ in Tampa, Texas, which is very small, very rural. A lot of the rules are, are either non-existent or they’re lax, right? They’re relaxed because I’ll give you an example. ⁓ we were gonna, I was looking at a, at doing a flip.

    in Pampa and I wanted to seal in a basement because there aren’t that many finished basements in Pampa, Texas. There aren’t that many basements. You would think there would be more, but especially finished basements. There aren’t that many in the last 12 months of all the homes sold. There’s maybe three houses that have had finished basements. So I wanted to finish the basement and add to the square footage. That’s one of the value tricks that I always try to do is how do I add to the square footage? How do I increase the appraised value of the home?

    Dylan Silver (16:30)
    Right.

    Steven Lee, Ph.D., D.C.J. (16:41)
    And so we were going to finish the basement. was going to have like a living room, a bedroom and a bathroom. And the problem is we didn’t know where the main water line came into the house because that’s where you’re going to have to take the concrete saw and right. And do all the work to put in the plumbing. And so we went to town hall essentially, and I figured out the office to go to, ⁓ to ask them for the blueprints of that, or they could tell me where the water line came in so we could see, and we could plan it out.

    And they said, it’s residential. We don’t keep blueprints. just, the builder just throws it away. Whereas if I do the same thing in California and you better believe they’re going to have it, right? They’re going to have every permit on record. They’re going to have the blueprints of the house. They’re going to have all that stuff. So you just have to adapt. That’s really the name of the game.

    Dylan Silver (17:27)
    I

    want to ask you about, I mean this is a very granular question here. How did you deal with that? I mean did you just dig in hope and say hey tread lightly because there might be an over-line here?

    Steven Lee, Ph.D., D.C.J. (17:31)
    Yeah. ⁓

    No,

    no, no, no. So yeah, there’s a number of ways you can do that for that particular thing. So we wound up not buying the house because we couldn’t. So the owners of that house is a company that’s based in Houston and they basically buy up foreclosures ⁓ usually through tax auctions. so ⁓ because the way that my process works is I get paid on the front end via rehab loan, right? And the rehab hold back funds, my rental company pays my flip company. And then on the back end,

    Dylan Silver (17:45)
    Okay.

    Steven Lee, Ph.D., D.C.J. (18:07)
    my company, either I rinse it out or my company sells it, right? It flips it. So depending on what’s going on. And so I wanted to do a rehab loan because that’s the process and they wouldn’t accept. So at least in Texas, and I’m trying to remember if this is true everywhere, one of the downsides of using a Realtor is you have to use their forms, right? And so the downside of using the forms,

    unlike in Wisconsin where I use my own purchase and sale agreement that I got from my wholesaling coaches and so on, is that ⁓ you have to, if you’re going to use the National Association of Realtor Forms, there’s an addendum that you have to file if you’re going to obtain a loan. And on that piece of paper, you have to put the maximum loan amount you’re going to obtain and the maximum interest rate. How in the world that is the business of the seller is beyond me. It makes zero sense.

    That’s one of the things I tell people you have to realize sellers have the advantage. They’re in the advantageous position because not only do they own the real estate, the NAR and all ⁓ these entities in real estate have lobbies and they’ve done very well for themselves, at least in Texas. And so it’s frustrating, right? It’s frustrating because it’s like me going to the seller and saying, well, I’m going to base my offer on what you pay for the property.

    Dylan Silver (19:22)
    That’s true.

    Steven Lee, Ph.D., D.C.J. (19:32)
    Well, that has nothing to do with me, right? It’s none of my business what they pay for the property in Texas is a non-disclosure state. So they don’t have to tell me. It’s not public knowledge.

    Dylan Silver (19:38)
    Right. Are there any

    strategies, Steven, where, people can talk about on the wholesale side, you know, double closing and this type of thing passed through funding to where the end buyer doesn’t know the acquisitions price as a realtor. I’m pretty sure I actually cannot do that because that would be not fully disclosing all the material facts, but as a wholesale, you can, is there anything similar that you could do when you’re talking about

    Steven Lee, Ph.D., D.C.J. (19:50)
    Mm-hmm.

    Correct. Yeah, right.

    Dylan Silver (20:06)
    ⁓ rehab loans and this type of thing and interest rates and making it so the seller doesn’t have access to that information and you probably couldn’t do that as a realtor but as an independent investor is there anything that one

    Steven Lee, Ph.D., D.C.J. (20:17)
    Oh

    yeah, no, I just use my own purchase and sale agreement. Because I’m not using a realtor, but there are benefits to having a realtor. The realtor knows the market better than you do, right? The realtor will be able, yeah, they’ll be able to tell you, okay, this is what the inventory has been like over the last 12, 24, 30, whatever months. So they’ll be able to identify seasonality, like when is a good time to enter into the rehab loan, fix it up, because you’re looking two months out usually.

    Dylan Silver (20:21)
    Nice.

    They’re slow.

    Steven Lee, Ph.D., D.C.J. (20:43)
    So they’ll say in two months, the inventory is probably going to be here if it goes up and down like this. So anyway, to answer your prior question, sorry for getting off track, is that the company wanted to be the bank. So it’s interesting because in real estate, you’ll come across, if it’s company owned property, you’ll come across companies that will only take cash sometimes, or they’ll take cash or they’ll accept a rehab loan if that’s what you’re going to go get.

    but they will not under any circumstances do owner financing. There are other deals where they say, well, we’ll take cash, but we really want to do owner financing. And it’s like this, it’s like a lot of people over here and a lot of people over here. And it’s so interesting to see. It’s kind of like whenever you’re in the lending space, right? And you are, or you’re obtaining a loan from someone in the lending space and it matters. It’s like life or death of whether or not you’re going to occupy the property.

    It’s like everything changes for whatever reason. So when I’m doing these rehab loans and even DSCR loans, I have to sign all these documents that say I will not under any circumstances occupy the property. Whereas other loans, have to, right? FHA, VA, all these, you have to occupy the property. It’s so weird in real estate. You just come and you run into all these different things. And it’s so bizarre. Yeah.

    Dylan Silver (21:43)
    It is awful.

    this conversation is exactly

    what makes me want to be a lender. Actually, I was just thinking about this because I just got this short sale and foreclosure course that I completed and I was walking through this. I was thinking like the lenders really are the most in so many ways, the most important. You mentioned the appraisals and how often deals break down because of the appraisal. But we are actually coming up on time here, Steven. Where can folks go if maybe they’ve got a deal in ⁓ the Texas

    Steven Lee, Ph.D., D.C.J. (22:08)
    yeah.

    cool.

    You

    Dylan Silver (22:31)
    one of the Texas markets or maybe in California and they’d like to reach out to get your feedback on it or if they’re in the greater Pampa area and they’d like to reach out to you.

    Steven Lee, Ph.D., D.C.J. (22:41)
    Yeah. So the two people I would say that I’m always interested in meeting are general contractors who want to work on places, but they’re not going to buy it. So I want to meet with general contractors. And I also want to meet established nonprofits to do the sober living and section eight work with on the rental side. So you can go to rapidgainrealtee.com. also I’m on LinkedIn. I’m also on Instagram where I post my reels for the rehab work, looking at properties, and I can provide you those links.

    as well.

    Dylan Silver (23:12)
    Steven, thank you so much for coming on the show here today.

    Steven Lee, Ph.D., D.C.J. (23:15)
    My pleasure. Thanks so much for having me, Dylan.

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