13. Jumpstarting Your Journey in Real Estate Development

Debunking myths and lay out the ground work for success in this industry. No need for a degree, license, or a ton of money to get started. In fact, the most crucial aspects are a clear vision, the right knowledge, and a team of professionals to help you navigate the process. 

Ever wondered how to approach project budgeting and financing without breaking the bank? We tackle these pressing issues head on, dissecting the importance of meticulous budgeting, identifying potential profits, and exploring various financing options. We also delve into residential development, highlighting the importance of data-driven decision making, the art of flipping projects to build nest eggs, and managing expectations effectively.

As we venture deeper into the world of real estate development, we uncover effective strategies for identifying potential investors and partners. We echo the importance of being proactive, leveraging your team's experience to secure loans, and being prepared for the unexpected. Reflecting on the lessons from our first major development project, we discuss how these nuggets of wisdom can be applied to future ventures. Whether you're an aspiring developer or a seasoned pro, this episode is packed with insights and practical guidance to navigate your journey in real estate development. Join us as we uncover the secrets of the trade!

Stay connected with me for even more valuable content and stay in the loop with the latest trends in the world of real estate. Your journey to becoming a real estate pro starts here.

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Transcript

Getting Started in Real Estate Development

Speaker 1 0:00

The thing about a loan is if this is your first project . Usually the main question that a traditional bank is going to have is you have any experience in this , have you ever done this before ? Because this can be kind of risky if you don't know what you're doing . And if you say , yeah , I've never done this before , the chances of them actually giving you the loan is really slim . Just because you have 5000 square feet in a lot , that doesn't mean that all of that space is usable , because when you go to the city for permits , they have city ordinances where they say , okay , when you're having a lot , the driveway needs to start this amount of feet . Back from the street , the sidewalk . All these type of ordinances come into play that can take away from your usable space . Not only that , they have something called the easement . So utility companies , water companies , gas companies , they have different lines that can run underground on your land and , depending on the location and where it is on that land , it could run right through where you're trying to build . And so this lot that you thought was a nice square lot that was perfect for building a duplex , it's no longer that perfect .

Speaker 1 1:17

What's up , everyone , you are tuned in to the throne . I'm your host , natasha LaQuinn , the queen be of real estate , and I have a special treat , and I say that every single time because every single time is special . But I get asked this particular question a lot and I figured you know what . Instead of just having to answer this question individually each time , I'm asked how about we discuss it today ? And what is that question you may ask ?

Speaker 1 1:50

As a real estate broker and developer , I'm always asked how did you get started in development ? What are the basic steps ? What do I need to know ? How do I do it ? How do I overcome the obstacles to just getting started ? I don't have the experience or the credit or the money , or I have one without the other . What are some tips you can give me ? And so the thing about me I'm not a gatekeeper , right , if I know . You can know I'm very approachable in that matter , and so I always enjoy sharing knowledge , actually , but there's only so much I can share when it's just on a one-on-one basis , and so I'm thinking today we're going to spread the love on a larger platform so that anyone that wants access to this information can have it .

Speaker 1 2:38

Now . I only have a certain amount of time today , so we won't get into the real nuts and bolts and all of the layers of development , but we're really going to start at the basics . So today it is going to be the beginner basics of real estate development right , how to get started . And because I think there's a misconception that you need to have some sort of license or degree or a whole lot of money or already on the land , and it's just not true . And so my goal today is to help break down , I guess , some of those mental barriers or those mental blocks that may be in the way . It's not as complicated as it seems , although you know there's some different layers and moving parts to it , but it's not as difficult as it seems , especially if you have the right flow down right . It's all about order in development , knowing where to start , what the process flow looks like and the right professionals that you need to tap into along the way . As long as you know those things , you'll be a OK .

Speaker 1 3:44

The cool thing about real estate development and the part that I enjoy the most is being a developer is like being a choir director . You don't have to know how to sing , you don't know how . You don't have to know how to play the drums . You don't know how to , you know , do play the piano , you just have to direct the singers and the band players . You don't have to know how to do those things . And so when I first decided that I wanted to cross over into development , I was coming from the traditional side of real estate , so I guess that was a good thing . I still had exposure to the real estate industry in general , so I was familiar with just the concept of real estate . I was familiar , you know , with different terms and things like that , but it was still . It was still new . And so whenever you go into something new , you know it definitely is scary .

Speaker 1 4:38

And my initial thought was all right , tasha , you want to be a real estate developer ? That sounds complicated , you need to go get a degree . So I started researching degrees in real estate development . Prayer View A&M University had one . I mean , there were a few different universities , if you want to be technical , that had this program and I started looking into different ones . And okay , how long is it going to take me to figure this out and figure that out ? Well , by the time I looked into it , it was going to be like maybe six or seven years into the process of me obtaining a degree in real estate development , and when I start looking and researching , I realized that , well , wait , a minute , in development you have the architect and the engineer , then the builders , the structural engineer , right , the civil engineer , the lender , but you don't have to have those licenses yourself , tasha . So I'm thinking well , wait a minute . All the key players that have to give you the professional services to become a developer , they're the ones with the degree . You just have to be creative in finding the deals and having the vision right . You're the visionary behind it all . You are determining what you want to see being built . What areas do you think need redevelopment ? Do you want to create housing ? Do you want to create multi-use commercial spaces ? It's all up to you on the vision that you have , but it's up to the team members that you coordinate and put together . It's up to them to provide the professional services and have the degrees to make it happen .

Speaker 1 6:22

So , of course , me being me and being impatient and I think I talked about this in another episode of how I like microwave results I was like listen , I enrolled . I did enroll back in school and it was about maybe 30 days into it I was like no hell , no , I don't want to do this . I want to actually do deals . I don't want to go to school , so how do I figure this out ? And so that's where my journey began in real estate . Development is wanting to find , I guess , the I won't say loopholes . But I wanted to find how do I get started in this right now without having to go to school before . And so I just started partnering up and teaming up with the industry professionals that play a part in development , and then I trusted them to kind of guide me along the way and I did my first deal without a degree , and it was up from there , because it was almost like I'm not going to say the school of hard knocks , but it was , it was learning on the go . I got my degree by actually , I got a street degree , basically , or an experience degree . I went through the process and learned all I need to know just by doing the deals myself , and then I packaged all that information and put it in my back pocket , and the next time I ran into another deal . I'm like , oh well , I remember that I had to do that the last time and I was like God , let me reach in my pocket and pull out what I've learned along the way . And then eventually I mean I'm thinking well , dang , I've accomplished projects . Now where , if I would have went to school and let me just say this , I'm not discouraging you from going that route and obtaining the degree and development if that's what you want to do , but I'm thinking , I was thinking well , the time that it would have taken me to get the degree . I've already done two or three projects by now . So let's get started on this . Let's talk about If you're an individual that has been thinking about real estate development and you want to develop and build your first property , where should you start ?

Speaker 1 8:33

Now , the question you have to ask yourself , number one , is are you buying the lot ? Do you have to buy land or do you already own the land ? Either way , there's something that you need to do first . Well , again , whether you need to buy the land or you already own the land , there is something that you need to do first . And what you need to do first , you need to determine the usable space of that land . Okay , because you might say , hey , I have a 5,000 square foot lot that I've inherited from my grandmother and I want to build three houses on it . Well , wait a minute , you may not have the usable space for that , you know . Or hey , I want to build . I have a 5,000 square foot lot and I want to build a duplex on it .

Speaker 1 9:32

Well , what we need to figure out is , just because you have 5,000 square feet in a lot , that doesn't mean that all of that space is usable , because when you go to the city for permits , they have city ordinances where they say , okay , when you're having a lot , the driveway needs to start this amount of feet . Back from the street , the sidewalks , all these type of ordinances come into play that can take away from your usable space . Not only that , they have something called an easement . So utility companies , water companies , gas companies , they have different lines that can run underground on your land and , depending on the location and where it is on that land , it could run right through where you're trying to build . And so this lot that you thought was a nice square lot that was perfect for building a duplex , it's no longer that perfect when you look at the survey , because the survey shows that there's this large easement running right through the middle of the property and you cannot build a permanent structure on top of those type of easements .

Speaker 1 10:46

So in order to determine the usable space for your lot , the first thing , most important thing , is to obtain a survey . A survey is black and white document and a surveyor will go out to the property and they will actually measure and look at your boundaries . They'll determine where your property line ends and stops , as it begins and stops , as compared to your neighbor . It'll tell you about any easements , utility easements and things like that that may be running across the property or to the back of the property . And once that survey is complete , it can also identify if there's nearby utility so that you have access to water lines and electrical lines and things like that .

Speaker 1 11:33

But the most important part that we're looking for is if there are any restrictions or easements running through the property that will stop you from building what it is you think you can build . So once that survey is done , you can take that survey and you can show it to . Even your architect or your engineer can look at it and say , oh , this is a perfectly open lot , perfectly square lot where , yeah , there's some easements on it , but the easements are to the back of the property and that's not where your structure is gonna be . Anyway . Your structure is gonna be towards the front , so that easement can stay in the backyard where you're not building anything across it , and this is actually a good lot . Or they can say hey , you do have an easement , it's a little further up than we'd like , so we're gonna have to , I guess , maybe minimize the structure that you can put there . So instead of a 3000 square foot structure , we can build you a 2400 square foot structure .

Speaker 1 12:35

Now , the reason that is important is because the difference between a 2400 square foot structure or 20 , we're gonna talk in terms of a duplex just because we're going to determine that you wanna build some type of multifamily investment property the importance and the difference of square footage is that a 2400 square foot property versus a 3000 square foot duplex , it makes a difference when it's time to resell it and what you're going to determine your profit to be , because obviously and it depends on the area and it depends on the research after we do that but the 2400 square foot property is more than likely going to sell less than the 3000 square foot property . So once you know the size of the structure that could be placed there . You know the size . Now you can approach a builder , a general contractor , and say , hey , I've been speaking with an architect . I have this lot . He told me I can build a 2400 square foot duplex here . Can you give me some preliminary numbers as to what that may cost me ? And that's gonna be important because before you even decide to do the deal , before you even pull the trigger , before you even decided that this is gonna be the deal that you take on , this is the type of research that has to happen first . So you go to the builder and say can you give me cost per square foot or some type of preliminary bid as to how much this 2400 square foot duplex would cost me to build ? Okay , so let's backtrack . You have identified the lot that you think you wanna build on , you've ordered a survey and we've had our architect team or either our civil engineer to review the survey and to tell us what the actual usable space is and what size structure can go on the property . Once we know the size of the structure , we can engage with a builder or general contractor to get some preliminary pricing as to how much this size structure would cost us . Following .

Determining Project Budget and Financing Options

Speaker 1 14:50

Okay , the reason why doing all these steps are important and the reason why getting these preliminary costs in line are important is because the cost is what determines your project budget . It's what is known as your expenses . And once you identify all of the expenses of the project and then you compare it to the potential income or how much once this structure is on the ground , how much can I resell it for ? That's where you get to realize if it's worth doing the deal or not , because this is how we figure out what our profit is going to be . So if you go and buy a lot just because , oh , I grew up in this area , or a lot of my homies stay over here , or my grandmother , my family's , from the areas I think it'd be real cool to build in the same area where my family lives , can't make those kind of emotional decisions in development . They all have to be based on facts . So once you get the cost or preliminary budget together that shows you your expenses associated with the project , you can have a real estate professional to tell you hey , what are 2,400 square foot duplexes selling for in a particular zip code ? Now you can kind of have an estimate of the potential profit that can be made , and that's when you determine that it's worthy enough to pursue the deal .

Speaker 1 16:24

Now , another reason that it's very important to start here first and to get some type of idea of the budget is because without the budget , you can't go after any type of financing . Whether you're gonna get , whether you're gonna seek to get a loan , whether you're going to borrow , I don't know . Maybe you have money in your 401K , maybe you have a friend or a family member that has some money that they be willing to share with you or partner with you on as an investor . Their main question is gonna be well , how much are you looking for , how much do you need ? So it's very hard to approach a lender or anybody in that situation without knowing what kind of money am I up against ? So determining the budget will help you lead into your next steps . Okay , do I have the capacity to find $200,000 from somewhere ? I'm just using that as an example . It can cost more than that , but just using that as an example .

Speaker 1 17:26

Let's say you need $200,000 to get the deal done . You need to know that's what you need , because if you approach a lender and a lender tells you all right , we can get you a construction loan , but we require 30% down . Right , if your budget is $200,000 and the lender is going to require 30% down , that means you gotta figure out whether or not you have access to $60,000 . Make sense . So without knowing how much you're looking to borrow , how much you need , there's no way to go after the money . So let's say it's $200,000 and you go to the lender and the lender says , hey , we can get it done . You're gonna need $60,000 in down payment . We'll finance the rest , but you need to come up with 60 .

Speaker 1 18:15

Well then , that takes you to the next level of all . Right , I have a lender that's willing to potentially loan me $200,000 , but they're requiring $60,000 in a down payment . Do I have the ability to find $60,000 ? And maybe you do . Maybe you have your primary residence where you live and you can take out a home equity loan . Again , maybe you have a friend or a family member that's been looking for an investment opportunity and you reach out to them , or you have other accounts and 401ks and things like that that you can tap into as a resource . But you need to know what that dollar amount looks like .

Speaker 1 18:56

Another thing maybe , maybe you don't have access to that much . Maybe there's , you have access to a little bit , so maybe you need to go back to the drawing board , go back to the builder and say , yikes , okay , I have a lender that's willing to give me the money , but 200,000 budget is too high . They want 30% of that , which is 60,000 . I don't have 60 , I only have 40 . So can you run the numbers and tell me how to get that price down ? So maybe they say , all right , we can get your budget down , but that's going to eliminate the square footage . So we're gonna have to bring the square footage down on what you build , because typically on a building project it's price per square foot . So maybe the way you get the budget down is to bring down the square footage . However , keep in mind , bringing down the square footage yeah , it will bring down your budget , which will also bring down your portion that you would need to bring on the down payment of the construction loan . But what it can also do , if you bring down the square footage of the unit that you're building , that can change what your profit may be as well , because if you remember bringing down the square footage , those properties are probably gonna sell for less and you may not realize as much profit as you thought you were going to . So those are some things to keep in mind there , but determining the usable space , figuring out a preliminary budget and what your cost is looking like and then going after , or even just thinking about your current resources , your current network and where is it that you think you can get the funding from ?

Speaker 1 20:30

Now I know what a lot of people think when we talk about , when we talk about development projects and obtaining a loan . The thing about a loan is if this is your first project . Usually the main question that a traditional bank is gonna have is you have any experience in this ? Have you ever done this before ? Cause this can be kind of risky if you don't know what you're doing . And if you say , yeah , I've never done this before , the chances of them actually giving you the loan is really slim , and so a lot of first time developers and even myself , we use what they call hard money or private money lenders . Right , so it's not your traditional banks . They're the smaller , independently owned or privately owned lenders where their interest rates are much higher . So you know the cost to get the money is higher , but there's not as much red tape and requirements , and the thing about it that you have to remember is all right , interest rates may be extremely high , they may require more money down , but it's a foot in the door , it's your stepping stool to get to the next project . So even if you have to use a hard money lender with a higher interest rate to get in on your first project now , you can write this off as an experience under your belt and then maybe , after the second or third one , you have enough experience now to maybe go after better

Key Considerations for Residential Development

Speaker 1 22:00

terms .

Speaker 1 22:00

But what you also wanna keep in mind is that when you're doing a development , especially residential development I'll speak to residential right now is you're not planning on keeping the property long term . So timeline is very important . You're looking at getting in and getting out , and that's , of course , the larger scope , the project . You know the longer it takes , but we're talking about one lot and one structure . So one lot maybe building one duplex , or one lot and building one house . We're looking at the timeline because we wanna get in , build and flip it out as quickly as possible and so , yeah , interest rates are a little high , but it doesn't matter because you don't plan on holding onto it long term , you just wanna get your foot in the door and get the deal done . And then what flipping it does for you is not only is it increasing your experience , it's increasing your experience , but it's building your nest egg . It's building up your capital , because that first one , you may have needed a friend or a family member or 401K or something like that to help you with the down payment . But as you flip and sell your first development , and then the next one and the next one , you're stacking up your own nest egg to where you don't have to go out and maybe borrow the down payment money anymore . You have it on your own to be able to do that .

Speaker 1 23:20

So one of the questions is well , how do I determine where to build ? And as we talked about . Well , I touched on it just a little bit earlier when I said when you're determining your real estate development project , you don't rely on emotions , you don't rely on the fact that your grandmother lives on the next block and this is where you grew up and you think it'd be really cool to build housing in the area where you grew up , because there's an emotional attachment there and it just sounds good to do . Just sounding good to do is not enough . When you're in any type of real estate investment , the facts have to make sense . So before you start any real estate development project , the most important part is the research process , and it's also what we call due diligence . We can also call it feasibility . We are studying , we're pulling up different facts and data about different areas and what those numbers look like , because we're trying to break it down and determine where's the action happening , where's the activity for what I'm trying to do , where's the proof that it's working already ?

Speaker 1 24:42

You don't wanna be the first one to go into a zip code where there's nobody else doing it or they haven't done it within the last six months over there , and now you're the guinea pig coming along to build a duplex and hope that it sells . We're not in the hoping business . You need facts and data to show . Hey , in this zip code I see in the last 60 days , eight duplexes have been built and sold . They only stayed on the market for eight days , or the average days on the market between all of them were only 15 days . This is how much they sold for .

Speaker 1 25:19

So you need the facts , and so I just did this for a client this morning actually when I start is and where you would start . You need to like , let's say , you wanna do multifamily , and I just mentioned . I pulled up a list . I said , all right , I left the zip codes totally open and I said show me in Houston and this is just the realtor site that we use show me in Houston all of the duplexes that have sold within the last 60 days that were brand new . And when I did that there were 25 properties that came up and from there I clicked through each one of them , did some data , analyzed the data and I was able to say , all right , out of these 25 properties , they all fall within five different zip codes . So that let me know , out of all the zip codes in Houston and I'm not gonna even lie to pretend that I know how many zip codes there are in Houston , but there are a lot it took me right to the facts of what I needed to know . All right , these are five zip codes where all the action was happening for the duplexes within 60 days .

Speaker 1 26:32

From there I was able to say , okay , in this area and Independence Heights , zip code 77018 , duplexes are selling for 699 over there , but the duplex needs to be at least 3,000 square feet for that to happen , and the lot size was this size lot in order to make that happen . And so from there , I knew off top out of all the 25 , the area where the duplexes were selling the highest , at 699 , was Independent Heights . So my next question was okay , let me go and see how much the vacant lots are in Independent Heights , because you better believe that if the duplexes are selling for higher over there , the lot cost to acquire a lot , to even do this on , may be higher . And so then I researched that and then I say , oh , okay , let's go to the next best thing . There's a next zip code , which was the sunny side area , and I noticed that duplexes over there some sold for 550 , some sold for 515 . What is the difference between the same zip code ? Both of them were duplexes and what's the difference between the one that sold for 550 and the one that's over 515 ? Okay , I see that the one that sold for 550 , the square footage was higher and the one that sold for 515 , the square footage was 2,100 square feet . So in order to get a resale out of it where I can resale mine at 550 , I need to be closer to the 3,100 square foot duplex .

Finding Financing for Development Projects

Speaker 1 28:14

And so you do these different exercises and there's a lot of data comparisons back and forth to determine where the areas where multifamilies are selling , how much are they selling for in these areas . And then the second layer to that is okay , I know how much we can sell them for , but we need to find what type of lots are available for me to be able to do this . Are there lots available and how much are the lots selling for ? Because with that information remember , that's when we start to build our budget .

Speaker 1 28:45

So let's say , out of those five zip codes I realized doing research , I said , okay , 77033 is the best area for what I'm trying to do right now . This is where I wanna start . Let's start searching for a lot in that area . And then that's when you it's kind of like a filtering process . That's when you eliminate the other four areas and you say , all right , I'm making some progress .

Speaker 1 29:14

I've looked at five different areas that are hot for selling duplexes . I've narrowed it down to one . Let me start my lot search and then you begin the process of identifying a lot , and you do that based on the facts . If you're wondering , hey , I wonder what square foot , what size a lot ? I need to do this look at the ones that just sold , the ones that just sold in the last 60 days in that zip code . What size lots did they sell on ? Was it a 5,000 square foot lot ? And it probably would vary . And so when I look to see , okay , what size lots were these duplexes built on between 5,000 and 7,200 square feet ? So that lets you know . All right , let me start looking for a lot in this zip code at 5,000 , between 5,000 and 7,200 square foot and see what those prices are . And so that's where you start and that's kind of how you narrow down the area and do your due diligence there .

Speaker 1 30:15

And remember , it's also okay to engage a real estate agent , a realtor , to help you identify lots . Once you know the area that you're looking in , because you don't wanna get caught up in doing everybody's job , remember , you pull in the professionals that you need . You're not a realtor , you're not licensed . All you wanna develop something . Hey , realtor , I'm looking for a lot in 7,7033 zip code between the sizes of 5,000 and 7,200 square feet , and then you're able to determine the budget and then , as a buyer , when you're the one buying the lot . You don't pay the real estate agent . You're not responsible for paying their commission . The owner of that lot is gonna pay the agent commission for bringing them a buyer . So you need to engage and take advantage of using a real estate agent to help you find and locate your lot , because you don't have to pay them . So why not engage their services Now ?

Speaker 1 31:06

Don't waste their time . Nobody's they're not gonna be out here looking for a property just because you think you wanna do this . It needs to be set in stone that you're actually gonna do it . But once you identified the lot , now this is where you begin the process of eliminating the excuses which in most cases in development , there's three main issues . You've identified the lot , but how am I gonna pull this off ? I don't have the credit to even start thinking about obtaining a lot and a construction loan at the same time . Nobody's gonna fund me . Scratch that mindset . Somebody will fund you , and that's when you start looking for hard money lenders . It may take you having a conversation with six or seven different hard money lenders , but somebody's gonna do it . So don't eliminate yourself or discourage yourself before you even get started thinking that you can't take on a development project or build a property because you don't have the credit to do it .

Speaker 1 32:24

There is a hard money lender . There is a private lender , as long as the numbers make sense Remember , you wanna have that budget together and as long as you can show them the numbers make sense , because they're gonna also ask you . They're gonna wanna know what research you did . You're gonna have to prove to them that the project is viable . So when you approach the lender , as long as they're able to see that what you're saying makes sense , the lot costs this much . My construction costs this much . This is my total budget . My total budget is $400,000 , but I'm able to resell it at 550 and here's my profit margin . Long as it makes sense , why wouldn't they do the deal ?

Speaker 1 33:02

And so a lot of hard money and private lenders . They're not necessarily looking at your credit . They are looking at , number one , what down payment are you putting in ? Do you have skin in the game ? And number two let me see the details of the project and especially if you show them the area where I'm looking to build my duplex , there's seven others that just sold at 550 in the last 60 days . So I'm not pulling this number out of the sky . These are facts . And not only that , there's a demand in this area , because out of all seven that sold in the last 60 days , each one of them didn't stay on the market no longer than 10 days . So , based on the facts , this is a good area . This is a good project . There's a need for this . In that area , the activity is fire and I need this loan . So you have to have those facts . So don't let credit rule you out . Just have your facts together and seek out a hard money or private lender .

Speaker 1 34:05

Maybe credit is in your issue . Maybe you're thinking Tasha , I don't have the credit problem . I'm sitting at a 750 . My problem is that when I approach one of these lenders and they agree to do my loan , they're gonna want 20% down or they're gonna want 30% down . I don't have the initial funds . I don't have the liquid assets to get the loan . I don't have a problem . They're gonna approve me based on my credit , but when they require that skin in the game , I don't have that . If that's your problem , then you need to start combing through how you can overcome that problem .

Speaker 1 34:44

Maybe it's again . Do you have a ? Can you get a home equity loan , and it depends on how bad you believe in yourself too , cause I know getting a home equity loan and that kind of stuff is is can be scary . But how much do you believe in what you're doing ? But where can I get this money ? Looking at my sphere of influence , who do I have around me that would be interested in partnering with me on this ? I'll tell you , guys what I did , I , and that's where the birth of my whole little investment well , I won't call it little , but that's the birth of my investment club .

Speaker 1 35:23

I said , tasha , taking no , I couldn't listen . Not doing my first development project was not an option . I was going to figure it out . And so I'm thinking , tasha , you've been in this real estate industry long enough . You know enough people . Who , what loan officers , have you worked with over the years , that you developed good relationships with your own real estate agents that's on your team that you built a relationship with over time past clients over the years , church members , all these people that you engage with on a normal basis . That trusts you . Why don't you reach out to them and tap them on the shoulder and let them know what you're doing and see who's all interested ? Just just take inventory , just check the temperature around you See what's going on . And I kid you not , I needed $60,000 . And just by tapping into the people around me , I think I ended up with it was about 13 of my closest friends and colleagues , people that I've done business with in the past I think it was like 13 or so and in over , in less than a week , I had over $60,000 .

Speaker 1 36:38

Just by tapping people on the shoulder around me , letting them know now , wait , now , let me say this when you approach people , you need to have your details in order . That's important too , because you can't just say , hey , let me highlight you for a minute . I need you to invest $6,000 . You don't wanna do that . So when you approach people with the opportunity , you need to have your facts straight . You need to have already done your research and said hey , I have opportunity . Okay , I've already done the research .

Speaker 1 37:09

Real estate development is where it's at right now . This market in this particular area of town is hot . I've already done the research on that too . We can find a lot in this area for this . Much Based on that , we can build a 2,500 square foot duplex , and in this area they're reselling for this okay . So our project expenses , take away our project income . This is what we can possibly get . We can split it . The percentage is how we're gonna split it out .

Speaker 1 37:38

You have to paint the picture first and show them what it is you're gonna be doing exactly for them to buy in , of course , but getting very creative and not being fearful . You can't be scared . Either you wanna do this or you don't . And you would be surprised how many people have been looking for things to invest in . People wanna be a part of something greater . They wanna be a part of development

Real Estate Development

Speaker 1 38:02

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Speaker 1 38:02

Development is one of the really cool . I love development and the reason why is one of the coolest investments to me because you literally watch something . You literally watch nothing turn into something , if that makes sense . So , yeah , real estate development is my favorite . You literally watch a piece of dirt turn into framing , turn into a roof , turn into plumbing , turn into electrical wires , turn into paint , turn into countertops and cabinets and toilets and you're like wow . And so it's also cool because you can literally drive by that property 10 years from now and tell your kid I was a part of that , I hope that come into development . And so people actually they're looking for opportunities .

Speaker 1 38:53

You'd be surprised who's right around you and don't eliminate anybody . Don't assume that just because this person doesn't post or brag on social media a lot , that they don't have the resources to help you . You don't know until you put it out there and ask . Or you may reach out to somebody and it's like oh man , I don't have it , but I have a sister that'd be interested in it . You never know who's within arm's length of the ability to help you , so you gotta put it out there . And you'd also be surprised that just because you wanna take on in this real estate development your investors or the people that might wanna partner with you they may be a police officer , like , hey , I don't wanna quit my day job , I'm gonna stay a police officer . I don't have any plans on crossing over to real estate at all , but I like what you're doing . Or I wanna invest . I wanna put my money over here without having to quit my day job . Maybe they're a school teacher , whatever it is that that person does on a daily basis . They wanna continue to do that . But they want to also have their money working for them and be able to participate , and so those are people that you can tap into , where you don't have to worry about going and find the money on your own .

Speaker 1 40:08

So that's the key to how bad do you want it ? And you have to want it bad enough to where you think very creatively and figure out how do I overcome the issues . That's in front of me . How do I overcome this ? Because I know I can get the loan based on my credit , but I don't have the money . How can I get it done ? And at some point you wanting it has to outweigh the fear of you asking , the fear of you reaching out to someone to see if they be willing to invest in your project . You have to get over that part . You wanting it bad enough has to overweigh the fact that you don't like being rejected . You may be rejected by six different banks before one tells you yes and you have to be okay with that . You have to want it bad enough . Now let's say credit isn't your issue , money isn't your issue .

Speaker 1 41:05

Maybe it is the experience . I've never been in real estate a day in my life and I don't have a clue of what I'm doing . Or maybe you have been in real estate , maybe you started off as a real estate agent or a real estate broker like me . So you're in real estate , you're just not on the development side and you're scared to death because you don't know what you're doing . Or maybe you're not scared . It's like I got this , I'm gonna figure it out along the way , but you still don't have the experience that the lender may ask you about .

Speaker 1 41:34

That's when you make sure that you are hiring the right team . That way , when a lender asks , well , who's on the team , who's your development team , you can show them the organizational chart to say , well , here's my architect , he has 17 years of experience . Here's my builder or my general contractor , he has 19 years of experience . Here's my project manager , they've been managing projects for 22 years . So you leverage the experience of the team that you have to bring in to make a project happen . You leverage them . That way , when a lender asks , what type of experience do you have ? Here's my team , here's our experience , and so you don't have to necessarily worry too much about that . So don't start creating barriers , mental barriers that will stop you For every . I won't call it an excuse , because it's a valid obstacle , but for every obstacle there is a solution hanging out there somewhere . You just have to identify what those obstacles are .

Speaker 1 42:47

Also , the key to beginning a real estate development project is getting really comfortable with uncertainty . Things don't always go as planned . So you may think that we're gonna get this done in seven months . Seven months may turn into 13 months . I'll give you my example .

Speaker 1 43:13

On my first project , my first project , my team , the builder that I hired I was told I mean because it should have been an easy project . It was just a 5,000 square foot lot and it was a 2,400 square foot duplex . So ideally it was a simple project . It shouldn't have taken long at all . We're gonna get our permits , we're gonna build . So ideally , looking at it on the surface , it was a simple project that , from beginning to end , from permitting to build maybe six months that's six months turned into a little over I wanna say about a year and a half , a little over a year , not quite a year and a half .

Speaker 1 43:55

And the thing about it luckily and this is key , luckily the investors that were in the background that had helped me come up with that down payment money I needed . Luckily they were people that I trusted and that trusted me and trusted my character , because when six months turned into eight months , and eight months turned into 11 months . That's the worst thing is to have somebody down your back hounding you , wondering if you've jipped them or ran off with their money or what's really going on . Luckily , you wanna pick people that trust you . You wanna be transparent . You wanna keep everybody abreast of what's happening . If you do the go the investor route , because that's trouble too . To have your first real estate project going on , to have six months turned into a year and to have investors going down your back that's not what you wanna happen . But all of the obstacles I can't even count all of the things that happened on our first development project . But we made it through and we all made money . We were in the green , and so what more can you ask for ? I'll give you an example of things that can happen On our project .

Speaker 1 45:06

We started first of all . The permitting process was a beast , dealing with the city getting our permits . That was a doozy in itself , but we're not gonna go there . We finally get our permits . We pour our foundation . We pour our foundation and the city sends the inspector out , cause there are certain phases throughout the development project where you have to get inspections done to make sure things were done up to code . So we pour our foundation and the city .

Speaker 1 45:39

They come out and they inspect it and they said well , wait a minute , the flood control department must have missed this , because this street , this lot , you're in a flood zone and you never went through the flood control department properly . This never should have got . This type of foundation should have not never gotten passed or approved . And because so we had to go back through , they paused all work . We had to go back through permitting to get reviewed again by flood control .

Speaker 1 46:16

After the review , they came back and said due to the location of this lot , we are requiring you to raise this foundation by seven feet . Literally , we literally had to put these large concrete pillars and raise the home seven feet . The home , of course , was so high off the ground during construction I can literally walk back and forth through it . Now , what did that do ? It messed up not only timeline , because we had to come to a screeching halt to go back through review , the review process , but now , when we have to go back and tear up , basically , the foundation that was already laid , we had to backtrack . So we lost time there . Then we lost money , right , because to go and have a company , a commercial company that can take a home that was already starting the process of being built and raise it seven feet was an extra $20,000 . Now , luckily , when we started the project the margins were large enough to where there was still much more money to be made , so that $20,000 hit didn't hurt us too much .

Lessons Learned From Real Estate Development

Speaker 1 47:44

But imagine if we hadn't done enough research and we hadn't done enough in the beginning to know that we had still a nice profit so that if unforeseen circumstances would happen it wouldn't totally wipe us out . We hadn't done that initial research like we could have really been wiped out Along the way . We also learned check this out . When we started building it , we already had a buyer that was interested in buying the property before we even got started on the construction , which was great , and I thought it was great too . Even me , being in the real estate industry , I was like , oh , I didn't think about this . But I was like , oh , it's perfect , we'll go ahead , put the buyer under contract . That way , once it's built , we don't have to go and worry about finding somebody to buy it . We already secured and locked in a buyer .

Speaker 1 48:37

Well , that wasn't a smart move because at the time remember , we do our research and at the time we were able to resell the duplex . When we started it , the resell value was $325,000 . And what I would do is every couple of weeks , I would monitor the market again because I wanted to see what the sales were doing . This was like in 2021 , I believe no , no , no , no , no . Was it 2020 ? I think it was 2020 . Don't quote me on the top , but this is , the area was jumping and so , yeah , it was 2020 .

Speaker 1 49:11

And so what happened was we locked in the buyer right away . It made me feel confident and it made my investors feel confident , because we already had a buyer that was a pre-approved for their loan . They were just waiting on the construction of the property to be completed . So that was a lot of confidence there . But what we didn't realize was that we went under contract for $325,000 .

Speaker 1 49:34

And as I monitored the market , I was like , oh crap , we got a problem . I watched the market go where now the duplex is in that same area , sold for $330,000 . And there was another one that popped up a couple weeks later and it sold for $340,000 . And I'm thinking crap . Another one $345,000 , $360,000 . And it had taken . You know , our timeline got stretched out , and so the longer our timeline stretched out , the more it allowed for market changes and for the values to increase , which usually that would be a great thing .

Speaker 1 50:15

The fact that you're building a property that you thought you could only sell for $325,000 and now you can sell it for $350,000 . Usually that'd be a great thing . But remember , we already had a buyer locked in in contract for $325,000 . So how shady and me , other builders and other developers can do what they want to , but me it's all about ethics , doing what's right and integrity . So I'm thinking this is like an extra $25,000 up in profit that we're swallowing , you know , because we're selling at $325,000 . I can't go back to this buyer and tell him I got to increase the price to $350,000 . Not only that , he doesn't have to agree to it anyway , because he's already locked in .

Speaker 1 50:58

But this is where this is where things got real crazy . By the time our property was complete and ready for a buyer to move in the resale value , the appraisal value on our property was $375,000 . So a property that started off being a resale at $325,000 , just a few months in the game , a few months of delays , and all that $375,000 . And I'm looking at all the profit that we're throwing down the sink at that point , because all of that would have just been icing on the cake . And so , luckily , we didn't do what a lot of other builders were doing .

Speaker 1 51:45

But what I did was we went . Well , I went and had a conversation with the buyer and luckily , thank God , he met us in the middle , because what we were able to see was hey , I know , we said we could sell it for $325,000 . But if you look , the market right now is at $375,000 . So what can we do to work together ? Can we agree that maybe you come up to $340,000 and that way you still have the remaining up to $375,000 in equity for yourself ? So you're walking into a property with X , y , z number of equity and we're not taking the complete loss on the increase of value . That has happened over time , and thank God to the heavens that it was such a blessing . He said yes , so we didn't go all the way up to the $375,000 , of course , but we were able to increase the sales price just a little bit and he was able to still walk in with a lot of equity on his side as well .

Speaker 1 52:46

But that was what I learned and that one was all right you don't want to go under contract until you're about maybe 60 days out and that's even a lot too maybe 60 days out from completion time because you don't know what the market can do between that time and you don't want to , you don't want to kick yourself in the butt . So , anyway , there are all kinds of things that happen , and there's more that happened , but I'd be here a whole another hour explaining everything that happened on that first run . But it was all a learning lesson and guess what , moving into the next project not saying that things will be perfect and I have everything under control , because there's so many variables in development . You can't be in control of everything , but there were certain things that I wouldn't make the mistake on . Again , there were certain things that now you know we're going on a next permitting , going through a next permitting process for the next development project . I knew , hey , wait a minute , let's make sure it went through flood control , right , because then so there's different things that we know how to check for now . Hey , wait a minute , let's not get under contract too fast . And so these are things that you learn along the way . But doing that first one is key . But I won't go any further because , again , the world of development , there's so much to learn , there's so much to know .

Speaker 1 54:04

But those are the basics and I think even more so there may be some of you that own land already . Have you already owned land ? You're one step ahead of the game . You already owned the land , so you don't even have to now what it will do . You don't get to necessarily choose the hot areas of where the multifamilies are , where development resales are taking place . You don't really get to choose what the hot areas are because you kind of have to go off of the data of where your lot is already located . But you've already , you're already a step ahead .

Speaker 1 54:37

So have you already owned the land ? Start having a realtor to look at . Are there any duplexes that have resold in the zip code where my existing land is located ? Give me some facts , give me some data . You may have a larger piece of land and we'll get on that later . That's a whole nother conversation where you may have a larger lot that can be subdivided or the proper word is replatted , meaning not only can you build one property . It's almost like baking a cake and seeing how many slices you can get out of that cake . Not only can you build one , you can have the city cut it into pieces and build seven on your one lot . So if you already own your land , you are really ahead of the game , and there's countless , countless things that you can do .

Real Estate Development Consulting and Support

Speaker 1 55:26

So , as always , I'm here . If you need a real estate development consultant , are you looking for a team to help you get started along the way ? Maybe run some values on some things for you , help you to determine what areas are good right now for what it is you're trying to do ? Drop us a line . I'll be more than happy to get you started or direct you to the different professionals in the area , so at least you don't have to start from scratch and come up with your own team . I can help direct you to industry professionals in the development community that can help get you started on your dreams . So I hope until next time , you guys are staying true to yourself , remaining inspired and motivated and going after your goals . And , as always , I'm your host , natasha LaQuinn , the queen bee of real estate , and you've been listening to the throne . Bye , bye , bye , bye , bye , bye , bye .