Sean Myers and Raul Veitia, co-founders of GreatLeaf Capital, believe now is the perfect time to invest passively in real estate, and their track record proves it. With over 7,800 residential lots entitled, $310M in land sales, and 100+ homes in their development pipeline, they bring extensive expertise and insight, ready to help investors capitalize on real estate opportunities.
Here’s some of the topics we covered:
- The Ultimate Launchpad for Your First Investment Property
- Why Mastering One Geographic Area Can Supercharge Your Success
- Focus on Real Estate Cycles, Not Just Markets
- Why a Sense of Urgency is Your Secret Weapon
- Overcoming the Fear and Analysis Paralysis in Real Estate
- Leveling Up from Single Family to Multifamily
- Sean & Raul’s Favorite Markets to Invest In
- The Top Priority Every New Investor Needs to Zero In On
- The Must-Know Safety Checks Before Sealing the Deal on Any Property
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
Full Transcript Below
00:02:40:07 – 00:02:59:05
Rod
Welcome to another edition of Lifetime Cash Flow through Real Estate investing. I’m Rod Khleif and I am thrilled you’re here. We’ve got kind of a unique interview today with a couple of gentlemen, that are the co-founders of Great Leaf Capital. We’ve got we’ve got Sean Myers and Raul Veitia . And, they are big in the, single family space building.
00:02:59:05 – 00:03:06:05
Rod
Single family. They property managed multifamily, they develop land. We’re gonna have a lot of fun today. Welcome, guys.
00:03:06:11 – 00:03:07:03
Raul
Thanks for having us.
00:03:07:04 – 00:03:07:11
Rod
Yeah.
00:03:07:11 – 00:03:08:18
Raul
Of course. Excited to be here.
00:03:08:19 – 00:03:22:04
Rod
Why don’t we. Why don’t we take a minute and each of you tell a little bit of your backstory? Raul, you can start and, just, tell us who you are, where you came from, and why. Real estate. And maybe if you started with something else before real estate, just give us a little background.
00:03:22:07 – 00:03:34:08
Raul
No. Absolutely. So, I’ve been in real estate, for 20 years, essentially. That was my first job out of college doing property management. So we were doing, low income housing at the time. So.
00:03:34:10 – 00:03:41:00
Rod
Wow. You are a glutton for punishment, Zach. And you’re still in after 20 years. After 20 years. There’s burnout in property management.
00:03:41:03 – 00:03:59:18
Raul
There is? Yeah. Okay. I’m, I’m very blessed that we have a really good team now working for us, but certainly, kind of the school of the hard knocks. God. Trying to figure things out as you went. In 2009, I started what is now one of one of our companies, one of our ventures, Belmond management Group.
00:03:59:20 – 00:04:16:00
Raul
And we do property management of, you know, residential housing, either for a third party owners or some of our, some of the properties in our interior internal portfolio. So we’re managing roughly $120 million worth of income producing assets now.
00:04:16:03 – 00:04:18:17
Rod
And these are single family and some small multi and.
00:04:18:17 – 00:04:25:19
Raul
Some small multi. Correct. So you know our focus is central Florida, Orange County Seminole County Osceola.
00:04:25:21 – 00:04:27:05
Rod
That’s Orlando and the surrounding.
00:04:27:05 – 00:04:28:19
Raul
Areas Orlando and surrounding areas.
00:04:28:20 – 00:04:30:01
Rod
Lakeland as well. You go in.
00:04:30:03 – 00:04:35:16
Raul
We don’t go as far as Lakeland not yet but we do go into kind of southern Lake County. Okay.
00:04:35:22 – 00:04:54:11
Rod
All right. But by the way, sorry to interrupt. The reason I was joking about that is, guys, if you get into the property management business, a role can, can, can attest to this. People don’t call you when they’re happy owners or tenants, okay. And so you know, it can it can be brutal sometimes. And so anyway please continue.
00:04:54:11 – 00:04:56:03
Rod
I just that’s why I made that funny comment.
00:04:56:03 – 00:05:06:02
Raul
No. Absolutely. Well, it’s a grind, you know, and you’re very right. Like any kind of service industry, you don’t you don’t necessarily get phone calls from people telling you like, hey, you’re doing amazing and a random person.
00:05:06:02 – 00:05:07:11
Rod
You rock. Let me send you a gift.
00:05:07:16 – 00:05:37:04
Raul
All right. So but along the way, what we found is, as we continue to look into other opportunities and other investments, we, we started doing, multifamily in 2015, 2016, just kind of acquiring and syndicated a couple deals, small multifamily in Orlando, in Orlando. And, and at the time and again, I everything everything that I’ve kind of learned or experienced has been by by trying trial and error.
00:05:37:06 – 00:05:48:11
Raul
Hard knocks. Hard knocks. Yeah. But quickly realize especially in the multifamily space, how important having that property management background became for our operations.
00:05:48:14 – 00:06:07:20
Rod
Can I speak to can I interrupt for one? Absolutely, please? Yeah. Because, guys, that is a big, big tip. If you get into this. I’m sorry. Let me rephrase that. When you get into this business, if you can start with some some actual management yourself, like you buy a duplex, a four plex, a ten unit, whatever, and you suck it up and you manage that thing.
00:06:07:20 – 00:06:21:02
Rod
You will learn so much about every aspect of the business that when you go larger, you’re really going to understand what’s going on. Now, you don’t have to start that way, but it’s a fantastic way to get it, you know, to drink through a fire hose and learn. Learn what to do.
00:06:21:02 – 00:06:44:21
Raul
Yeah. Fun, you know, still amazes me. And we still get calls from new clients who, want us to manage our properties and everything else. And it’s it’s amazing to me how many people buy real estate or buy investment properties without consulting with a property manager or having a property manager involved in the process. Yeah. So to me, that’s been a it’s actually shocking to me.
00:06:45:00 – 00:06:59:17
Rod
That’s one of the things that’s one of the things I teach in my bootcamps is, is like that’s that should be one of the first calls you make. Why? Because you’re going to learn more. I learned more from interviewing property management companies, correct, about a market, particularly if I’m doing multiple markets, which I do not suggest you do, guys.
00:06:59:19 – 00:07:17:02
Rod
But but you learn more because your boots on the ground, you know, what the demographics are that are going to rent a particular asset class. And in a submarket, you know, if it’s going to be families or single people, you know, where they work, you know what they make you know, you know what they want from a from an amenity standpoint, from a, from an interior finishes standpoint.
00:07:17:02 – 00:07:41:00
Rod
Correct. And, and you know, how to market those assets the right way because it’s different by geographic area as well. Know it guys. When you get in this business that should be one of the first outside team members that you start talking to. And candidly, the other thing is with property management companies, when you know somebody is going to sell and you know somebody is going to sell, who do you want to buy that someone you’ve got a relationship with?
00:07:41:00 – 00:07:42:02
Raul
Yes, 100%.
00:07:42:03 – 00:07:52:03
Rod
You’re right because you don’t lose the management. So those relationships are worth their weight in gold, not just from an from an informational standpoint education standpoint, but from potential deals.
00:07:52:03 – 00:08:12:20
Raul
And and that’s an excellent point. And some of the best investors that I’ve been in touch with, or that I’ve worked for or with, have been guys who have reached out to me knowing that I have access to, you know, 700 properties or whatever the case may be. And they understand, and I’m no special being, but I happen to be anytime an owner is going to sell, I’m the first.
00:08:12:20 – 00:08:13:19
Rod
You know that. Sure.
00:08:13:24 – 00:08:18:00
Raul
Or should be the first one to find. Well, yeah, well, it doesn’t always work out that way. Unfortunately.
00:08:18:02 – 00:08:30:03
Rod
They’re going to usually fix the place up right. The numbers looking better. Get the occupancy up get you know do some do some improvements and you know about that. And you know what? The skeletons are in the closet with these assets as well because you’ve managed them. There’s any.
00:08:30:06 – 00:09:00:20
Raul
Yeah that’s correct. So so in short it’s been I think I’ve been able to last in the business just because I think I, I kind of started looking at it from, from a huge benefit advantage, having that experience and having the property management operations and just kind of changing mindsets from, hey, I’m just going to take these, maintenance calls, toilet calls and everything else, but really seeing how I can leverage the business into into developing bigger relationships and better.
00:09:00:20 – 00:09:26:09
Rod
Relationships, and every business is nothing but people and systems. And as you you know, I’ve been a management company my whole career. I’ve got one right now, you know, just for a handful of properties now, but at one time managed, you know, a lot can be a thankless job. But, you know, especially if, you know, if you’re if you’ve got your own portfolio, you know, to be vertically integrated, it’s called, you know, we I see that with some of the most successful operators in the country, they, they stick with a geographic area.
00:09:26:09 – 00:09:47:24
Rod
They vertically integrate, meaning they form their own management company, they form their own construction company. And and I will tell you, those are some of the most successful operators I’ve ever seen. Rather than diversifying in multiple markets and relying on third party property management. And I’ll say something else, Raul, and you probably know this as well. It’s not as sophisticated in the single family property management space.
00:09:47:24 – 00:10:07:16
Rod
Okay. There’s a lot of brokers that do it on the side. There’s and and I’ve had lots of bad experiences with trying to outsource third party property management for some of my single family portfolios. Back in the day, I’ve owned 2000 single family houses in my career that I’ve rented long term, and and there’s not that many great single family property management companies.
00:10:07:16 – 00:10:12:07
Rod
So the fact that you’ve been around that long speaks to the fact that you guys probably do a really good job.
00:10:12:13 – 00:10:14:02
Raul
There’s more bad ones and good ones.
00:10:14:02 – 00:10:14:22
Rod
Well, no, no question.
00:10:14:22 – 00:10:26:00
Raul
And it’s a, it’s, it’s it’s a bad part of our industry. And I tell people all the time I’m, you know, we get calls from new clients who I had a really bad experience. And I’m like, I wish I could tell you that. I’m surprised.
00:10:26:00 – 00:10:38:07
Rod
But no, no, it’s it’s it’s the business. And then, you know, like, I’ll get people that, that, that are interested in this, someone will sell a property that they’ve basically flipped and fixed up and put a tenant in.
00:10:38:09 – 00:10:40:02
Raul
Like a turnkey, turnkey turnkey.
00:10:40:02 – 00:10:56:16
Rod
That that’s what that’s what I was missing, you know, and I hear horror stories from people that will buy a house a thousand miles away. One house, and they’re relying on that management company. They have no leverage with that management company, and they do a horrible job. And I’ve heard I can’t tell you how many horror stories I’ve heard about turnkey, as well.
00:10:56:18 – 00:10:59:24
Rod
So anyway, so you in a property management, how did you get lined up with this guy here?
00:10:59:24 – 00:11:21:04
Raul
Yeah, absolutely. So we’ve been working together for we’ve known each other for 15 years through a previous, partner of ours. And in 2005, 2015, he came on board with our property management company, to help us continue to grow the operations. And at the same time, we were buying multifamily and looking at different multifamily investments. So we did a lot of that.
00:11:21:04 – 00:11:25:16
Raul
And then in 2020, as when we started our current homebuilding operations, yeah.
00:11:25:16 – 00:11:43:13
Sean
We met, back when he was first starting his property management company. So prior to us getting involved in, like, official partnership, we were interacting a lot. So I was seeing him work, seeing like, his dedication to customer service and all that property management. And my prior history was in, you know, land brokerage and real estate development.
00:11:43:13 – 00:12:02:21
Sean
So it was not the same kind of service business at all. And I had realized the value of having a service business, because when we were going through the 2008, 2009 and we were looking at distressed assets and, you know, the first couple we calls the property management company and realize, you know, if I want to understand how this apartment, you know, building is operating, I need to talk to the property manager.
00:12:02:21 – 00:12:07:01
Sean
So I saw the value of good property management, through that.
00:12:07:01 – 00:12:22:16
Rod
Oh, it’s critical. It’s critical. What do we do in the larger complexes as well? In fact, that’s our that’s the bane of our existence. Is is lackluster, poorly, poorly trained. You know, property management companies that I end up having to tell them what to do, which shouldn’t be the case.
00:12:22:16 – 00:12:28:01
Sean
And you. Right. So when I was going through that, I didn’t have that income producing property experience. I had a totally different like myself.
00:12:28:02 – 00:12:31:07
Rod
So talk about your background. Were you were you pretty much finished with your.
00:12:31:07 – 00:12:32:18
Raul
Yeah, I think we can tie the rest of it too.
00:12:32:18 – 00:12:35:18
Rod
Yeah, yeah, yeah. Perfect to talk about your your story. Sean.
00:12:35:18 – 00:12:51:13
Sean
Yeah. So I started yes about like, you know, first job out of college was as advertising agency. And I was doing that for about a year. Didn’t like sitting in the office and working on other people’s businesses. And I wanted to do something. And I was in downtown Orlando and it was undergoing like a renovation of the housing stock there.
00:12:51:13 – 00:13:09:03
Sean
And I met one of the guys, you know, who’s flipping a house and rehabbing it. And I’m like, that sounds interesting. Let me go do that because I want to get out and do my own thing. And so started doing that. I did that for about a year and then just wanted to get bigger and, you know, looked at different kinds of commercial and land was appealing to me.
00:13:09:03 – 00:13:15:16
Sean
So I became, you know, worked as a land broker, and I was helping investors acquire, kind of large agricultural tracts in the park.
00:13:15:18 – 00:13:16:02
Rod
When was.
00:13:16:02 – 00:13:28:13
Sean
This? This was 1996, 95, 96? Yeah, a long time ago. Okay. And, you know, they sent me out there, you know, here’s what we want to buy. And they’re buying in the future path of growth. I didn’t know anything about that. They just like, you know, go out here with the, you know, phone in a and a map.
00:13:28:18 – 00:13:36:01
Sean
Right. And I remember calling them the first day, I’m like, am I in the right spot? Because there is nothing out here that. Yeah, no GPS in fact.
00:13:36:01 – 00:13:40:10
Rod
And what was that? What was the horrible map software that they had for a while? I forgot what it was.
00:13:40:13 – 00:13:59:21
Sean
We didn’t even have that. I had like a paper, paper map. Right. But I’m in the right spot. They’re like, yes, yeah, yeah, there’s going to be an expressway coming through here and you’re in the right spot. And so basically just helping, that group acquire, about 5 or 6000 acres along West Orange County and South Lake County, just anticipating the 429 expressway coming through.
00:13:59:22 – 00:14:16:09
Sean
And, so I kind of learned that business by, by doing it. I really liked talking to the farmers and ranchers and doing that. And, as it’s coming along, they’re like, yeah, you’re you seem like a pretty decent guy. Maybe we should start doing, you know, some of the development entitlement. Like, I don’t know anything about that.
00:14:16:09 – 00:14:37:21
Sean
And, you know, I was an English major in college and. Right. Ended up going to business school. So I got a, MBA, concentration in finance. And I came back. I’m like, now let’s do some real estate development. And so we would put that portfolio and other pieces of land into the entitlement permitting process, produce finished lots and sell those to homebuilders on a take down basis.
00:14:37:23 – 00:14:54:16
Sean
And so it’s got like a pre-sale of, you know, I’m going to sell 125 lots to this builder. Here’s the price. So getting that experience of working with the homebuilders and analyzing the housing market, even though we’re not selling any houses, but we’re selling lots to the builders are going to sell houses. So to do that I kind of have to project 3 to 5 years into the future.
00:14:54:16 – 00:14:59:16
Sean
What’s going to go on in this market? What are the homes going to be worth to work backwards to figure out? What can I pay? What can.
00:14:59:16 – 00:15:00:06
Rod
You sell.
00:15:00:08 – 00:15:02:01
Sean
For? Yeah. What can I sell actually.
00:15:02:01 – 00:15:03:18
Rod
So what do you sell them for. And then what can you pay for.
00:15:03:18 – 00:15:16:19
Sean
So it’s all kind of working back. What we call like the land is residual value. You tell me how much the home is going to be and. Right, and, you know what my development costs are going to be and then it comes out at the bottom is my land value. So, I did a lot of that.
00:15:16:19 – 00:15:33:07
Sean
I love that business. I like the creativity of, like, figuring it out and working with a bunch of different constituents to get your projects approved and, home builders and, you know, we could see, the market getting like, really heated, overheated, where our subdivisions were selling out much faster than they should have.
00:15:33:07 – 00:15:34:14
Rod
When was this?
00:15:34:16 – 00:15:55:10
Sean
This is like just starting early 2000 all the way, you know? 02030405 and all my, all my builders, like I need more lots in it, in subdivision getting bigger and bigger. And I’m doing my analysis. I’m like, it doesn’t make sense because I can’t project, you know, these home prices going up like this, you know, 15% or 10% when incomes going up two and a half or 3%.
00:15:55:10 – 00:16:10:00
Sean
Right. And I was just searching for who’s the buyer? Who’s the buyer. Right. And, you know, every subdivision was overperforming and things like that. And I’m like, instead of selling six lots of month, you guys are taking 12 months, like, who’s buying these houses? And they’re like British tourists or retirees or something. I’m like, well.
00:16:10:00 – 00:16:18:23
Rod
Actually, actually, back then if you fogged a mirror, you could get a loan. That’s why you could work in Wendy’s and buy a $100,000 house because they had stated income loans. Yeah. Hello. What’s wrong with that picture?
00:16:18:23 – 00:16:20:18
Sean
Yeah, that’s what I eventually figure it out right.
00:16:20:23 – 00:16:25:13
Rod
Well, I’m amazed that you figured it out. I had to lose 50 million to figure it out, but, good for you.
00:16:25:13 – 00:16:39:04
Sean
Yeah, I was, I kept on asking, and no one would give me an answer that made sense. And finally, someone’s like, I know the area manager for countrywide. You know what? You’re one of the big mortgage. Oh, and I got in touch with him. Okay, let’s have lunch. Have some questions to ask you. And I told him what I just told you.
00:16:39:04 – 00:16:52:00
Sean
I got to project the stuff. I don’t see how it’s working. How are these buyers qualified again? And the most amazing thing is clear as day even that was like 2006. He’s like, they don’t qualify. I’m like, oh, you’re the first person who hasn’t told me some B.S..
00:16:52:05 – 00:17:11:24
Rod
They can’t afford it. And then hello. And God, I mean, I was, I was I thought I was set for life back then. I wasn’t really paying attention. Yeah. And, you know, you thought it was going. Yeah. You think it’s going to last forever? Yeah. Like the, like this. This apartment cycle we just went through. You know, we were talking about the bridge debt and the fact that a lot of operators are in trouble with that as well.
00:17:12:01 – 00:17:13:16
Rod
You just don’t see the writing on the wall.
00:17:13:18 – 00:17:29:16
Sean
You have to be real. And it was kind of a way to learn about that cycle. And I think that’s, people, they ask what’s going on the market and they don’t ask where they are in the cycle. So if you’re getting any new real estate, I would say start with what is the real estate cycle? Because it seems to repeat over and over and over again.
00:17:29:18 – 00:17:48:13
Sean
Yeah. And just understand whatever market you’re in, a product. Where are we in the cycle right now. Because, you know, you mentioned before how you picked up some, some lots and things cheap at the end. Yeah. And that’s when everyone’s scared you know. So right. Everyone like loves it when the prices have gone up and they’re trying to buy as many single families their homes as they can.
00:17:48:15 – 00:18:01:07
Sean
And then when the prices drop down and you can buy that same single family home that sold 175, now you can buy it for 35,000 and 40,000 in 2009. Yeah. No investors wanted to do that. Now I’m sitting here like we can buy hundreds of these and, you know, and they’re like, you.
00:18:01:07 – 00:18:20:12
Rod
Know what he’s talking about here, guys. Before we started recording, he’s got properties down in an area that when I first moved to Florida, the there’d been it was the it was the bottom of a cycle and people were reeling from that. And I bought lots where you could take a boat out to the Gulf of Mexico with no bridges for 50,000 apiece.
00:18:20:12 – 00:18:38:00
Rod
I bought houses on those lots for less than 150 apiece, about five of each, because that’s all there were in this market, because nobody that lived here wanted to deal with it, because they were they’d gotten their butt kicked in. So, you know, not it was good timing for me, but yeah. So now that completely makes sense.
00:18:38:00 – 00:18:44:19
Rod
So so you, you you did land entitlement. And now you’re actually building as well.
00:18:44:21 – 00:18:46:11
Sean
Yeah. So after that, that.
00:18:46:15 – 00:19:05:21
Rod
We’re going to take a break from this great episode for word from our sponsor, which is the multifamily bootcamp. Now, financial success is what you’re after. We are rapidly approaching one of the greatest opportunities I think we’re going to see in our lifetimes to capitalize financially. So if you know real estate is the vehicle for you, you’re crazy not to spend a couple days with me and one of my bootcamps.
00:19:05:21 – 00:19:21:06
Rod
I’ve always got one right around the corner. Thousands and thousands of people have taken action on their journeys to creating generational cash flow for themselves and their families. From attending my events, I don’t sell anything at this event, so it’s basically 16 to 18 hours of training with nothing being sold. Kind of a no brainer if you’re serious about this.
00:19:21:06 – 00:19:34:10
Rod
To check it out, text the word links to 72345 or go to Rod’s links.com. Again. Text links to 72345 or go to Rod’s links.com. I promise you’ll be glad you came. Let’s get back to it.
00:19:34:10 – 00:19:48:02
Sean
Downturn. We got into distressed asset acquisition and that’s where I learned the whole income side and the value of a really good property manager because you realize, hey, where’s all this income come from? It comes from the renters. Where did the renters come from? It comes from the property manager leasing the property and doing a good job of managing the property.
00:19:48:07 – 00:20:02:06
Sean
Right. And, you know, being at 90% occupancy or 95 or and that’s where you’re really making money, that last tip. So if you have a property managers like, hey, I’m done, I’m going to sit back. They don’t understand. They don’t understand cap rates. They got to keep.
00:20:02:06 – 00:20:02:14
Rod
Pushing the.
00:20:02:14 – 00:20:07:24
Sean
Envelope. Yeah. They don’t understand like $20 is not $20. It’s $20 times 12 months.
00:20:08:01 – 00:20:16:24
Rod
Times the number of units. Yeah. Yeah. And becomes a divided by divided by, you know, a cap rate that can add 20% a year. Multiply times 20 for the value.
00:20:16:24 – 00:20:18:08
Sean
Absolutely. So it’s a huge number.
00:20:18:09 – 00:20:26:17
Raul
Got to be a sense of urgency at all times is even even now where the permanent financing that we were talking right before, we went live.
00:20:26:20 – 00:20:27:07
Rod
00:20:27:09 – 00:20:45:04
Raul
I mean we understand internally the urgency to stabilize a rent roll in order to be able to get that permanent financing. And we see so many people that are just they know that there’s urgency that needs to happen, but they don’t act on it. So so if you wait too long time kill seals, right? Yeah. Like anything else.
00:20:45:04 – 00:20:57:19
Sean
But it is really that property. And so that’s when about that time is when, as I was learning the value of a great property manager versus a, you know, fair or mediocre one, that’s when I met rogue. We had that relationship where I was we weren’t efficient. And so.
00:20:57:19 – 00:20:59:21
Rod
You were buying these these distressed houses.
00:21:00:00 – 00:21:00:21
Sean
Distressed houses.
00:21:00:21 – 00:21:01:15
Rod
Renting them out.
00:21:01:19 – 00:21:21:01
Sean
Yeah. And then rented them out and and because my investment thesis was I can buy them at 35 or 40, I can still get, a yield on it. And then I’m just waiting for it to recover back to 85 or 100 where it should have been, and it never should have been. One 5175 and the incomes are going to end up it’s like a five year, you know, hold.
00:21:21:01 – 00:21:27:06
Sean
And, you know, most investors didn’t want to do that or hear that and believe about it. And then we also got into apartment.
00:21:27:07 – 00:21:29:00
Rod
How many were you able to buy Historic year us.
00:21:29:04 – 00:21:45:08
Sean
We probably about 40 or 50. And then we started and then we started doing apartments and I hooked up with, a couple of families, one in Tampa that had a lot of money and understood the value of real estate at the time. So we did some large transactions with them that were more like the 8 or $10 million range.
00:21:45:08 – 00:21:49:00
Sean
Nice. It’s still scary when you’re doing it, but if I could go back, I would like buy more.
00:21:49:06 – 00:22:05:16
Rod
So let me ask you that question. How do you push through the fear? Because I get a lot of I have a lot of people that listen to my show that, yeah, no, they need to do something, haven’t done it. So talk about how you push through some of these fear hurdles because you’re obviously very analytical. And so speak to it from your frame of mind.
00:22:05:18 – 00:22:28:23
Sean
I would go back to that because I am analytical is really understanding that real estate cycle. Because if you’ve never been through it, then you don’t understand what’s going on. So when I was in it, I was like, I need to figure out what’s going on. And so my person I was like, I understand it. And I got that cycle and I remember getting, actually presentation on it and someone’s like, hey, this is the same chart that we did in 1998.
00:22:28:23 – 00:22:44:09
Sean
We just changed the dates and I realized it’s the same thing over and over again. So they literally like said, here’s what happens here. Here’s what happens here. You know, euphoria. Everyone’s a you know, excited. Everyone’s a buyer. You know everyone exits. The Vulture’s come in. I’m like, we’re right here with the vultures coming in.
00:22:44:10 – 00:22:45:07
Rod
You need to know that.
00:22:45:08 – 00:22:57:10
Sean
So it was that like, even though everyone’s scared and fearful and they didn’t know what’s going to happen. I know where we are in the cycle now. And what do you do in this part of the cycle is by you find out you can’t get debt. You have to have cash, right?
00:22:57:10 – 00:23:00:11
Rod
No. Yeah. It’s very difficult to buy in a certain part of the cycle as well.
00:23:00:11 – 00:23:01:15
Sean
But that’s what you should be buying.
00:23:01:17 – 00:23:08:08
Rod
Right. So you started buying multifamily is syndicated some multifamily. And this was in ten, 11, 12 somewhere. Yeah.
00:23:08:09 – 00:23:26:01
Sean
Like, first big apartment. So we’re buying the houses in 2009. January started in January 2009 and going through there and then I’m like, hey, maybe I can do this on a bigger scale. And that’s when I had a connection. You introduced me to, like a high net worth family in Tampa, and they like, we’re looking for real estate.
00:23:26:01 – 00:23:43:06
Sean
And so I’m out running around finding, you know, distressed assets and learning. Learning. And it was still scary because I remember one day we had an A contract and, even though it’s a lot of fear, there are still those guys who do understand. So we would sometimes have 20 bids on, you know, the assets. Yeah.
00:23:43:08 – 00:24:00:14
Rod
I had a I had an 88 unit in Northport. Yeah. That, that unfortunately and it would have survived. And this is the reason I started my podcast because it pulled back about 11%, but we could have easily survived. But in my infinite wisdom, I collateralized it with packages of houses to say 50 basis points, a half a percent interest.
00:24:00:14 – 00:24:03:01
Rod
And so the whole thing. Yeah, getting floated.
00:24:03:01 – 00:24:03:23
Sean
Pulled all that. Yeah.
00:24:03:23 – 00:24:19:07
Rod
In fact, what’s interesting is one of my warriors, one of my coaching students is buying it right now. Same complex. It’s hilarious. Yeah. But, but anyway. Yeah, that, that, you know, there were there, there were opportunities to buy multifamily as well. But cut you bought 40 or 50. Just think if you had about a thousand of those.
00:24:19:07 – 00:24:22:14
Rod
Oh yeah. You’d be on the back of a 300ft yacht right now.
00:24:22:16 – 00:24:43:07
Sean
Even, you know, you would we, we, we have like, we had a townhome deal that we couldn’t we had an investor and they didn’t get into it, but it was like 27,000 a unit, a unit, you know, in Altamonte Springs, Florida, like right. Five four. Wow. We had another one in Kirkman Road, which is like Metro West area, and that was a seller who was, you know, they were distressed and there was 20 bidders.
00:24:43:07 – 00:24:59:13
Sean
And we get in a contract and you know, I’m running all the numbers. And so it’s like they’re at that point it’s like three months free rent, 64% occupancy fee. And you know our our financial model is like it’s going to take this long to burn off the concessions this long to come back. We’re buying at 56,000 per unit.
00:24:59:13 – 00:25:13:15
Sean
It cost 125 to build that new. Yeah, yeah. And it’s got like a 27% IRR with the five year exit. And my investor is like I think it needs to be 52,000. I’m like, what is what happens if I do that because he had his own guy? I’m like, you guys just put that number in there. It makes it above 30.
00:25:13:17 – 00:25:18:15
Sean
Like, yeah, it’s above 30. And I’m like, we’re in the 50s per unit. You know, in 2 or 3 years.
00:25:18:15 – 00:25:19:06
Rod
It’s all over.
00:25:19:07 – 00:25:19:19
Sean
Matter.
00:25:19:21 – 00:25:24:15
Rod
Oh I know you know. But you know, it’s all it’s all market driven and fear driven, you.
00:25:24:15 – 00:25:28:19
Sean
Know, and all that stuff actually recovered faster. Oh I know than we all anticipated.
00:25:28:19 – 00:25:40:10
Rod
Oh, much faster. Burned off. In fact, I saw an article that said rents exceeded pre-crash levels within three years of the crash. Yeah. Like that in three years, rents were higher than they were before the crash.
00:25:40:10 – 00:25:50:22
Sean
Yeah. Like that deal. I had the five year recovery. It would have been like a 2 or 3 year recovery, and you would have made probably twice as much and half the time. Yeah. But like, yeah, you still had that fear down. Yeah.
00:25:50:24 – 00:26:00:01
Rod
Well that’s it, that’s it, that’s it. So, so you’ve done entitlement this whole time, but when do you start actually building houses?
00:26:00:01 – 00:26:17:06
Sean
So that was interesting. Thing is we, we, you know, have developed all these lots we never actually built a house where we have all these properties, we manage all these properties. And that came out of us continuing to get beat on bids for our small multifamily. You know, we’re we’re we’re doing our underwriting, make an offer. And this is like, you know, a 30 year old product.
00:26:17:06 – 00:26:33:00
Sean
And, you know, I understand we can pay 170 per square foot because the numbers work. But at the same time, it is 30 or 40 years old. And I kind of thinking I could build something for less than that. Yeah, yeah for sure. And we have other guys coming in bidding higher than us. I’m like, I don’t know how their numbers work.
00:26:33:02 – 00:26:37:06
Sean
And I was working on entitlement work. Yeah, yeah. So expensive.
00:26:37:07 – 00:26:38:15
Rod
Well they don’t work. They don’t.
00:26:38:15 – 00:26:40:13
Raul
Work. No. Yeah I don’t work at all. Yeah.
00:26:40:13 – 00:27:01:22
Sean
So yeah. So as we’re trying to figure out like what can we invest in that’s like a, you know, value add long term income producing asset that we can like fix up and refinance at home. I was working on a 63 acre mixed use land site behind a Publix. And it’s, you know, a lot of these citrus families that have worked with and and the father’s like, hey, my son bought these ten lots with a partner who’s going to build him.
00:27:01:22 – 00:27:16:08
Sean
And his partner flaked out on him. He goes, you want to buy ten lots? And I’m thinking to myself, I don’t really want to buy ten lots, right? I have a relationship with them. So I called Raul and we had another friend who’s a general contractor, and he and he was building houses. And I’m like, hey, we can buy these ten lots, help this guy son out.
00:27:16:08 – 00:27:33:15
Sean
It’ll be good for my relationship with him. And so we tell them, yeah, well, we’ll buy your ten lots. And then our contractor flaked out on us two. And so we’re like, should we terminate? I’m like, no, I can’t, you know, I’m doing like a $6.3 million transaction on the land development. And I’m going to tell them we can’t buy the $300,000 for the.
00:27:33:17 – 00:27:40:23
Rod
By the way, guys, if you’re buying land in Florida, there’s a lot of citrus because there’s a lot of people that grow, you know, that grow oranges and lemons and oh.
00:27:40:23 – 00:27:41:23
Sean
Yeah, this still has.
00:27:42:00 – 00:27:46:22
Rod
Everything else. Yeah. So we’re citrus capital. And so you’re going to deal with those types of farmers anyway.
00:27:46:24 – 00:28:01:05
Sean
And it’s and it’s a lot of relationship business where this, this family I met through someone I had met literally 22 years ago where it’s like one manager tells his client, you know, and just being introduced from one to the other. So you have that relationship and that reputation and.
00:28:01:05 – 00:28:04:02
Rod
Reputation and you’re known for integrity and so on.
00:28:04:07 – 00:28:07:12
Sean
Guys like unfortunately, we’re going to have to buy, you know, these ten lots.
00:28:07:14 – 00:28:10:14
Rod
You can have. You found another contractor and you built ten houses.
00:28:10:16 – 00:28:12:02
Sean
Not before we closed on it.
00:28:12:06 – 00:28:25:16
Raul
So we close on the property. Imagine this. We close on the property February of 2020. We sell phone of that project. Tim and I, basically in cash before the our investors came in with us.
00:28:25:16 – 00:28:40:07
Sean
Yeah. Because we just we’re like, okay, we’re just going to do it because we got to do it and and we’ll figure it out. I’ll get it. You know, there’s contractors, we’ll find a contractor to build a house. Right. And we closed on it in February and March. Covid we had the little March Covid thing and then we’re like, oh yeah.
00:28:40:09 – 00:28:53:10
Rod
Yeah, I know all about that too. In fact, this video studio came as a result of that. I was supposed to have 800 people in Orlando, in like April or May of 2020, and we’d sold most of the tickets, like Holy crap, what do we need to do? And so we built the studio here. Yeah.
00:28:53:12 – 00:29:02:06
Sean
So yeah. So our plan with the ten was we’re going to build ten, you know, 1800 to 2000 square foot, you know, 32422 car and rent them out. It’ll be a nice little cul de sac.
00:29:02:07 – 00:29:03:17
Rod
Oh you were going to build to rent. Yeah.
00:29:03:17 – 00:29:19:06
Sean
Built to rent. So that was my. I’m like, this kind of fits in with our problem with finding, you know, income producing property. We just build our own. And we did find a contractor and set that up and got the homes built. And then as we’re building them, that’s when we came out of Covid. And all of a sudden you have rent depreciation and price appreciation.
00:29:19:06 – 00:29:23:19
Sean
So even though our rents are coming at higher than we, you know, pro forma.
00:29:23:20 – 00:29:24:05
Rod
You figure.
00:29:24:05 – 00:29:41:00
Sean
Out our purchase price. Yeah a purchase price is way higher. And we’re looking each other like, would I buy this home at this price to rent it. No. So I guess we’re going to sell it. And, we ended up selling those ten. And why we’re doing that. I picked up eight more in another subdivision. Same kind of thing.
00:29:41:00 – 00:29:45:24
Sean
And, you know, think you were going to build those and rent them. And so it just became a,
00:29:46:01 – 00:29:52:13
Rod
Almost by accident, a pipeline of. Yeah. So I buy, build and sell. Yeah. So, how many of you got in development right now? We’re on.
00:29:52:13 – 00:29:56:12
Sean
Oh, we have about 45, 46 right now in our pipeline.
00:29:56:16 – 00:29:58:00
Raul
That are under construction.
00:29:58:00 – 00:30:01:16
Sean
Yeah, we’ve probably completed around 70 now at this time, since starting with those.
00:30:01:20 – 00:30:04:19
Rod
Multiple multiple GCS or the same.
00:30:04:21 – 00:30:07:01
Sean
Same same contract, same contractor. Yeah. Same.
00:30:07:01 – 00:30:10:14
Rod
Okay. So all pretty much in the Orlando metro or somewhere around.
00:30:10:14 – 00:30:23:14
Sean
Oh, we started in the Orlando Metro and then we moved to palm Bay, which is in Brevard County, okay. We saw a lot of stuff with the Space Coast there. And then, we moved into Marion County, which is Ocala. You have a lot of retirement.
00:30:23:14 – 00:30:24:14
Rod
Okay.
00:30:24:16 – 00:30:25:05
Sean
We still.
00:30:25:05 – 00:30:27:19
Rod
Like same contract to be that diversified. Okay.
00:30:27:19 – 00:30:30:06
Sean
Yeah, because he’s really managing the sounds.
00:30:30:08 – 00:30:30:21
Rod
Managing stuff.
00:30:30:21 – 00:30:45:12
Sean
Yeah. And we have we have what we call the guy in the white truck who’s the construction manager? Who’s there? Are the subs here? Are they doing their job right? They do their job right. Do I need to reschedule something? And we use, shell contractor who’s one of the largest shell contractors in southeast. And that’s something about home building.
00:30:45:12 – 00:30:53:22
Sean
I think a lot of people I didn’t even understand when I was first selling lots to builders is they’re not really they don’t have, you know, employees who are doing the framing. They don’t have employees.
00:30:53:22 – 00:30:55:19
Rod
Yeah. You don’t realize they sub everything out.
00:30:55:20 – 00:31:00:11
Sean
Yeah. And you realize they’re kind of like a development sales and marketing and finance manager.
00:31:00:14 – 00:31:02:10
Rod
The orchestra. Yeah. Yeah yeah, yeah.
00:31:02:12 – 00:31:15:02
Sean
So so we’re able to do that now when we do focus on markets. And I heard you mentioned that a couple times at the beginning, I think that’s one of the most important things you could tell. You know, people are starting out or and people have been doing this for a while is you’re better off being in one market.
00:31:15:02 – 00:31:26:20
Sean
Yes. That’s a good market where you understand the product right. Then telling your friends, I’m in three different places because when you focus on one market and you understand what’s going on and someone says, I have an opportunity, you don’t have to spend any time.
00:31:26:20 – 00:31:29:06
Rod
You know, instantly that’s an option. You smell. If it’s an opportunity.
00:31:29:06 – 00:31:39:03
Sean
You can you can see it then. And that’s one of our advantages in focusing our land on the small multi-family is something pops up and we can make an offer an hour later, right. Because we know we know what.
00:31:39:03 – 00:31:52:04
Rod
The rents are, you know, you know what the you know what they should be. You know what the pricing should be. You know what the cap rates are. You’ve got the connections. You know, all those reasons it’s better guys. And I literally just had a boot camp last weekend where I told everybody, focus on one freaking market, right?
00:31:52:04 – 00:32:16:04
Rod
And become really good at it. And that’s the secret to success. So, so, I, one of the things I asked you before we started recording was the impact of the interest rates on selling these houses. Now, I’m guessing you’ve got an alternate exit strategy to, to rent them. If you have to. But but could you could you could you repeat what you told me before we, started recording about the impact on sales right now?
00:32:16:10 – 00:32:28:20
Sean
Yeah. So interest rates has had a tremendous impact, as you can imagine. So we see people being much more cautious about it. They seem to be highly reactive to any change in rates. It’s almost like.
00:32:28:22 – 00:32:35:00
Rod
They just said they’re not going to lower them yesterday. Yeah. And I think Trump’s going to go over there with a hammer ball peen hammer.
00:32:35:00 – 00:32:49:20
Raul
And there’s a lot of sensitivity. We see huge swings in buyer demand and basically housing activity from showings to offers huge swings in a matter of half a point. Yeah. You know when the rates it’s less.
00:32:49:20 – 00:32:53:06
Sean
It’s almost like they hear that rates drop even at the time and they call their agents.
00:32:53:06 – 00:32:55:20
Rod
Even though there’s no real significant impact.
00:32:55:20 – 00:33:11:17
Sean
On the impact. It’s it’s a psychological thing. Yeah. So I see that a lot more than I recall. You know, if I think back 20, 30 years, if someone said, I’m going to buy a house, they come in and then they, you know, the agent says qualify and how much do I qualify for? And they don’t ask what were rates six months ago or where rates going.
00:33:11:18 – 00:33:12:23
Sean
They’re like, I’m ready to buy a house.
00:33:12:23 – 00:33:32:20
Rod
Yeah. Well it’s it’s an emotional purchase. That’s, that’s that’s you know, what’s interesting is, is and I tell this story on the podcast, when I got in the business in 1978, rates were 18%. Okay. And I remember like coming out thinking we were on the moon when they hit 7% like, oh my God, this is freaking amazing.
00:33:32:20 – 00:33:41:08
Rod
7%. So just to give some context, do you see pricing starting to adjust because of these interest rates shifting in in the new home market.
00:33:41:08 – 00:33:42:17
Sean
Yeah yeah. So what you do.
00:33:42:17 – 00:33:43:01
Rod
Has to.
00:33:43:01 – 00:33:57:20
Sean
Right. Yeah. It’s the same similar what to do with a rental where like hey I’m going to give a rental concession right. One month free rent. Hopefully not more than one month free rent or waiving application fees. We start to do concessions because we want to hold price just like other builders. And so you contribute more to their closing costs.
00:33:57:20 – 00:33:59:16
Rod
Do you buy down interest rates? I know they’ve done.
00:33:59:16 – 00:34:11:23
Sean
That a couple times, but that that doesn’t seem to that didn’t seem to have that big of effect. Not a lot of people are looking for that. For our buyers, and we’re trying to hit the middle of the market. A lot of times it comes down to do they have the cash to close. So assisting them.
00:34:12:00 – 00:34:14:10
Rod
With the down payment? Yes. More down payment than the.
00:34:14:12 – 00:34:19:05
Sean
Down payment closing class. So we and our homes what we’re trying to do is hit the middle of the market where the most.
00:34:19:05 – 00:34:21:20
Rod
Buyers three two, two three bedroom, two bath, two car.
00:34:21:22 – 00:34:36:18
Sean
Garage, everybody wants. And we’ve kind of got to where we started with, you know, that first subdivision we started with six models. Right now we’re down to like two. Out of those two it’s probably 70% of the of the bread and butter house and then 30% of the other. And so we’re trying to be right in that middle of the market and do slightly elevated.
00:34:36:18 – 00:34:50:15
Sean
So we do nicer finishes and and all that’s done. But we see people, you know, really sensitive with their cash to close. So if I told someone hey no cash, you know, and you can’t do no cash down. But if we can provide them with a lot of cash, sometimes that’s more. And you.
00:34:50:18 – 00:34:53:16
Rod
Give me an idea, the price range that you’re selling these, these like.
00:34:53:21 – 00:35:01:02
Sean
Three, three, 75 to that much. Yeah. Which I hate to say, you know, if you’ve been in the business long time, like me, you’re like, that’s a crazy number.
00:35:01:02 – 00:35:06:04
Rod
I remember buying houses in Cape Call for 50 grand that that three, two, two dynamic. Yeah that’s.
00:35:06:04 – 00:35:19:00
Sean
Crazy. So that that I mentioned before like we still do the development. So we’re doing a what’s called a paper lot sell engineered lots where the lots are permitted ready to go. But nothing’s happened to the citrus grove. And we’re going to sell that to a national homebuilder.
00:35:19:02 – 00:35:24:20
Rod
So that’s interesting. So you did you there’s still growing citrus on it, but it’s completely entitled. But you haven’t put in you.
00:35:24:20 – 00:35:26:17
Sean
Put it on infrastructure, haven’t touched any part of.
00:35:26:23 – 00:35:29:12
Rod
It. It’s just the entitlement. Yeah. Without the action.
00:35:29:12 – 00:35:32:19
Sean
So we’ve taken all we’ve taken away, all they’re taken away, all they.
00:35:32:21 – 00:35:35:07
Rod
Is is what’s called I didn’t this is I’m this is educating me.
00:35:35:07 – 00:35:44:10
Sean
So we’ve we’ve taken away all the risk from the home builder because they don’t want to take development risk. They’re like, I’m have a home building machine and I need to write the input of the finished lot. So they prefer.
00:35:44:14 – 00:35:47:10
Rod
But they still have to put in the plumbing, I mean, the water level. I got to.
00:35:47:10 – 00:35:48:23
Sean
Do the roads and everything.
00:35:48:23 – 00:35:49:23
Rod
So yeah, the roads. Yeah.
00:35:49:24 – 00:36:06:01
Sean
Another preference is to buy finished lots. Well we’ve done all that. But in certain times of the market you can you can do that. So I’m working with you know we put this on the market I’m getting bids. We still use a land broker. Really great broker. Mike at Land Advisors if you need a land broker. Okay.
00:36:06:03 – 00:36:23:19
Sean
And the bids start coming in and they come in high. And I had the kind of same reaction do you do when I said, hey, three 375. That’s really high. Right. So we’re getting a bid for these homes are for these paper lots, which are in the 90, in excess of $90,000. And I call one of my old investors who’s retired that I started off with.
00:36:23:19 – 00:36:34:24
Sean
And the first we did, we were selling finished lots to Lennar for $24,000. And like the finish line for like they still have to spend $50,000 to get the sure roads.
00:36:34:24 – 00:36:37:22
Rod
So they got two world water lines electric and I call him.
00:36:37:22 – 00:36:43:14
Raul
And the question is still the same as to how they back up to the pricing of the homes. So they’re using the same.
00:36:43:16 – 00:36:58:02
Sean
They’ve gone up on the ratio. So as you get to higher land cost. But when I was doing the business, it was like 20 to 22% of the average selling price of the home was going to be your finished lot cost and the back down to the land, and now they’re pushing up to like 27, 28%.
00:36:58:04 – 00:37:08:04
Rod
But you know, let’s say let’s say somebody is listening and they’re thinking, you know, I’d like to maybe build a few homes, maybe build them to rent, maybe build them to sell. What advice would you give them?
00:37:08:06 – 00:37:10:05
Sean
Yeah, again, pick your pick your market.
00:37:10:05 – 00:37:11:09
Rod
Think your market number one.
00:37:11:09 – 00:37:13:01
Sean
Understand you know who your buyers are going to be.
00:37:13:03 – 00:37:21:11
Rod
How can they educate themselves? How would they educate themselves. So you know what. Yeah. Answer that question. And then I want to drill down on the entitlement process a little bit like we said.
00:37:21:13 – 00:37:33:05
Sean
Yeah. So you want to have a really good contractor who’s going to walk you through that business. And it’s important a lot of people don’t realize, but you have to have a contractor who has vendor relationships because your vendors have to show up and be competent and get.
00:37:33:05 – 00:37:34:19
Rod
Your vendors as in subs.
00:37:34:19 – 00:37:38:14
Sean
Then yes, subs. So subcontractors. So yeah, there’s going to be a guy.
00:37:38:14 – 00:37:54:06
Rod
Who’s like, so if you’re going to go look for land to buy to and or you’re talking about buying lots and lots, we’re not entitling right now you to buy lots to build on. Got it. Yeah. If you do need a contractor, bottom line, you’re not going to do the any of the entitlement the contractor is going to be.
00:37:54:06 – 00:38:00:04
Rod
Yeah. Now of course you’ve got to have, designs for the what you’re going to build. Yeah. I need an architect.
00:38:00:10 – 00:38:06:15
Sean
An architect. Okay. Yeah. So those are two different if you’re talking about, like, how am I going to go out and get an orange grove and turn it into a.
00:38:06:17 – 00:38:32:00
Rod
We’ll do that conversation just a second. But let’s talk. So somebody wants to build maybe maybe they want to build, you know, ten units like a, like a townhome community, something like that. Same thing. You need an architect, you need a contractor, and you need to go find the land. That’s that’s that’s zoned properly. Correct. Yeah. And then see what you’re then you want to see what you’re a density is or is that the term where how many you how many units per acre.
00:38:32:00 – 00:38:35:05
Rod
How many units per acre you can put on there. And,
00:38:35:07 – 00:38:39:08
Raul
You want you want to have an understanding as well, like just kind of looking ahead, like, what are you going to do with it?
00:38:39:12 – 00:38:39:20
Sean
You want to.
00:38:39:20 – 00:38:40:10
Raul
Feel the same.
00:38:40:10 – 00:38:43:22
Sean
Way, the property manager or agent who’s going to be showing it. And sure. But if.
00:38:43:22 – 00:38:44:13
Rod
You’re not sure.
00:38:44:13 – 00:38:57:08
Raul
If you’re going to sell, for example, one of the exercises that we do any time that we go into a new market is that we actually go through the permitting department to figure out how many construction permits are in the pipeline. Sure, sure. We have an understanding of like what.
00:38:57:08 – 00:38:57:20
Rod
You’re competing.
00:38:57:20 – 00:39:16:00
Raul
With. Is there a thousand homes being on under permanent now? Because that obviously is going to change the dynamic or how do you look at the process? So but boots on the ground, I mean, you’ve been in real estate long enough and I always tell I always tell people I love driving and looking at real estate. Like, you get so much from.
00:39:16:00 – 00:39:16:15
Rod
The world to do.
00:39:16:15 – 00:39:37:12
Raul
You get so much of a better grasp for the location, for what’s happening around that. Yesterday, I spent the majority of the day, visiting our homes and their construction and call and basically taking notes for our broker that’s helping them sell them, because there’s a part like a beautiful park down the street from one of them that it’s not included in the listing.
00:39:37:12 – 00:39:50:07
Raul
So a lot of this stuff is not is being there and getting a feel for the neighborhood, the neighbors, what’s happening after hours? I mean, our apartment communities, I go at night just before we even close on on.
00:39:50:07 – 00:39:50:19
Rod
My.
00:39:50:21 – 00:39:52:07
Raul
Stuff, stayed in the parking lot.
00:39:52:10 – 00:40:12:09
Rod
There’s people if there’s a lot of cars going in and out, there’s people standing on the corner with little packets of stuff. You know, you need to know what’s going on there. Yeah. So but look at the, you know, the safety of the asset and the lighting and the and the security and the and if there’s, if there are cameras and these are all things that, you know, perimeter security if it’s necessary depending on the asset class.
00:40:12:09 – 00:40:13:19
Rod
But yeah, know that you’ve got to go drive.
00:40:13:20 – 00:40:23:01
Raul
But identify the market by going to the market. Yeah. Like spend the day. Go to lunch I like going to Publix. Yeah I got a good feel for what’s happening by just like the.
00:40:23:03 – 00:40:41:04
Rod
Pathways to Publix. You know. What are the national retailers near the as near what you’re doing? I don’t want to see, you know, Bob’s Burgers and Sushi. I want to see Starbucks. I want to see a Home Depot. I want to see Lowe’s, stuff like that. But back to you know, somebody that wants to go do this, so they need a contractor, an architect.
00:40:41:04 – 00:40:47:24
Rod
Any other tips? Obviously they got a line out, the financing. They got to know their exit strategy. Are they going to rent or sell? Yeah.
00:40:47:24 – 00:41:09:22
Sean
Anything else I would say. So one unusual thing about that construction, which it was not similar thing that I encountered in, when we were getting construction loans for, for lot development is that, you know, we’re going to use a construction lender and it’s unlike multifamily bridge loans. Right. And that, you know, they would kind of pitch it as like, hey, we’ll do 75% loan to cost, right?
00:41:10:00 – 00:41:31:20
Sean
And so you’re like, okay, here’s my here’s my land finished land cost if you’re going to do the home building and here’s my construction cost, and this is going to be my holding cost. And the lender’s telling me he’s going to loan me, you know, 7,075% loan to costs, right. Or, you know, loan value. You’re going to make a mistake if you think, okay, that means I need $40,000 to to make up the gap because you need more.
00:41:31:22 – 00:41:33:20
Rod
And it’s why do you need more?
00:41:34:01 – 00:41:51:20
Sean
Because what they’re going to want you to do is close on the first and also escrow with them that equity so that that gap they’re going to say I want you you know, your budget is 300, I’m going to want you to 60. You give me 40,000 at closing. So I know that cash is in my reserve.
00:41:51:24 – 00:41:52:22
Rod
To make payments.
00:41:52:24 – 00:42:04:02
Sean
To to finish out the budget. So if you didn’t have any, because if they closed and you have the 40,000 your account for all they know, you spend the 40,000 the next day. Gotcha. And there’s not enough money to finish the house so that like, you reserve that money with us.
00:42:04:03 – 00:42:05:12
Rod
They’ll loan it to you, but they’re going to hold.
00:42:05:12 – 00:42:15:23
Sean
It. Yeah. So when we’re doing the first draw, it’s actually our money coming back. And by the way, we had to pay the van, the subs to do the first set of job. So let’s take that 40,000 and turn it into like 100.
00:42:15:23 – 00:42:18:24
Rod
It got it. You got the money to actually do the work before you can be.
00:42:19:01 – 00:42:38:12
Sean
Reimbursed because you do that work. And then you say, hey, I have done this work, I’m ready from our first draw. Here’s what we completed. Right. They send out, they’re inspected like, yes, you did it. Give us your contractors release so everyone’s paid and then we’ll give you the money back. Can you repeat that process? So going through, I realize we never really get to the full funding of the loan because we’re done.
00:42:38:12 – 00:42:39:16
Sean
And,
00:42:39:18 – 00:42:47:12
Rod
But another question. Have you ever, done some creative stuff where you had the seller stand for part of the equity in the deal?
00:42:47:14 – 00:42:54:07
Sean
Not with with any the home building. We’ve done that with, some land land deals or we have seller financing.
00:42:54:09 – 00:43:09:07
Rod
I mean, something you can do, right? I mean, you could say, hey, do you want to stay in this thing, keep a piece of this and have some, some residual, you know, maybe a little up, up, a little up. On your on your returns by staying in the deal and then participating. I mean, I think you could do that.
00:43:09:07 – 00:43:16:18
Sean
Yeah, I think you could do I think you, you could have some people who are interested in doing that. And we’ve done it on other, other types of deals. We just haven’t done it on in the single family.
00:43:16:18 – 00:43:17:03
Rod
Got, you.
00:43:17:09 – 00:43:18:05
Raul
Know, more challenging on the.
00:43:18:05 – 00:43:24:20
Sean
Construction if we were doing, so if we knew for certain that we were going to do something was going to be like a long term rental, I think would make more sense. Yeah.
00:43:24:20 – 00:43:44:00
Rod
Right. Yeah, that’s what I’m saying. Yeah. I’m this is actually self-serving because I’m going to start doing this myself. And my son’s getting his GC license and and one of the things that we talked about is going out there and finding land and building some townhome complexes here, I love Florida, I mean, you got to deal with the insurance issue, but, I’m sure that’s that’s become a real issue for you like it is for me.
00:43:44:00 – 00:44:01:03
Rod
It’s crazy. It is. I mean, I settle for just under a million on this compound from Hurricane Ian. And I know if you when you leave, go out and look at my doc, it looks like something out of a Doctor Seuss book. It got destroyed by the two hurricanes. Milton and and, fallen. So let’s talk about briefly the entitlement process.
00:44:01:03 – 00:44:10:03
Rod
So we’ve talked about the construction. You know what you need the components you need to go out and build. But what is it? What is it? What does the entitlement process look like? Just to demystify it a little bit.
00:44:10:05 – 00:44:11:06
Sean
Yeah. And that’s a part.
00:44:11:09 – 00:44:12:19
Rod
You buy raw land then what.
00:44:12:20 – 00:44:14:24
Sean
Well first thing is you don’t buy real land okay?
00:44:15:05 – 00:44:15:17
Rod
Okay.
00:44:15:19 – 00:44:26:24
Sean
So I can tell people like one of the best rules of real estate development, real estate entitlement is don’t buy real estate. You make a contract with the land owner because of the risk of the entitlement.
00:44:26:24 – 00:44:28:07
Rod
Like to sell. It’s entitled.
00:44:28:07 – 00:44:40:00
Sean
Yeah, because getting the rezoning is a yes or no. I’m going to go in front of the city commission, the planning zoning commission, and I have to get three votes out of five. And if I don’t get my three votes, then it’s still a cow pasture or orange grove.
00:44:40:02 – 00:44:46:10
Rod
Got you got so you. So you never really pay for it. You lock it up. Yeah. It’s subject to the approval process.
00:44:46:10 – 00:45:08:14
Sean
Yeah. And I tell these guys, you know, and I said mentioned before, I have a kind of a reputation or, you know, relationships in this county. And I say, listen, I know you’re tired of farming or ranching and, you know, here’s what your land is worth. Is agriculture. What I’m going to do is I’m going to pay you more than what I’m going to agree to pay you more in exchange for the time to get it through this process, because it’s not worth anything to me.
00:45:08:18 – 00:45:10:05
Sean
I don’t know how to farm. I don’t have any.
00:45:10:07 – 00:45:14:23
Rod
You sure you can understand? If it doesn’t get approved and I’m. I’m screwed if I bought this and I’m.
00:45:14:23 – 00:45:24:13
Sean
Going to spend the money in that time because it does take, you know, the size of a project, but you might spend anywhere from 80 to $150,000 to get through that rezoning process.
00:45:24:13 – 00:45:27:12
Rod
Over what size piece of property or does it matter?
00:45:27:14 – 00:45:33:06
Sean
Some of the costs are fixed, but yeah, the larger property is going to be more. But you could count on,
00:45:33:08 – 00:45:37:03
Rod
Just to give me a range. Yeah. How many acres would you pay? 80 to 120.
00:45:37:05 – 00:45:38:01
Sean
40 acres.
00:45:38:02 – 00:45:38:13
Rod
40 acres?
00:45:38:13 – 00:45:54:09
Sean
Yeah. You can you can think in terms of maybe 1015 hundred 2000 per unit that you’re trying to get entitled to go through there. And like I said, some costs are fixed and some are variable. But I just tell them, like, I’m going to agree to pay you more than the property’s worth in order in exchange for you giving me the time to increase the value.
00:45:54:11 – 00:45:59:05
Sean
And by the way, when I’m done, it’s going to be worth more than what I’m paying you, right?
00:45:59:05 – 00:46:00:05
Rod
So please know that.
00:46:00:08 – 00:46:13:01
Sean
Understand that I’m not here, right? Yeah. Just to just to do a bunch of work. And I learned that early because I had one guy who got upset with me. He’s like, hey, you did this work. And. And then it was my course. We’re aware of it. Yeah. I’m not I didn’t spend and that was a big problem.
00:46:13:01 – 00:46:17:03
Sean
But we didn’t spend $700,000 to get our $700,000 back. Right.
00:46:17:06 – 00:46:17:23
Rod
You know, right.
00:46:18:03 – 00:46:23:00
Sean
On that to, to make it so it’s it’s getting that time. So you do not want to.
00:46:23:00 – 00:46:25:14
Rod
Buy what is that length of time on average.
00:46:25:16 – 00:46:26:07
Sean
I would say sure.
00:46:26:07 – 00:46:27:15
Rod
It’s geographically.
00:46:27:17 – 00:46:28:08
Sean
So it depends on.
00:46:28:08 – 00:46:33:24
Rod
Just a specific. You want some. You said palette is you want to shoot yourself before you do business. Yeah.
00:46:33:24 – 00:46:49:03
Sean
So there’s exactly just like we said, picking market. You want to pick municipal. So there’s certain places where I wouldn’t want to do a project because not only is it going to be painful, it’s going to take a long time and taking a long time cost more money. I’m not going to name specific ones, but.
00:46:49:08 – 00:47:04:09
Rod
Certainly certainly you see that in the blue states as well. I mean, there’s so overregulate it’s ridiculous. There’s a lot of talk about, you know, this fire damage in LA. It might take them a year to get a freaking permit again to rebuild their homes. Yeah. You know, because of the overregulation a lot. Right. So.
00:47:04:10 – 00:47:20:15
Sean
So first of all, you don’t want to buy the land. You want to identify land as potential. You want to get it in a contract. We have at least 12 months, maybe longer around the jurisdiction. And you want to have time to extend that contract in case you run into some kind of snags or delays. Okay. You’re going to take that into the municipality.
00:47:20:15 – 00:47:35:06
Sean
They’re going to have a planning and zoning department. They may call different things. And you have a pre-application meeting where you just talk about what you just like, hey, I have this idea of building single family homes or, you know, your son. I want to build townhomes. And do they say, that’s great, we like that or hell no.
00:47:35:06 – 00:47:38:01
Sean
And then you decide, do you want it? Yeah.
00:47:38:03 – 00:47:51:16
Rod
Correct me if I’m wrong. I’ve always told people this. If you have communication with the municipality, you always follow it up in writing because people forget what they said and what they didn’t say. Do you do that? Do you always follow it up with a hey to to recap our conversation?
00:47:51:16 – 00:47:54:23
Sean
No, we sometimes we will have emails and we take notes at them.
00:47:54:23 – 00:48:01:00
Rod
That’s what I meant. Email. Yeah. Just saying, you know. Thanks. It was nice to meet you. Yeah I appreciate you thinking this was a great idea or something like that.
00:48:01:00 – 00:48:19:19
Sean
And those guys in the planning and zoning, the staff, their staffs and staff is the one who really knows what you’re doing. And they write a report saying, we recommend you approve this or we recommend you deny it, or we recommend you approve of the changes. You always want staff to be on your side, right? And that’s you know, we talked about concentrated markets I concentrated municipalities.
00:48:19:19 – 00:48:26:10
Sean
So if I find one where I like the staff and they’re positive, I want to work with them. So I’m not coming in and they’re trying to figure out who is this person.
00:48:26:10 – 00:48:34:13
Rod
You take good care of them to. You’re really nice to them. You show them you’re integris, you’re responsive, and all of that makes a big difference.
00:48:34:13 – 00:48:52:13
Sean
For a lot to to do that. And so you want to you know, ideally if you live in the municipality, that’s better. You know, if you can find if you’re in a place like that where you have it, you can know them and they’re your neighbors, right. But you want to get that information from the staff, and then you’re going to proceed to your planning and zoning commission and ultimately a city commission.
00:48:52:13 – 00:48:55:07
Sean
Who’s going to vote yes or no to prove your your rezoning.
00:48:55:09 – 00:48:57:08
Rod
And this is without any plans or anything or, you know.
00:48:57:09 – 00:49:12:18
Sean
You’re doing plans, you’re doing conceptual plans. And so once you if you have a positive pre-op, you may spend money on a conceptual plan, which could be anywhere from 2000 to 5000, depending on the complexity, just to show them what you’re doing. You know, if you’re first time, I wouldn’t recommend doing that. Okay. Just go in there and say, here’s what I want to do.
00:49:12:18 – 00:49:32:00
Sean
Townhouses. Right. Well, you can’t do townhouses, but we do single family or we’re not going to do. And then you’re going to go through and it’s it it’s kind of like iterations of like, okay, I got a positive feedback from the staff. Now I’m going to hire a landscape, you know, planner to do a concept plan. I’m going to hire the guys to do, you know, some of the feasibility, like a phase one environmental.
00:49:32:03 – 00:49:49:20
Sean
I’m to do a search survey, a threatened and endangered species and kind of figure out, do I have a big problem with the land? And if I do have a problem, you know, to have wetlands or, you know, the elevation, topography is going to be extra development cost and you have to go back. Can I modify the plan and still make it work?
00:49:49:20 – 00:49:55:17
Sean
Do I have to go back to the seller and explain, you know, the problem with their land, which they always think somehow we caused the problem by figuring.
00:49:55:17 – 00:50:00:06
Rod
Out do they really? When you when you look at it. Yeah. Guilty. Guilty because you’re.
00:50:00:08 – 00:50:04:04
Sean
Like, I can’t believe you told me I my snooping is your property, that you have it and.
00:50:04:04 – 00:50:06:01
Rod
That’s another. And tell me it had this turtle on it.
00:50:06:02 – 00:50:19:20
Sean
Yeah, yeah. You just reminded me something else. If this is your first time doing it, when you talk to that landowner, ask them if they’ve ever had it in a contract before. And I forgot to say that and, and they’ll say yeah I did twice what happened. He told me I had some.
00:50:19:22 – 00:50:25:02
Rod
You know red, red pecker. Yeah. But yeah.
00:50:25:04 – 00:50:26:16
Sean
Yeah. And there’s, there’s like you know where.
00:50:26:16 – 00:50:28:22
Rod
There’s a flood zone or there’s, there’s environmental.
00:50:28:22 – 00:50:36:20
Sean
Contaminants. Right. If you can find that in the beginning, I kind of tell you, you want to be the first developer they ever talked to or like the third or fourth when they already figured out, you know.
00:50:36:20 – 00:50:39:16
Rod
Right. Right. Right. Well, that makes good sense.
00:50:39:18 – 00:50:58:12
Sean
But you go through that process and it’s, it’s very risky because it is a yes or no and things can change. I’ve had things where during the process, you know, there’s an election and the county commissioners change or the mayor changes, and then the whole tone can change as the cities take in different directions, so that you sometimes can’t control that.
00:50:58:14 – 00:50:59:18
Rod
Have you lost deals over it?
00:50:59:18 – 00:51:01:19
Sean
Oh yeah, we had one. We had a we had a very.
00:51:01:19 – 00:51:03:00
Rod
Money expended in Europe.
00:51:03:00 – 00:51:25:05
Sean
Oh yeah. We had, we had a very supportive mayor, and one project and rolls. This was a sad long story, very sad. But we had a mayor who understood the project. It was a large mixed use project is going to have a huge impact on a smaller city. And he supported it. And he had a couple, you know, friends, not friends, but his his colleagues understood that it was not going to be an easy thing to do or something necessary to do.
00:51:25:05 – 00:51:33:09
Sean
And so during our process, they had an election and he lost. And there’s a new mayor and meet with a new mayor. And, that person kind of like.
00:51:33:11 – 00:51:33:24
Raul
Yeah, she was.
00:51:34:02 – 00:51:49:07
Sean
I wouldn’t say she like, lied to us, but she missed lettuce and like, we going to continue on. But she really wasn’t. And she was building opposition in the background. And by the time we figured it out, I’m like, I think we’re sunk, you know? But at that point, you just. All right, we’re going to have to take your licks and move.
00:51:49:09 – 00:51:59:10
Sean
Yeah. And so we write off our expenses to pursuit. We didn’t buy the land, so we’re not stuck there with land that we can’t develop. But, you know, we did have to, like, just so that happens. And it’s.
00:51:59:10 – 00:52:14:00
Rod
It’s part of the same in the multi-family business. You know, you going and you put an asset under contract, you do your due diligence and you may find something. Sometimes the best deal is the one you walk away from. And you may have already spent, you know, ten, 20, 30, $40,000, not hundreds. If you’ve got a huge mixed use development like you talked about.
00:52:14:00 – 00:52:15:11
Rod
I can’t even think about the pain on that one.
00:52:15:11 – 00:52:20:03
Sean
But that one we had four partners, so we’re like, let’s take because we knew it was like a hard deal, like it’s going to be expensive.
00:52:20:03 – 00:52:22:14
Rod
So let’s let’s take your licks, okay.
00:52:22:19 – 00:52:29:16
Sean
And you’re right. I mean, I think you’re better off walking away from a bad deal and trying to make it work because it’s just going to be in your head and take it.
00:52:29:17 – 00:52:45:10
Rod
And it’ll take up your time. It’ll slow you down and everything else that you’re doing. Well, I will tell you, this has been hugely educational for me. I really appreciate it, guys. I hope I didn’t get too much in the weeds on this stuff, because just something I’m very interested in. Hopefully you all got value from it as well, those of you listening.
00:52:45:10 – 00:53:03:00
Rod
But, you know, I think there’s real opportunity and entitling land and doing your own construction and building things is something I’m very excited about. And, you know, I really appreciate you guys coming out here. I know, you know, it’s I know it’s a bit of a drive from Orlando. And, it’s great to meet you both. You know, I think the place that.
00:53:03:02 – 00:53:08:09
Rod
Did you go to Kevin Bob’s mobile home park training. Was that where I met you?
00:53:08:11 – 00:53:10:19
Sean
I don’t care, I talked on the phone with Kevin.
00:53:10:24 – 00:53:12:24
Rod
Wasn’t that because you said we met at some?
00:53:13:01 – 00:53:22:00
Sean
Was it was a guy from Canada and it was in Orlando. Oh, okay. And it was. He had some kind of real estate exchange I can’t review with you, but that was my first time seeing you in person.
00:53:22:00 – 00:53:34:19
Rod
Okay, I okay, well, I thought maybe that was it because I did a training for Kevin for one of his things once in Orlando. I do so many of these things. You lose track. Melissa, it’s a pleasure to meet you guys. I appreciate you coming out. And, I look forward to staying in touch.
00:53:34:23 – 00:53:36:19
Raul
Yeah. This was incredible. Thank you so much.
