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Show Summary
In this episode of the Real Estate Pros Podcast, host Micah Johnson welcomes Donovan Gilbert, a seasoned real estate investor with nearly three decades of experience. Donovan shares his journey from starting as a buyer’s agent to becoming a successful real estate broker and investor in the Twin Cities of Minnesota. He discusses the evolution of his business, including the shift from managing a large rental portfolio to focusing on flipping and wholesaling properties. Donovan emphasizes the importance of adapting to market changes and finding a business model that aligns with personal strengths and lifestyle goals.
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Donovan Gilbert (00:00)
So before we knew it around 2006 we got up to like I said about 80 units and then we said let’s make a shift like everybody does and let’s start buying some of these bigger properties. So in 2006 we located a 48 unit that was condemned, foreclosed, vacant ⁓ and you know we felt we had the ability to take it on but it was definitely stretching ourselves a little bit and looking back on it obviously 2006 probably wasn’t the best time to get into a property like that.But needless to say, we got the project done and turned it, you know, got it rented out.
Micah Johnson (02:06)
Hey everyone, welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I’m joined by Donovan Gilbert, who’s been making some serious moves in real estate investing for almost three decades now. Donovan, welcome in, man. Glad to have you.Donovan Gilbert (02:18)
Hello, thanks for having me.Micah Johnson (02:20)
Absolutely, absolutely. think our listeners are going to take something away from overall how you’ve approached real estate and our pre-recording talk. I love the story that you have and how you’ve just made sure to keep yourself in the industry and creating the life you want after a long career through it. excited to dig in. So for people who may not know you yet, let’s talk about what’s your main focus right now and what markets you operate in.Donovan Gilbert (02:46)
I’m operating operating out of theCities of Minneapolis and St. Paul in Minnesota. I’m a licensed real estate broker. I’ve been licensed for 28 years and during my 28th year, I’ve been investing in real estate for about 2526 years with my general contract general contractor business partner. In 2021, we joined on with the national company we buy houses calm. And right now we’re solely focusing on buying and
flipping real estate or buying and wholesaling or buying and reselling. And we also own a small portfolio of single family rental properties.
Micah Johnson (03:24)
Excellent, man. And that wasn’t always the case. So let’s back up for a second. Tell us a little bit more about your story through the industry. You got started, like you said, about 28 years ago as an agent, and then started growing into the investment space. Give us a little history on your story and how you’ve just kept plugging along here.Donovan Gilbert (03:41)
Yeah, I got licensed towards the end of 1997. I got started off as a buyer’s agent on a new concentrating a lot on new construction. I didn’t really care much for the new construction. within a couple of years, I found myself really highlighting on small investment properties, duplexes, fourplexes, ⁓ foreclosed properties, so to speak, stuff like that. So got off the team and then started my own real estate brokerage within about two or three years.just a small brokerage and then around 1999 with my general contractor business partner. We’ve been friends since we’ve been about seven or eight years old and I had a property that I’m like, hey, this could be converted into a six bedroom rental house. I see an opportunity here. So we pulled together on it. We bought it and it turned out great. And then we just said, hey, let’s do this again. So we did it again and again and again. between 2019 and about 2000 or 2000, 99 or one.
1999 and 2005, we bought about 80 properties and we just continued to do the burr on a really high level. We did a lot of no money down, a lot of owner financing, creative financing. We would buy a property, we’d buy a single family home, 1031 it into a fourplex, buy a duplex, 1031 it into a fourplex.
We’d buy a fourplex, 1031 it into a 12plex.
before we knew it around 2006 we got up to like I said about 80 units and then we said let’s make a shift like everybody does and let’s start buying some of these bigger properties. So in 2006 we located a 48 unit that was condemned, foreclosed, vacant ⁓ and you know we felt we had the ability to take it on but it was definitely stretching ourselves a little bit and looking back on it obviously 2006 probably wasn’t the best time to get into a property like that.
But needless to say, we got the project done and turned it, you know, got it rented
But, you know, we were holding on to 12 to 15 % interest rate, hard money on these projects and the market started to collapse. We weren’t able to pull the money out. So we went for three, four or five years of just spinning our tires with unable to really help our situation until it came to a head where we pretty much lost everything, filed bankruptcy, lost our houses.
Micah Johnson (06:49)
andDonovan Gilbert (06:51)
lost the majority of our portfolio. were up to at our peak, probably about 150 doors. When it was all said and done, we got down to about 50 doors and ⁓ started said, okay, what are we going to do from here? So we owned about 50 units. were, we were definitely upside down. We were negative equity at that position, but we understand and knew the market was going to turn around. So we said, let’s just hold on. Let’s hold this through. So around 2010, my business partner and I, we were not in any position at all to buy properties. SoMicah Johnson (07:00)
Wow.Donovan Gilbert (07:20)
We took on a third partner, a pretty wealthy guy, and we started buying single family homes. And we pinpointed one city within the Twin Cities here and we saw good opportunity. We thought the housing stock was good. So between 2010 and 2015, we bought about, I’d say about 50 single family homes and converted all of them into rentals. We weren’t flipping them. You know, there was really not a market for buyers at that point, but it was just obvious the values were so low. like, we’re going to accumulate these. So.We were picking up houses for 70, 80,000 that today are worth 350 to 400. So, ⁓ turned out great and it was good. We were succeeding, but we didn’t necessarily like the life of being a big landlord and having 80, 90 doors and dealing with the problems that come with it. So we kind of slowed down and just kind of own those rentals till about 2019. Around 2019, we said, hey, these went up a little bit. Let’s start selling them.
Micah Johnson (07:56)
Wow.Donovan Gilbert (08:19)
So we kind of started selling a little bit here and there and then COVID hit and the dynamics of owning rentals, we just saw it changing and a lot of negative aspects of it, not just the personal effects it was having on us and the negativity of always evicting people and dealing with this and dealing with that, the government involvement. So we’re just like, we just want to get rid of these. So we started really aggressively selling off all of our properties around 2020 or so and.Micah Johnson (08:41)
Good night.Donovan Gilbert (08:46)
Now we’re at the point we’re down. then in 2021, we also joined in with a national company, buy houses.com and kind of made a shift from rentals into just buying and flipping and wholesaling. And it’s turned out great. And now we’re down to, have about 12 single family homes. We’ve got rid of all of our multifamily stuff. We’re probably sitting on about a 30 % loan to value on our rental portfolio. Easy to run, low stress. Now we’re just really concentrating on wholesaling and flipping properties.Micah Johnson (08:53)
Gotcha.Man, thanks for sharing that information. And what I love about your story proves a point I like to show about real estate. the longer you go in it, the more chances you have to keep adjusting, keep pivoting. Because not everybody picks the part they like to do the first time, that first thing you get into. And you’re online right now and you’re seeing different YouTube university stuff and gurus and all these folks are out here.
doing it huge, because that’s what goes viral, is this idea that you need to do this big thing. And a lot of folks get into real estate thinking, well, that to be successful, I got to do this big thing. And it’s an easy trap to get into, where you catch the wrong market, right? Y’all got out there with your hair on fire, things are going good, accumulation, accumulation, thinking, I’m doing it. This is what I’m supposed to be doing, what I’m supposed to be doing.
even without, throw out the part about the…
where the market cycle happened, eventually that method just started to wear you down internally. You start questioning your life like you were saying, is this what I actually want? Am I doing, okay, money’s awesome, but wait a second, I don’t enjoy this at all. And it’s a point I like people to see that, yes, we all need our financial paychecks paid, but you go long enough without getting that emotional paycheck paid and you’ll be ready to give all that money away.
Donovan Gilbert (10:48)
Uh-huh.Micah Johnson (11:11)
You won’t want the stress that it causes.Donovan Gilbert (11:13)
Yep, the stress of it. then we both, my business partner and I, we realized we weren’t really utilizing our strengths. know, running rentals wasn’t our strengths. I’m, I’m a sales guy. a real estate guy. I understand the market and you know, it does come into effect a little bit when you’re running rentals, but moving and pushing a lot of properties through every week or every month and every year, it more fits my skillset.Micah Johnson (11:21)
ThankRight, right. And y’all are, and what’s interesting too is, and again, I want to point this out. There’s no right way to do it. There’s just your path in it. Cause a lot of folks start fixing and flipping and then switch to buy and hold later. They, they realize they don’t like that part where your skillset uniquely lines up with that strategy with, cause y’all do fixing and flipping and what’d you call it? A hybrid of hold tailing, correct?
Donovan Gilbert (12:02)
Correct, yep. Yeah, we’re.Micah Johnson (12:04)
Yeah,so it’s, go ahead. Please.
Donovan Gilbert (12:06)
would you like me to talk about our concept and kind of how we look at properties? know,we look at them a little different. You know, people know what whole tailing is, you know, you kind of fix it up a little bit, maybe sell it to an investor off market, or you get it on retail, or you can do a full flip. And you know, we’ve done them all. But we’ve really found that not only are we good at doing the hybrid of the whole tail, we feel in the long run, it’s more profitable. Like, let’s say you have a property, got
Micah Johnson (12:32)
Mmm.Donovan Gilbert (12:34)
Well, you have a property and you’re diagnosing it and you can go one route with it. Let’s say you have a property that the average neighborhood value is, let’s say, and you’re able to pick up a property for, let’s say, $240. One route you could go on, you could do a four five week rehab, put in $40,000 and hope to get a sale price of $360. Or you could do another route of say, hey, let’s put $15,000 in this, we’re going to put some carpet paint, we’re going to fix some of the kitchen, we’re not going to totally redo it.Now that property is not going to sell at 360. Maybe it’s going to sell at 320. But in the end, you’re making close to the same money because you have a longer holding costs on the first option. It’s going to take longer. We feel there’s more risk. There’s more variables. You know, if you’re doing a $15,000 remodel or a refresh, if things don’t go right, you’re going to spend 16 or 17. You do a $40,000 project. Things don’t go right. You might spend 50,000 and that four to five week timeline can turn into six or seven.
you do a refresh that’s going to take a week, it’s going to take eight days if something goes wrong. So there’s more variables just on top of the money. You might be able to make more money on doing a full flip, but the time in and the time out, the risk, the variables that can come in, we’ve just really found and discovered that doing that hybrid of that way, it works out great. And that being said, our properties are not cheap. They’re not, we’re not cutting corners. We do everything great. We cross our T’s dot our I’s.
We’re just not putting in marble. We’re not replacing the kitchen, but we’re fixing all the screens. If there’s a rusty door knob or something, we’re going to fix it out. So it’s crisp and nice. We’re not just going to necessarily go retile everything or put in the most expensive XYZ. And it’s a formula that’s worked well for us.
Micah Johnson (14:19)
And I love that you talked about it because it’s very often done that every flip you think you need to make it as awesome as it can be. A flip just means make it great, redo the kitchen and all the bathrooms and do everything. And you’re nailing it. Not every time is just because you can list it and possibly sell it for more. Does it mean it’s a better deal?Sometimes maybe, but being able to look, there was an investor I used to work with that was really good at this. They would run their numbers at those different rehab levels. Okay, I can make this the baddest house in the neighborhood. How much does that cost and what’s it mean? And so often it is that different rehab. Don’t make it the nicest one. Cause one, your fire pool
and that other level house, you have more people looking for it. Your time is different. And over
Donovan Gilbert (15:48)
Yep. Yeah. If you’re in that neighborhood,you have a, let’s say you have a four, four bedroom, two bath, two car garage, and the neighborhood is selling on average for 350 and you docked it up and make it look really nice. And you’re trying to get 360 or 370. A it’s going to take longer to sell B there’s a, you know, chances you may have to do a price reduction on it. But if you’re 320 in that neighborhood and everything’s clean and everything’s nice, but your kitchen’s a little dated, the bathrooms aren’t perfect. That 321 might get bit up to 335.
and then you’re actually making more. There’s more of a likelihood on it. just from the volume that we’ve done through the years, I don’t even think there’s any argument to it that there’s a better way to do it.
Micah Johnson (16:21)
There is.I wouldn’t either, I agree with you there because in the end too, that buyer that’s moving in, you’re leaving them the space to make it their own and enough room in the deal where the house will be worth what it’s worth when they do it. So it’s a way for again, shrink that cash conversion cycle, which in real estate is everything, especially flipping, because the longer that thing runs, the less money you typically coming back.
Donovan Gilbert (16:54)
Yep, I always like to say to you learn it as if you’ve been an agent out showing lots of buyers and just seeing what’s happening on the market. Every house really eventually sells. It doesn’t have to be perfect. There’s a buyer for every type of house and there’s more buyers for that house at that lower level usually than at the higher price. Now in 2022 maybe was the other way better to go because things are going like crazy. I still don’t think so just because of the timeline on it. If I could, we do a lot of properties even, you know,Micah Johnson (17:06)
Right. Right.Donovan Gilbert (17:23)
we’ll be in and out in less than a week and we’ll buy it, get it cleaned up, list it at a good price and have it resold. There’s a lot of times we’re 45 days, 50 days from start to finish versus someone taking on a property. Okay, great. Yeah, you made 70 grand on this one. I only made 35 or 40 grand, but it took you six or seven months to get from, you know, start to finish from buy to resell the clothes. So I’d much rather do three of the small ones than one of the big ones.Micah Johnson (17:34)
HeyAnd then what happens now you’re at what 115,000 or now you’ve.
Donovan Gilbert (17:54)
Yeah. Yeah. And, andyeah, I mean, everybody, think it’s a common place. think if you, the more, if you talk to people that have been in the business a long time, eventually people start to understand it. And they’re like, I don’t want to flip houses. We still like to flip them. We still, and I almost call it more now. We, we buy and resell houses. I don’t even necessarily like to say we flip them because sometimes we’re going in, we’ll put three, $4,000 in it. We’ll garbage it out, put a coat of paint on one of the walls and sell it as a property. But
Again, in that neighborhood, if they’re supposed to sell for $350, we put it on at $290, and people are going to eat it up. You don’t have to do anything to it. But the key is obviously finding the right properties and getting those properties. And I think that’s where the webuyhouses.com brand helps us, where if we’re really pushing our marketing and our SEO, we can get a lot of leads, which are going to get you a lot of bad ones, but you’re also going to have opportunities on, you you want to find the houses that a little deferred maintenance or.
Someone older was living there and couldn’t take care of it. It’s not a bad house. There’s a lot good going on with it. It doesn’t necessarily need it, but the seller is motivated and looking to sell and you can make a good deal.
Micah Johnson (19:02)
Right. And that, again, man, the watching your journey and just shifting from, okay, we were doing this and that wasn’t the best. You took the best parts from each section and just kept moving on. Even the way that your business is built now, because what, y’all got low, one thing we buy houses to help y’all do was keep your overhead low. Keep the lifestyle that you want while not being stretched every direction in the way you were doing it before.Donovan Gilbert (19:26)
Yeah, when we first started out, did some mailers, we did some PPC, we kind of pushed SEO. And it did help us to work our way up in the stuff. But the good thing with the We Buy Houses, my local business is called We Buy Houses MN LLC. So just having that name alone with the association with We Buy Houses, if people are going online and looking, sell my house for cash, We Buy Houses companies, I can spend.10th or a fifth of what some of the other operators are in town and my stuff is going to be up there on the SEO. I know there’s some major operators in town and you kind of hear through the grapevine, know, people know each other and stuff. They’re spending 10 times what we are and we’re right up there with them in the rankings. So it’s been a good tool with the WeBuyHouses.com for sure.
Micah Johnson (20:14)
And it’s powerful there. And again, it just shows that if you’re gonna get into this industry, plan it for the long haul and be open to change. You’re not necessarily gonna find the strategy in the way you like doing it out of the gate. You’re gonna have a lot of fun, don’t get me wrong. But when it starts grating on your gears and you’re not feeling like you’re getting anywhere, that’s that time to take a step back and say, okay, what do I like? What do I not like? What life do I want?what’s keeping me from living that life and then what tools do I need to add to my business that will actually get me there and then pull the trigger, go for it, right? Cause you can always adjust again. That’s what I like people to know. every decision is you’re not shutting the door behind you. You can just reopen the door and walk back out. Think of it like a hallway instead. You always are going right into your mind.
Donovan Gilbert (20:49)
Yep. Yep.Yep, I think it’s that too that it’s, it’s that too and
then also accepting, hey, someone might’ve gotten the business five years ago and you know, their first year wasn’t good, their second and third year was awesome and then maybe their fourth year wasn’t as good. Sometimes you just have to accept, maybe the next couple of years are not going to be as good as your first year, second and third year. And it’s not because of you, it’s just maybe because of the dynamics of the real estate market or what’s going on in your local market or macroeconomics things. And it’s okay, work your way through and.
better times will come or like you said, adjust to something that fits you better.
Micah Johnson (21:34)
Right. Right. And one thing we were talking about pre call was how y’all are approaching goals and how you’ve actually been doing it for the past couple of years where, especially in a market cycle, building, building how and what you’re trying to do becomes even more intentional because you, you choose the wrong thing that you think you need to go after and then start building a bunch of systems and processes around it.you’ll start experiencing failure and it’s not because of the system and process, it’s the wrong timing. The right thing at the wrong time is still the wrong thing. You can never force it in there. So just keeping that awareness and openness of, okay, what is it that I’m actually trying to do here? Beyond just real estate, you set it down to the life you wanna live. Am I actually, besides what I have to do every day,
You hated the landlord part. I don’t want to do this. I don’t want to deal with all this. This is not the stress I want to think about when I go to sleep each night. That’s a question I like to think about, right? If I just get sat up in my bed from a thought running through there, which one’s the one I want to stress in me out? And if it’s not that, not doing it, no thanks. I don’t want to go down that road because it’s
Donovan Gilbert (22:30)
Yep, for sure.Yeah, back,
you know, almost 25, 30 years ago when I first got started and even talking with my business partner, ⁓ you know, we wanted to make money and we know in real estate you can make money. There’s no ceiling to it that’s great. But we also, the bigger part was knowing, hey, we don’t really have a boss. We don’t answer to anybody. We can do our own thing. Now you have to be ethical and, you know, follow rules of real estate and that stuff. But when you’re a property owner and especially when things started to shift around 2020,
you’re losing control a little bit when you’ve got people that you don’t have to pay rent here. You’re trying to evict someone and you can’t evict them or you have to fix it up to a certain standard that you start to lose control over the over it where yes, you own the properties, but you’re kind of answering to the city. You’re answering to the inspectors. You’re answering to the agencies that are paying the rent where when you’re flipping houses, you know, you get that house, you fix it the way you like it. You don’t have to answer to anybody. You get it on the market. You know, you’re going to deal with professionals along the way, but you’re
Micah Johnson (23:26)
I know.Donovan Gilbert (23:40)
not really answering to anybody. And that was kind of our more of our goal of getting into real estate and understanding real estate outside of the money was we’re in control here. We don’t have to answer anybody other than obviously the ethical and professional standards.Micah Johnson (23:52)
I getIt leans into that freedom part. Again, lining up with that personality. How do I go about doing this business where what I’m trying to own doesn’t own me back? Because that’s what gets us a lot, right? I I explained that to my kids in a way I hope they can understand. Like we have a camper that camper also owns me. I have to take care of it and do the things. And now I think about it, right? Whatever it is that you’re going to do is also going to take some ownership back in your life. It will live, take some, some space in your head and
Donovan Gilbert (24:15)
Mm-hmm.Micah Johnson (24:25)
your time. it’s being aware of it that, okay, if I’m going to do this, I’m choosing this and this is how I want to do it. And that’s where when I was coaching folks in real estate to let them know, remember why you do it’s for the hard days. When the days that come around that would none of us enjoy, if you’re still building to that thing you’re trying to build, it makes it way more, not just enjoyable, I’d say, but you become more durable.the way you process the problems and how you go through it. doesn’t become crisis. It becomes like, okay, problem solving.
Donovan Gilbert (24:51)
Air.And not only not only
starting, but like during the process, there was many years in there, I’d say there was a good four or five years where we were working solely to pay off our debts and our negative problems we had. But we saw that it was we saw that it was materializing into and we saw that these values were going to go up. So there are times that you got to just kick back and work and maybe you’re not making a lot of money, but you see the bigger picture on it.
Micah Johnson (25:22)
Right, right. And that’s where each of our journeys don’t get hung up. If you’re listening to this on again, the guru who says they’re doing everything and making all the stuff, your journey in real estate will never look exactly like someone else’s. They’re not dealing with the sellers and buyers and team that you’re dealing with. You’re going to have your own version. So that’s where the comparison game’s not really helpful in this industry. If you’re going to compare anything, compare process, compare strategy, understand the how and the mechanism. And then you can decideis that the way I want to do it? Because that’s where it really starts to become repeatable, right? We’ve been doing real estate a long time. People have been doing the processes a long time. It’s not that we invented new processes. We just find the one that jives with us, the one that’s like, okay, that’s the one I want to keep repeating.
Donovan Gilbert (26:08)
Yep, agree.Micah Johnson (26:11)
Donovan, man, I really appreciate your time today, your story, your perspective. Thanks for coming on. For those that are listening, if they were interested in finding more out about you, possibly reaching out, what’s the best way to find you?Donovan Gilbert (26:22)
I don’t really have much of a social media presence. on LinkedIn. You can find me there. If you want to email me, can email me at [email protected]. ⁓ Yeah, so that’s how you can contact me.Micah Johnson (26:35)
Excellent. Well, thanks for sharing that. For those listening and watching, we’ll make sure that you have Donovan’s contact info in the show notes. If you’re wanting to hear from somebody, talk to someone who’s been through it, lived through the cycles, been through the hard parts, reach out, touch base with them. I’m telling you, information in real estate is the most golden thing you can get to help you be successful in what you’re trying to do. Again, Donovan, thanks for being here. Appreciate you, I think we need more folks out there doing it like you.building a real business, designing it around the life that you actually want. So great work there. Again, for those listening, if you got value out of today’s episode, please like this episode, share it with someone else you think you get value out of it too. If they’re thinking about real estate and different parts of it, please subscribe to the podcast. We appreciate everybody that does. Thanks for following along with us. We have more conversations coming out with operators just like Donovan. We’re out there building a real business, living the life that they want. So thanks for joining us.
We’ll see you on the next episode.
