Like a metal building , is like a pre-assembled Lego set , like when you get the package there's directions how to put it up , kind of like a Lego set , and it's not very hard to put up . Honestly , you can find a metal erection crew pretty easily .
Speaker 2So the big question is this how do real estate investors who don't have a ton of free time , don't have access to off-market deals and didn't start life on third base , how do we conservatively grow our real estate business to support our families , finally leave the corporate rat race and build a legacy ? That is the question . This podcast will give you the answers . I'm Ed Matthews and this is Real Estate Underground . Greetings and salutations , real Estate Undergrounders . It is Ed Matthews with the Real Estate Underground .
Speaker 2Thank you so much for joining us again today and making us a part of your day . For those of you out there who are getting value first off , thank you . I'm grateful for all the listeners . I'm grateful for the emails and texts and I love the ideas and the concepts and the other guests that you are suggesting , so keep them coming . Thank you very much for that that you are suggesting , so keep them coming . Thank you very much for that . Also , if you are new to the show and you do get value , I would be very grateful if you follow us , because that helps us grow .
Speaker 2So with that , let's get into the show . With me is Alec McElhaney , and he is the CEO of Landplay , one of the reasons that I love having guys like Alec on the show is multifamily . In a lot of markets it's played out , at least for a little while , and so active investors are dry powder on the sidelines looking for other really interesting asset classes , and Alec has a really interesting and thriving company that as soon as we discovered him , we had to have him on the show . Alec , welcome to the show and thank you very much for joining us . For those folks who haven't discovered Lay or you , why don't you tell us a little bit about who you are and what you do for a living
?
Speaker 1Yeah , my name is Alec McElhaney . I am a FlexSpace developer and I'm doing my first retail and medical office project as well .
Speaker 2Okay , cool . Is that the passion project you talked about when we were getting ready to press record ?
Speaker 1No , it's actually a FlexSpace development , but it's going to be on 35 and I'm going to build the biggest sign on 35 . So I'm excited about that .
Speaker 2We'll get into that in a few minutes . So let's talk about FlexSpace and why it's an interesting asset class . What drew you to get into that business ?
Speaker 1Yeah , I was doing industrial value add . Interest rates were coming up . This was a little bit after COVID and it was a little bit harder to buy an asset and stabilize at a higher value as cap rates were coming up . I met Guy at a conference . He was building what was called FlexSpace . I didn't know anything about it and I just looked at the numbers and I'm like , well , this makes a lot of sense and the margins on it are good enough where you don't have to really worry about higher interest rates Okay .
Speaker 2All right . So define flex space for me Are we talking about , because it's not quite industrial right and it's not storage right . So how does flex space fit into the marketplace ? Flex ?
Speaker 1space is like a hybrid of warehouse and office space , like light industrial office space and just depending on what the tenant wants we can build them out a little bit more office , but generally we stick to 10% office , 90% warehouse . Generally flex space have smaller bays like 2,000 to 4,000 square feet , but we can move bays around or the mizing walls to have bigger or smaller tenants .
Speaker 2And so with regard to the space itself . So you know , when I hear office and garage or warehouse , I think contractor garages , right . So is that a classic use case ?
Speaker 1That's great . Yeah , exactly , that's a great type of tenant . So down in New Braunfels is where I have one of my projects . Like when you think of like flex spaces , metal warehouses , you think of blue collar , like they're not businesses that are making a lot of money . But one of the tenants down in New Braunfels he makes all the bingo chips
in America and he makes millions of dollars each month and he rents out a small space to package his bingo chips . Even though they're smaller type of tenants they could be doing very well . Plumbers and electricians and HVAC guys are doing pretty well right now .
Speaker 2They are yeah , and some of the wealthiest guys , some of the guys that have the biggest boats I know are HVAC electricians and plumbers . So there's that which comes in handy because I don't have a boat . I have friends with boats , so it's a lot more fun .
Speaker 1I bring the beer and the food and the building . I'm going to make you tell me all about the building and then it's a rental or building as one . But we do condoize the units . You can sell at a higher price per foot . If you do sell it to a condo buyer , it could be an investor or it could be somebody with an SBA loan , like a business , who wants to have their own unit and maybe the unit next door that they rent out and further expand . So it just increases the buyer pool for it .
Speaker 2And so of the units that you're developing right now , are there any of them rentals , or are you building them to make them condos and sell yeah ?
Speaker 1I'll condo-ize it because it's not very expensive to condo-ize . But I would love to sell as condos . But I'm just performing like worst case scenario , like we can only rent it out and we'll just sell the whole thing once it's all done .
Speaker 2So what's your hold period on a project like your typical project ?
Speaker 1So the metal buildings go up pretty quick . Actually , you can have them go up in about three to four months and then site works about two to three months , depending on how big your site is . Three to four months and then SiteWorks about two to three months to be on a bigger site . Months you're operating and as long as you're in a market that needs a space , you can lease it up pretty quick .
Speaker 2Yeah , that was one of my other questions . How do you know if a market is right for this kind of building .
Speaker 1Yeah , and this is a little trick that I want to give to investors out there . I think a lot of people like you mentioned multifamily . A lot of people see what other developers are doing and hear about these mindset conferences and think that's the thing to do . You want to do the opposite of that . You want to go straight to the source and figure out what the numbers are . So I'll go to a leasing broker and figure out what like actual vacancy is . So , for example , like a office vacancy in Austin , let's say it's around 20% . I probably don't want to be building too much office , but if it's flex space and it's like 2% vacancy , that's a great vacancy . That means I can build something and I could probably lease it up a little bit quicker .
Speaker 2Yep , and so when you are . Obviously , adoption and vacancy are huge metrics that are easily attained through a good broker . In terms of the size , the scope , how many units is it ? Just hey , we're going to put as many units as that five acres is going to allow , or is it like ? What is the thought process in terms of how you're approaching these development engagements for projects ?
Speaker 1Yeah , that's a great question . So I think the time to maximize a site , to put as much flex space on a site , that time has passed . A lot of markets I'm sure you could find markets where that still works but I see a lot of that product that they can see starting to come up and I see a lot of projects going up like that . So that's a product I don't want to get into . I'm seeing more on a niche type of flex space . Let's say I find a five acre site and I can put 70,000 feet on there . I'd rather put up 40,000 feet and then have a two , three acre outside storage lot . I'll be able to rent it out a lot quicker and get higher rents Okay .
Speaker 2And so , when you're looking at the additional 130,000 square feet give or take in terms of that five acre lot , what types of space are you renting ? Are you talking about RV storage ? Are you talking about materials ?
Speaker 1It's a great question . A lot of flex space type tenants actually want a little bit of yard too . So that's if you have a guy who's selling bobcats , he wants a spot to put his bobcats outside and he doesn't necessarily need to pay 15 to 18 bucks a foot to leave it inside . He'd rather pay $1.50 a foot outside . So it's people who want outside storage and a lot of flex space tenants like electrical contractors , maybe even HVAC guys . They generally want a little spot outside the source stuff .
Speaker 2Yep , okay . And so when you're looking at land , so obviously land play being the name of your company . This is all about identifying the right space , right ? What's your process to identify the right space ? And I'm curious , from a zoning perspective , what types of lots are you looking for ?
Speaker 1It starts out with what type of product do you want to build ? So if I want to do a flex and outdoor storage for example that's one of the products I like I will first look in a county or city that's really easy to get it approved . So , for example , out here in Austin there's a city called New Braunfels . It takes about a year and a half . Let's say you identified a piece of land and you started site plans that day . It'll take you about a year and a half before you can actually start building it . And if you go like five miles north up to Como County , that will take around two months to get site plan approved and you get similar rents . So it's like why would you build a really difficult municipality when you can build an easy one ? So first find areas where it's really easy to build and then after that find what the right zoning is . A civil engineer can be helpful for that , or an architect could be helpful for that . A muni code you can look that up online if you want to do it yourself .
Speaker 2And then
after that , yeah , those of you out there having been through this a few times , don't do it yourself .
Speaker 1Hire a professional and then after that , is your site specifically good for it ? Are there any d researches ? Are there any masonry requirements ? Are there any proffered conditions ? There's a lot of things like and that's one of the biggest risks I find with the piece of land are like these little hidden things that you don't really know about the land that might not come up in the title commitment .
Speaker 2Yeah , we're talking deed restrictions is usually a big one , but are you talking about environmentals and things like that as well ?
Speaker 1Like a phase one . I've never had an issue with phase one or environmental issues , but if you're near a gas station or near what is it ? Laundromat Tiff yeah , you want to stay away from those . I did look at a site that I wasn't interested in once . That was a garbage disposal site .
Speaker 2Come to find out Are you looking for high traffic areas , low traffic areas , do you not care ?
Speaker 1Yeah , because I want to do like a . I feel like a lot of the flex space is starting to get overbuilt in the low traffic , like out in the industrial park areas . I'm targeting areas with very high traffic that should be a retail site but might not have sewer or might something else with the land where you can't put retail on it necessarily . So it's a great retail site but I can put the flex outdoor storage products .
Speaker 2Why wouldn't it be an ideal retail site ? You said something about septic .
Speaker 1Yeah , the site in New Braunfels or in Como County that I have . That site would be perfect for retail . It would get great rent for retail . But there isn't enough sewer for the site . There's a package plant in the back for housing development that is shared for the entire area so I can tap into that , but I only get like a certain amount of sewer credits . So that's not enough to do area . So I can tap into that , but I only get like a certain amount of sewer credits , yeah , so that's not enough to do retail , which is a little bit more sewer heavy . So I'd have to do a flex project .
Speaker 2All right . And so when you're looking at retail , for instance , you're talking potentially like a restaurant or something like I use , Like a strip mall or something . All right . And so when you are , you find a lot , you get the approvals . Are you having an architect design each and every one of plan ? It is really helpful if you stick to one size building and just cookie cutter it that does save a lot of money and your architect will love you for that Brain damage , it becomes okay .
Speaker 2And the metal building company that you work with local , or are they somebody that you've sourced and are national , international ? You flying this stuff in or boating this stuff in from China ?
Speaker 1Yeah , no . So I would say away from the Chinese metal buildings . And you can find them pretty cheap and I don't know how terrible to back that now , but you can't find them cheap out there . But let's say it's missing a part or a part breaks upon delivery . Yeah , you can take for them to send that back over . And what back and forth process ? Is a factory like reputable Find these or will they give it to you free ? So I wouldn't get your metal building from there ? There's so many things wrong . I can go with the metal building . I'd get that from american company corn . So it's a pretty well reputable company and I have a guy . He's a subsidiary of cornstone and if you order in bulk he can generally get good prices on metal buildings . Okay and just .
Speaker 2And just out of curiosity and give me a range . I'm not asking for the missile secrets . What's it cost to build separate from land ? Just the actual construction ? What's a per square foot number ? That is ?
Speaker 1If you talk to a GC , they'll tell you 120 a foot . If you build it yourself or have a really good GC that does flex space , you can build it for cheaper .
Speaker 2Actually , let's talk about rent first and then we can talk about selling . So in the markets you're in , what are you able to rent per foot ?
Speaker 1It depends on where . If you're in downtown Austin , you might be able to get north of 25 bucks a foot and if you're out in so the county I'm in Como County I would say flex rents are around 14 bucks a foot . If you're not on 35 , it's not as big as 95 , but it has about half as many cars going up and down it does 95 . Up to Connecticut it does . Yep , okay , yeah , crazy . But in Florida , yeah , but yeah , there's around a hundred thousand , 150,000 cars going by every day . I can get up closer to 19 , maybe 20 bucks a foot for the front buildings and the ones a little bit behind it . I'll probably get closer to 17 bucks a foot .
Speaker 2That's really good . And then when you go to sell , obviously you're selling the whole building right . So what's that look like in terms ? Of what are you getting per foot or is it per unit ?
Speaker 1I don't even know how they're priced , to be honest , yeah , and cause I have a little bit of outside storage , it'll increase the price per building footprint but I'll conservatively perform a 250 a foot for the flex space or for the stuff I'm selling , I think it'll be probably closer to 270 a foot .
Speaker 2Now I know why your investors are so happy . Yeah , interesting , yeah , interesting . Okay , I'm curious about the buildings themselves , in terms of maintenance and all that . You're only owning it for two years , probably not a lot breaking , and also there's not a lot of moving parts . We're talking about maybe a bathroom , maybe a kitchenette , and a warehouse .
Speaker 1Yeah , it's so much easier to build than a house . A metal building is like a pre-assembled lego set , like when you get the package there's directions how to put it up kind of like a lego set and it's not very hard to put up .
Speaker 2honestly , you can find a metal erection crew pretty easily do you ever thought about doing it , bringing that in-house or is it just easier to outsource it to another company ?
Speaker 1I feel like it's I could probably do it in-house , but I don't think I'm doing like I would need projects going like all the time and maybe if I started a company where I was GCing for other people then I would probably think about that . But I feel you can find a lot of subs . You do it for a great price , even a lot cheaper than what GCs will quote you .
Speaker 2All right , hey , so we're about 20 minutes into the conversation . Why don't we move on to the lightning round and then the final five and then we'll land this plane
? All right , Cool . So I'm always interested in . Obviously you're doing very well . I would assume the bills are being paid and the mortgage is taken care of . If you have kids , the college is probably well on its way to being taken care of , Cars are paid off all the good stuff .
Speaker 1And yet you still get up and go to work on Monday morning . So what gets you out of bed ? What is that thing that drives you ? I met a couple mentors right out of college who had phenomenal companies . They were making a ton of money and they were so young . They're younger guys in their early 30s . It was just so inspiring to see that people do that . There's a quote . I really you're the uncontested author of your life . I really feel that if I write something down , if I say it enough , if I start moving in that direction , I can make anything happen , and I want other people to feel that . I want other people to feel like anything's possible , because it is yeah .
Speaker 2Because it is In order to get where you want to go , you need help , right ? This is a team sport , and so I'm curious about the mentors in your life over the years , and , specifically , I'm curious about the best advice you ever got and who gave it to you .
Speaker 1That's a great question . The best advice I ever got was bigger is not harder , it's just bigger . I don't remember who gave that to me Right when I heard that I'm like that is so true Doing right . When I heard that I'm like that is so true doing a 10,000 square foot flex space development , I'm probably doing 250,000 this year . It's probably gonna be easier for me to do 250,000 than that 10,000 the first time , like 20 square feet yeah , square feet . So it's not harder , it's just bigger . That's all it is , that's also . I heard that entrepreneurs are really good at tricking themselves , that things are easy and then they jump in and just figure it out . So it's a great .
Speaker 2Really Okay . When you've burned the boats and the water is right at your eyeballs , you tend to figure it out Exactly All right , and so I also think that thank God for mentors , but also thank God for mistakes . Fundamentally believe we learn more from our mistakes than from our successes , and so I'm curious about a decision you'd love to have back over the years . What was it and how did you think it through and how'd you recover if you were able to ?
Speaker 1Yeah , I'll go with this one . The first investment property I bought , I think I was 23 or right out of college . I bought a duplex right when COVID happened . I overpaid it for it . I paid like 5K over what I probably should have paid for it .
Speaker 1I mentioned this mistake for two reasons . The first reason is you have to really know what you're doing . A lot of risk in real estate is not knowing what you're doing . If you actually know what you're doing , it could be less risky than a nine to five job . The second lesson from this is it's okay to make mistakes and it's going to be fine , and especially with real estate , just hold it a little bit longer . So with this property , I just wanted to get into something . Like I was just so tired of sitting in my butt like watching people be successful on YouTube and I wasn't I bought it and I just had to hold it a little bit longer and after the debt was being paid down , after prices kept going up , like I still made a profit when I sold it . Time does heal , that's for sure . Yeah , it's good to make mistakes . Go make mistakes , do it .
Speaker 2Now it's the . Somebody once told me you can't make an omelet without breaking eggs . So yes and sure , you're constantly taking in information in terms of books or podcasts , or however you do that . So I'm curious what is the way that you learn , like , how do you ? What are the tools that you learn ? Do you read books , do you watch podcasts ? Do you listen to or watch YouTube , and , specifically , what authors or creators are you paying attention to these days ?
Speaker 1Yeah , I just want to encourage a lot of investors and entrepreneurs who are listening to this . I think a lot of us didn't do well in school because we were kinesthetic learners . We learned by doing . If I don't know how stormwater management works , go talk to a civil engineer , and that is the best way to learn . That's way better than YouTubing things . Go in person , go talk with them and take action on it . That is the best way to learn , in my opinion , and a lot of the real-time information .
Speaker 1It's going to be a while before that's uploaded and made like very popular information . Like when
was the best time to get a multifamily ? Probably 2015 , and it probably wasn't very easy to find on the internet . Multifamily was something you get into the way to know . That was like actually talk to brokers and see what the demand was . Yep , right on For good resources . I think I actually really like chat , tpt , cloud , like any of the AI tools , because it might not be accurate information , but it gets you the context to know the right question to ask when you get to the place to ask those questions .
Speaker 2Gets you 80 plus percent of the way there .
Speaker 1right , you still got to dig deep , but what friend do you know who knows who's 80% right ? That's great , those are great odds .
Speaker 2I'm married , so I'm never 80% , but , and that just means that my wife is very smart . That's it . The last thing I'm curious about is how you define success in your own life . What does that mean to you ?
Speaker 1Yeah , if I think we all had a taste of being really successful when we were kids , when we woke up very excited about the day that we could create anything and we could imagine anything and believe anything was real . And I believe going back to that version of yourself who's a kid , who can believe anything is possible and actually make it happen , like that's what excites me .
Speaker 2I love that . All right , my friend . I've really enjoyed this conversation . Congratulations on one hell of a business that you've built . When you're not talking about FlexSpace or anything real estate related , what do you like to do for fun ?
Speaker 1I don't really have a lot of fun outside of . I work out a lot . I'm getting into eating healthy yeah , working out , but I like what I do and I also love vision . I love mindset , I love imagining the future , I love learning about new businesses . That's what really excites me Awesome .
Speaker 2So if people want to learn more about you or one of your projects , what's the best way to get in touch with you ?
Speaker 1Yeah , lamplaycom , and it's landplaycom . Or on LinkedIn . If you Google Alec McElhinney or Lamplay , just shoot me a message .
Speaker 2Would love to connect with you , great Alec , mcelhinney or LandPlay , just shoot me a message . Would love to connect with you , great Alec . Once again , congratulations on an awesome business . Thank you for letting me pepper you with all those geeky questions and look forward to seeing your business continue to explode . Congrats , thank you . This has been the Real Estate Underground . Don't forget to rate , review and subscribe . It helps us grow . Until next time , undergrounders , remember your real estate journey begins with a simple step forward . Now get to it . Bye for now .