From Blueprints to Properties: My Engineer to Real Estate Story

Stephen Schmidt (00:02.734)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs and I guess I’m going to have to say the world’s leading real estate entrepreneurs because this is my first time of talking with somebody who is from Canada and also still in Canada and I got a special treat for you guys today. I got Dan Illes in the house and he’s going to go into some real cool details about building and that process. He’s got a background in civil engineering and urban planning.

And his specialty is subdividing land and small multifamily properties. And really he’s probably the best guy to talk to for people that are wanting to get into doing their first deals and their first builds. So for those of you that want to develop some land and some real estate, this is the guy to talk to. And we’re going to have a great conversation today. Before we get started, just remember here at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, 2 5X their businesses so they can build the businesses they’ve always wanted.

in order to live the lives they’ve always dreamed of. that being said, Dan, welcome to the show today.

Dan Illes (01:02.809)
Thanks for having me, Stephen.

Stephen Schmidt (01:04.545)
Glad you’re here, my friend. Let me ask you this, so that way we can get a little bit of backstory from you. You have a background in civil engineering, like I said. You also have founded a company called Waterbill Solutions, where you do water sub-metering for multifamily and commercial properties. You got a lot going on. You got a real long rap sheet of accolades here. And so…

With that, what got you started in the real estate space coming from civil engineering and how have things evolved to where you’re at today?

Dan Illes (01:35.353)
Well, it’s not the most unique story, but as with a lot of real estate investors, started with a rich dad, poor dad. I read the book and my brain did a 180. I was still working my civil engineering career at that time, which I’ve since left about four years ago. And yeah, after reading the book, getting into some podcasts, reading some more books, real estate was it for me. It just made so much sense. And I dove in head first.

Stephen Schmidt (02:03.713)
What’s Rich Dad Poor Dad? I’m just kidding. I’m just kidding. If I had a nickel, I’m telling you what. Yeah, man, that’s where a lot of us start, right? I mean, I remember it ironically wasn’t the exact Rich Dad Poor Dad that I think most people start on, but my first Giyosaki book was The Cash Flow Quadrant. And I read it in about two days. And I’m pretty sure I didn’t sleep in that 48 hour time period because it was just such astounding information.

Dan Illes (02:05.409)
You

Stephen Schmidt (02:31.853)
take in as I think I was 18 or 19 when I read that book and I was like I’ve been lied to. So you got started in that at what point in your career in civil engineering were you when you picked that book up or was this like in the process of becoming a civil engineer where were you at during that?

Dan Illes (02:48.057)
Specifically, was about 27 years old. I had been in the civil engineering world for about five, six years at that time. yeah, that’s kind of when it hit me. I wish I had read it when I was 18, like you, but it found me when it did. And then that’s kind of when I started down this path.

Stephen Schmidt (03:09.343)
And so what was your first deal that you took on?

Dan Illes (03:12.665)
So my first deal actually was a small development deal. So essentially what I ended up doing is my mom and her husband owned a duplex on a big corner lot. I ended up purchasing the house next door to theirs. And then we were able to subdivide both their backyards off to create two new building lots. So that was my very first deal. The house that I bought itself was kind of just a

run of the mill rental, put tenants in it. And then while I had it rented out, I started on the process of subdividing the backyards off.

Stephen Schmidt (03:52.278)
Now, was this something that you, if you didn’t have your civil engineering background that you wouldn’t have thought to do or how much of a factor did that play into this?

Dan Illes (04:02.039)
I could still see myself thinking to do it and I could see other people thinking to do it. I’ve had a lot of people come up to me and say, hey, I’ve always wanted to, I’ve been ironing up this property, so on, so forth. But having the civil engineering background kind of gave me the tools to know how to do it, right? I’m a civil drafter by trade, so I know my way around drawings and AutoCAD and surveys and that kind of stuff. So for a lot of people, it’s a concept. For me, it was…

Here it is. Here’s your opportunity. Let’s go.

Stephen Schmidt (04:33.581)
Yeah, like second nature almost. Wow. So, you know, I just, if you’re familiar with Bigger Pockets, he’s no longer a host of the show, but I was hanging out with David Green, who is, I mean, he’s made somewhat of a name for himself in the real estate space. And he’s kind of, he talks a lot about how, and he’s known to be the cashflow king of breaking off and thinking of how to create.

new additions in your own home to create other sources of cash flow, whether that’s a screened in porch that you turn into another room or whatever that might be. So it almost is like you’ve taken that concept, whether you knew about it or not, and almost done it with the land itself.

Dan Illes (05:16.009)
That’s a fair way to put it but you know what? I’m glad you bring that up because around here in my part of Canada, so I’m in Ontario Most of the cities around here are now allowing you to do three to four units on on any piece of property, right? So I’m currently taking an existing duplex I’ve doubled the size of the house by adding a huge addition And I’m turning it into a fourplex. So when it’s all said and done, I’ll have

three three-bedroom units, two driveways, eight cars worth of parking. It’s just a really, really nice concept to be able to add units like that to an existing property.

Stephen Schmidt (05:57.548)
Now, so where does water bill solutions fit in with all this?

Dan Illes (06:01.271)
Yeah. So when I did my very first duplex conversion, which was a very popular strategy around here for the longest time, I had put in separate furnaces, separate duct work, separate ACs, separate electric panels, everything. I split everything, every last utility that I could. I was looking for a solution on for how to, how to divide up the water and pass the costs back to tenants. I found a system from a small company out of the U S I installed it in the unit.

and it worked great. I was able to log on, see how much water each unit was using down to the hour, drop invoices, send it to the tenants. And essentially I was just recouping all my water costs. And then I started telling other investors about it and they started saying, can you get me one? Can you get me one? And next thing you know, I’m like, okay, there’s a business opportunity here. And then I’ve just been growing that ever since.

Stephen Schmidt (06:58.589)
So like all impeccable businesses, you had a problem that you came up with a solution for and then other people were like, I’ll pay you to do it too.

Dan Illes (07:11.161)
pretty much and yeah I first started just helping people acquire these systems but then I literally built a business around it to the point where I’m doing larger apartment buildings now not just not just two three four unit type stuff

Stephen Schmidt (07:26.325)
Right, totally. Because ultimately that’s where the money’s gonna flow for a business like that is the bigger the project, the better the bill,

Dan Illes (07:34.475)
It is. It’s been helpful to like, these systems will also notify you if there’s ever a suspected leak or water abuse or anything like that. So if you’ve got the continually running toilet, you’ll get an email. Like I actually had tenants try install a pool without telling me one of those three foot kitty blow up things. Next thing you know, I get an email and I’m able to like put an end to that right away. So that’s been super helpful too, in addition to the whole financial side of things.

Stephen Schmidt (08:04.343)
Wow. So.

This is really interesting. With both of the companies you have, guess what’s the main focus for you in the next, let’s say 12 to 18 months? What do you really see doing in both of these spaces? mean, is your goal to just be developing only? Is it to have both companies kind of run themselves? What’s really the big goal for you?

Dan Illes (08:32.083)
Having both companies run themselves would be like kind of a long-term end goal. Yeah, right now I’m kind of between two things. So like I have a when I have active construction on the go, obviously that requires some more attention. When I’m not doing active construction, I’m actively growing the water sub metering business.

Stephen Schmidt (08:57.065)
And so what do you really want the world to know about your expertise? I guess that’s a fair question. Because you’ve got some strategies and techniques that I don’t think are common.

Dan Illes (09:10.371)
Yeah, I would say this, like if someone’s listening to us speak right now, the one thing that I’m really good at and I advocate for is I help people kind of do their first build, you know what mean? Your first duplex, triplex, fourplex, kind of that small multifamily. And I do it in a way where it’s fairly safe. And by that, I’ll give you a little bit of an example here.

I took a property, was 100 feet wide by 150 feet deep. Okay. And the house was well off to one side. So I was able to split that property into two 50 foot wide lots. Now here’s the interesting thing. It’s when I split that property in half, the house retained its value. It was still worth just as much as I had paid to acquire the whole property, but the vacant lot

was worth 312,000 because I’m in a high cost of living area. So that is one of the best ways that you can acquire land and even better than that, buying land can be difficult because it’s hard to get financing on it. But if you go after a property that already has a house on it, you can go get a traditional mortgage. You can put a tenant in there.

maybe the property will carry itself while you work on the development. It’s a very kind of training wheels way to get into into either like flipping land or building out.

Stephen Schmidt (10:48.343)
So I just want to make sure that I heard this right, but you essentially created 300 grand out of thin air or dirt, essentially.

Dan Illes (10:57.035)
Yes, and I’ve done that a few times. It works really, really well in high cost of living areas where the act of splitting a piece of just creates so much value just because of the high cost of land.

Stephen Schmidt (11:11.949)
Yeah, man, that’s nuts. Now, so, I mean, obviously the market up there I’m not as familiar with in terms of like a US market, but with it being so high cost, what would be a popular market here in the States that you would compare it to? So I kind of have a way of thinking about it in terms of like an analogy. Like, is it like…

California expensive, is it Florida expensive? Where would you say the market is comparable to in terms of that land cost especially? Seattle, okay.

Dan Illes (11:42.315)
It’s Seattle. It’s definitely Seattle around here. California would be another fair comp as well. It’s any of those really high cost of living areas and there’s other cities around here or there, but it’s pretty consistent across the board here.

Stephen Schmidt (11:50.977)
Okay.

Stephen Schmidt (12:04.769)
No kidding. Now, so with that, that’s a really good intro. I actually have a really good friend of mine, ironically, who’s developer in Seattle. that’s a really, really good sticking point for me. And so in that, I know some of the challenges that come with that, of course, are finding new lamps. So what is your strategy?

when you go to find a new property, like what are your criteria that you’re looking for? Is it that it has an existing structure on it so you can do that process, especially with the financing piece being difficult or?

Dan Illes (12:36.139)
So for me, it’s simple. It has to have upside. It can’t just be a vacant lot. It can’t just be a house. It has to have upside. So if I go after a vacant lot, actually I bought one somewhat recently, it can be subdivided into three building lots. And it’s the same with when I’m buying a house with some excess land. I have to know upfront through a due diligence process that I’ve kind of hammered out over time.

that there’s a very, very high chance that I’ll be able to split off the excess land, create a building lot, whether I flip the lot, which I have done, or hang onto it and build out some multifamily.

Stephen Schmidt (13:19.806)
So with obviously vacant lot, but what’s something else that makes a deal like an instant no for you?

Dan Illes (13:27.353)
To the opposite of that, it’s no upside. It’s got to be a deal. We’ve all heard this time and again, you make money on the buy. And you know what? I bet you that’s more true than ever when it comes to development and land type projects.

Stephen Schmidt (13:47.265)
What would you say has been the biggest turning point in your business for you?

Dan Illes (13:53.155)
Good question. I think it’s once I had a few projects go really well when I was able to stack some cash. so actually when I first started this, I started subdividing excess land, creating building lots and selling them to builders. Then after I had done that a couple of times, then I started hanging on to my own and building myself. Once I had stacked up a bit of cash, had the reserve,

I started seeing the exit to my career and that really got the gears going in my head.

Stephen Schmidt (14:30.573)
Are you a pioneer of this or is there anybody doing this on a grander scale that you follow?

Dan Illes (14:38.789)
speaking of Seattle, that’s Nguyen, has been, doing this kind of stuff. There, there’s other guys in the U S now, one thing I want to explain that differentiates me between some other folks you may have heard on podcasts is, a lot of land guys or land people out there, are buying lots and flipping them, getting good deals on them. I don’t really do that. What I do is I’m go more after the entitlements.

the get a piece of land subdivided a few times, get a piece of land, up zone it, get a piece of land. And essentially what you’re doing is you’re kind of, in not so many words, renovating the land. You’re making it worth more than it currently is.

Stephen Schmidt (15:26.807)
So you talk about upside. What does upside actually mean? Is it what you can do with the piece of property? How many more units you could build on it? What does that look like?

Dan Illes (15:38.521)
Um, I think it’s for me, it’s creating value and equity right away. So I’ll give you another example. I bought, I bought a property for 290,000. I tore the house completely down. was a terrible house. Actually. I bought it from the bank. Then I got approval to split the land into two building lots and each lot sold for two 15. Right. So I paid 2 90, but then I sold two lots for two 15 each.

That’s the upside right there. It’s the fact that a vacant building lot is only worth slightly less than a dumpy house.

Stephen Schmidt (16:14.829)
How do you find most of your deals?

Dan Illes (16:18.309)
MLS works to a degree and you know why it works. It’s because I’m not looking at it the way that everyone else does. where a lot of like home buyers are looking for home, obviously, or even investors are looking for, can I add a room? Can I fix this up? Can I flip this? I’m looking at a property is like, it’s got a garage off to the side. Can I rip the garage off and split off a 40 foot lot? Which, which

I’ve done so like that that kind of stuff is what I look for and there are often those gems sitting on the MLS just because people don’t think to look for that kind of stuff.

Stephen Schmidt (16:56.109)
Yeah, I mean, it’s like a completely. It’s a completely different and creative way of looking at a property and finding value that the average investor wouldn’t even consider. So. On that note, I mean, you’re talking about like 40 feet and I’m like looking at my office thinking to myself. That’s only like three times the size of the length of this room here. Like how big of a structure can you actually build on a 40 foot wide?

Like actual lot.

Dan Illes (17:26.905)
Well up here, can speak to up here at least. If you have side yard setbacks that are about four feet each side, that’s all you really have. And your lot is decently deep. You can do a pretty big long and skinny house. And then we all do, we do basements up here. Every house has a basement up here. So what you end up doing, you do the basement, one unit, you do the main floor.

Stephen Schmidt (17:37.346)
Mm-hmm.

Dan Illes (17:53.529)
next unit, you do the second floor, that’s your third unit, that’s your triplex right there on a 40 foot lot.

Stephen Schmidt (18:00.651)
Yeah, makes sense. the construction aspect, how long do your builds typically take?

Dan Illes (18:06.765)
so my, my last build start to finish was two houses at the same time. That was about eight months. That was a bit long and I was pretty green at the time. the current build I’m doing, I think I’m going to knock it out in five months. And again, that’s, that’s me general contracting it too. So I’m on site often. I’m, I’m driving everybody.

I’ll pick up a hammer here and there between trades if I need to to get over a hump or get something done and It’s served me well

Stephen Schmidt (18:40.193)
what point do you think you’re gonna have that feeling that you’ve made it?

Dan Illes (18:44.281)
After this podcast.

Stephen Schmidt (18:49.597)
Oh, what a great answer. Nice.

Dan Illes (18:51.861)
No, after I’ve made it, I would say once my cash flow is at a point where I’m not even really thinking about income, when I want to go on a trip, it’s there. I know it’s there. You know what I mean? I’m not a fancy guy. know what I mean? I drive older cars and whatnot, but I just, I think once everything’s covered and then some, and you know what? I’m on my way to that too.

Stephen Schmidt (19:18.433)
What will you do when you get to that point? I mean, I know you talk about not a fancy guy, all of that. How does your life change when you get there?

Dan Illes (19:29.177)
I’m going to live it a bit more for myself, do a bit more traveling, maybe splurge a little bit more than I have. But yeah, I want to do some more traveling. I’m a big motorcycle guy, man. It’d be nice just to do some more trips on the bike and just again, live life a little bit more for myself.

Stephen Schmidt (19:49.431)
Totally. What’s stopping you from doing it now?

Dan Illes (19:52.545)
I do it in small doses now. I want to do it little more regularly.

Stephen Schmidt (19:54.902)
Small doses. Yeah, you bet man. Because like ultimately we all get into real estate for, you know, I think really the ultimate goal is freedom, right? Because it’s one of the only businesses that you can get into that you can actually work your butt off for a season and then actually enjoy the fruits of that labor that continue to produce whether you go and pick up a hammer or not, right?

Dan Illes (20:17.271)
I would say this too. I like working on my own stuff, right? So I left my career almost four years ago. So I’ve been doing my own thing since then. There’s been some very stressful days at times, but you know what? I prefer to deal with my own problems, put out my own fires, dictate my own schedule. That alone to me is worth it all day long. Even if there are days here and there were kind of banging my head wishing I was

drawing up a survey.

Stephen Schmidt (20:48.589)
Sure, yeah, you know, it’s kind of like when you become like full-fledged entrepreneur, you’re trading that nine to five or that eight to six for more of a five to nine, 5 a.m. to 9 p.m. But there’s just something about the flexibility and the freedom to only have to deal with your own BS, right? It’s worth it.

Dan Illes (21:09.461)
It is. It is, and there’s no shortage of my own BS for what it’s worth, but again, I still prefer it all day long.

Stephen Schmidt (21:19.319)
Yeah, totally. So what Mark, I know you really like helping people to, or you at least advise, how much of your involvement, are you coaching yet at this point or with those people that are wanting to get into their first builds, like how are you helping those people?

Dan Illes (21:33.827)
Sure, I’ve participated in some events, I’ve hopped up on stage, kind of walked through how, like exactly how you subdivide a piece of property, how you run due diligence on things. And that’s where I can really like help somebody looking to get into this. It’s you got to get your due diligence right. And I kind of go through a checklist or a process just at a high level. It’s kind of what’s the size of the property? What’s the zoning? What’s the infrastructure? I teach people how to go

find what infrastructure is there and isn’t there. Is there environmental factors? Are you next to a highway? Are you next to a railroad? I’ve kind of just got this all systematized just point by point on things that can stop your development or cause you problems along the way. that’s what I’ve gotten good at and that’s what I help people with.

Stephen Schmidt (22:25.453)
Well if somebody wants to learn more about what you’re doing, where should they go for that Dan? Where can they connect with you for more?

Dan Illes (22:33.049)
Instagram’s the best. It’s illesinvest. I-L-L-E-S underscore invest. I got some stuff on YouTube. You can Google me. I’ve got a few videos out there of kind of, again, exactly how to run due diligence on projects like this. And I think you’ll find it valuable.

Stephen Schmidt (22:52.525)
Well, hey man, we appreciate you coming on the show. Thanks a ton for dropping some nuggets. For anybody that wants to learn more about this, and hit Dan up on Instagram. Go follow him, show him some love from the real estate pros and the Investor Fuel community. Appreciate his time and thanks again, y’all, for listening. We’ll see you in the next episode.