September 2023

Stijn Van Nieuwerburgh, Columbia Business School professor of real estate and finance, joins ‘Power Lunch’ to discuss key triggers of an urban doom loop, dramatic reduction in office demand adding downward pressure on city tax revenues and bank equity eroding due to debt exposure in properties with declining values.

In my last article, I talked about clarity—what it is and why it matters in content creation. I also provided five questions you can ask if you’re struggling with clarity or want to ensure your piece is as clear as possible.

The goal was to get you started in producing clear, influential content that educates, persuades, and leads to action.

You may be ready for even more clarity if you read that piece. I assure you— your readers are prepared for more clarity now.

To give them the clarity they’re hungry for, put the following 10 ideas to work. By doing so, you’ll create content that builds trust and spurs sales.

1. Define undefined terms and overloaded words

Understanding your audience is the first step to effective communication. Common jargon in one field may be completely foreign in another.

On the one hand, if you’re writing for a specialized audience, like gastroenterologists, you need not spell out or define industry-specific terms like EGD, or esophagogastroduodenoscopy. On the other hand, if you’re writing to patients undergoing an EGD, spell out the abbreviation, define it, and explain the procedure in layperson’s terms.

Several years ago, I worked as a development editor for a technical publishing house. That’s where I learned how overloaded words can be a minefield because, in programming languages, the same word can have different connotations.

For instance, “arrays” exist in the programming languages Python and C++, but the word means different things to programmers in each language. Same thing with “variables.” Some languages like C/C++ and Java have strict rules about what variables can be but in others, like Python and JavaScript, you can make variables anything you want.

If a term has multiple meanings that may confuse readers, tell them which meaning you’re referring to—and give yourself one point for content clarity.

2. Handle new topics as they come up

If you find yourself introducing a new topic while writing, handle it then or tell readers you’ll cover it later. Don’t leave readers hanging.

For instance, suppose you work for a cybersecurity firm and are writing a blog post about the importance of strong passwords. Midway through, you mention two-factor authentication (2FA) as another layer of security. Either explain what 2Fa is right there or say, “We’ll delve into the details of two-factor authentication in an upcoming post.”

When you take the time to handle new topics as they come up, the reader’s flow will remain unbroken. You want your content to flow so well that readers can read straight through, follow your thought processes, nod along with you, and be ready to say YES to the next step in the buying journey.

The alternative is that you don’t handle new topics. When that happens, the reader’s flow is broken, even if momentarily. If the question or gap in their understanding is too large, you risk readers leaving your content to search Google. They might get distracted and never return to your content.

3. Address prerequisites

Include content or pointers to content that readers should understand before they dig into your materials.

For instance, if you’re writing a technical blog post on machine learning algorithms, you might include a sentence in the introduction that says, “Before you proceed, make sure you’re familiar with basic Python programming and statistical concepts,” adding links so readers who need it can explore the prerequisite topics.

If you’re writing an ebook focused on sous-vide cooking, you might note, “This ebook assumes you have a sous-vide machine. If you’re new to sous-vide, here’s a guide to get you started.”

Prerequisites allow readers to get up to speed before digging into your content. Without prerequisites, you risk readers quickly becoming frustrated and clicking away.

4. Emphasize takeaways and key points

Imagine a busy reader scanning your document. What do you want them to stop at, be drawn to, or otherwise engage with? Emphasize those points with summaries, callouts, sidebars, and pull quotes to let readers know what’s most important in your content.

The book Third-Party JavaScript sets readers up well by including a bulleted list of what’s to come at the start of each chapter.

If you’re creating a business report on market trends, you might begin each section with a similar bulleted list or a one- or two-sentence summary of what the section will cover.

If you’re writing an ebook on personal finance, consider using sidebars to explain financial terms and concepts. You might also end each chapter with a summary and key takeaways to reinforce the material.

Throughout your ebooks and other documents, you can also use callouts to highlight key statistics or quotes from industry experts. For its content creators, North Carolina State University provides examples of a few different callout designs.

Emphasizing takeaways and key points lets readers know what to focus on. It’s as if you’re right there on the page with them saying, “Hey, check this out; it’s important.”

5. Provide a sense of forward flow

The next technique, forward flow, is about how you can help readers maintain a sense of momentum as they’re reading. There are four techniques: Segues, connectors, repeated words, and repeated graphics. Each helps readers transition between sections, ideas, and paragraphs and provides an ongoing sense of forward movement.

Segues

The word segue comes from the music tradition in the sense of a transition from one song or melody to another without interruption.

It’s pronounced like Segway®, the upright scooter.

In the writing world, segues are smooth transitions that link two different but related topics or sections. They serve as bridges to guide readers from one point to the next.

For example, in an academic journal article, a segue might look like this: “Having discussed the limitations of the previous study, let’s now explore the methodology of our research.”

In a business presentation, you might say, “Now that we’ve covered our Q2 performance, let’s look forward to Q3.”

Segues give your writing a sense of cohesiveness and let the readers know you’re moving from one point to another.

Connectors

Connectors are words that serve as bridges, linking sentences and paragraphs to ensure the logical flow of your content. They’re critical for guiding readers through your ideas and helping them follow complex concepts.

Here are several standard connectors:

• Therefore
• Moreover
• Also
• Furthermore
• Conversely
• Nonetheless
• Similarly
• To illustrate
• For example
• Yet
• Still

Using connectors lets readers easily follow your thought process. Connectors also enhance readability—another plus.

Repeated words and phrases

Repeated words and phrases are another way to maintain forward flow.

For example, in an article on remote work productivity, you might write these two paragraphs, with connectors italicized:

Paragraph 1: Flexibility is one of the key advantages of remote work. Employees can set their schedules, allowing them to work during their most productive hours. This flexibility can lead to increased job satisfaction and better work-life balance.

Paragraph 2: But flexibility can also be a double-edged sword.

Repeated graphics

Repeated graphics prevent readers from having to look backward.

Suppose your ebook presents a complex graphic on page 6. Then, on page 10, you refer to the graphic again. Instead of making readers turn back to page 6 to see what the graphic looked like, why not present it again on page 10, right when readers need to see it?

Third-Party JavaScript uses this technique. On page 5, the authors present a large graphic

Then, on pages 9 and 10, the authors refer to the graphic again. But instead of making readers turn back to page 5, they repeat the relevant portion of the graphic, making only tiny tweaks to adapt it to the new context.

This technique works not just in books. You can use it in course content, cornerstone blog posts, ebooks, and other in-depth content.

No matter the content, the more you can do to maintain a reader’s forward flow, the more clarity you bring.

6. Use concrete examples and real-life stories

Use concrete, simple, real-world examples and practical stories to illustrate to readers why what they’re reading is worthwhile.

For instance, in the article on cybersecurity for small businesses, you might share the story of a local bakery that lost thousands of dollars in revenue when hackers broke into its online ordering system.

In a business report on employee engagement, you might talk about a company that saw a 15% increase in productivity after implementing the employee engagement program, translating to an extra $2 million in annual revenue.

If you’re teaching a technical topic, as my authors did at the technical publishing house, open each section with a concrete example—before you dive into the training. The example lets readers know that the teaching to come is essential and will result in an outcome like the opening example.

Real-life examples and concrete examples help readers feel trust in your content. Use them whenever you can.

7. Ask yourself “why?” and “so what?”

By asking “why” and “so what” about your content, you can make sure to answer those questions for readers, too.

For instance, if you’re writing an article on time management, the “why” might be to help people become more productive. The “so what” might be so readers know techniques that can save them several hours each week.

Share the “why” and “so what” with your readers by bringing those elements into your content. Here’s an example for an article on the Pomodoro technique:

“By adopting the Pomodoro technique, you can break your work into intervals to improve focus. Intervals are important because they maximize your productivity. You’ll find yourself completing tasks faster and having more free time.”

When you take the time to ask high-level questions about your content—preferably before you begin writing—you ensure that what you’re writing is relevant to readers.

8. Ask what transformation you want readers to experience

Knowing the transformation you want readers to experience also serves as a guiding light for your content. Ask about the transformation before you begin writing so you can design your content to carry readers from their current state to the state they want to be in.

For instance, if you’re planning a webinar on thought-leadership writing, your transformation statements might read as follows.

Current state

Many executives publish generic content that blends into the sea of online sameness; such content fails to establish them as industry experts.

Future state

The best executive thought-leaders post insightful, data-driven content that addresses pressing issues and trends in their industry, offers unique perspectives backed by data and research, provides actionable insights and solutions for readers, and is frequently cited or shared, further establishing their authority.

Transformation

The webinar will guide executives from a state of producing generic, forgettable content to a state where they’re recognized thought leaders. To achieve this transformation involves

• Identifying niche topics where they can offer unique insights.
• Learning how to conduct and incorporate research into their content.
• Understanding the art of storytelling to make complex ideas relatable.
• Learning best practices for promoting their content to a wider, targeted audience.

Building those thoughts into your content will help readers understand and look forward to the promised transformation.

9. Identify your content’s top three takeaways

Takeaways are another guiding framework for your content. They ensure readers leave with the big ideas you want them to have.

For example, the top three takeaways for a white paper on AI in healthcare might be:

1. Understanding the potential applications of AI in healthcare.
2. Recognizing the ethical considerations involved.
3. Identifying steps for healthcare organizations to implement AI solutions.

Just like asking “why” and “so what,” identifying your key takeaways helps you to help readers get what they need and what the content promises.

10. Identify a single top takeaway

Zeroing in on the most critical takeaway can help you sharpen the focus of your content even further.

For instance, the top takeaway for the white paper on AI in healthcare might be to understand the transformative potential of AI in healthcare.

To ensure the paper delivers on its promise, you could open and close with real-world examples demonstrating how AI revolutionizes healthcare.

Can you guess the single top takeaway from this article?

The takeaway is this: Your readers are hungry for clarity. Use the 10 techniques in this article to infuse your content with clarity, build trust with readers, and publish content that sells.

Now it’s your turn. Go forth and produce clear content!

Dave:
Hello everyone and welcome to On The Market. Today I am joined by Kathy Fettke. Kathy, how’s it going?

Kathy:
Good. I’m excited for this interview because I’m a huge fan of Zonda. I watch all their stuff.

Dave:
Yeah. Well, since you’re such a huge fan, why don’t you tell everyone what Zonda is?

Kathy:
Well, I did actually talk to our guest today before the recording, and it used to be Meyer’s Research, and I interviewed those guys a bunch and would follow their information and they really just focus on new homes. They help new home builders figure out where to build their homes and where the market is and the demographics. And all that stuff is really important for investors too, so I figure if you’re a new home builder, you have to know what’s coming because it takes years and years to get those subdivisions up and running and make sure that you’re not timing the market incorrectly.
So I’ve always very much valued the John Burns of the world and the Myers Research because that’s what they do and they help builders. So Myers Research worked with a data company called Zonda, and apparently they merged and now it’s just Zonda. And I’ve been a big fan since they merged and excited to actually talk to someone from within and see how they do what they do.

Dave:
Yeah, absolutely. I think it’s super helpful to talk to these types of people because like you said, builders are sort of on the forefront of the economy and what’s going on with demand and supply dynamics in almost every market. The other part of it, and the reason we’re bringing these people on too with more frequency, is that as investors, the new home market is becoming more and more important. And I don’t know, you operate in a different world than I do in real estate, but for the first 10 years of my investing career, I never really even paid attention to what was going on with new homes because it was just a small part. As an investor, I never really thought about buying new construction.
Now as of the last couple of years, new homes are taking up more and more of the total number of home sales. Normally it’s like 10%, I’ve heard different estimates that’s between 15 and 30% now. Build to rent is a new thing that’s becoming increasingly popular. So I’ve personally tried to learn a lot more about the new home sale market and we’re bringing on guests like Nikolas today to help everyone understand it because in addition to the economic understanding and knowledge, this also might play a bigger and bigger role in our respective portfolios for the next couple of years.

Kathy:
Yeah, I have the opposite experience where when I started investing, I was already busy, but I wanted to buy in certain markets, not where I live, and I didn’t know how to assemble a team and be able to buy homes at a discount and then have a renovation team, and it just was too much for me. So I thought, “Oh gosh, a new home, I don’t have to do anything.” And at the time, it was 2004 when it just made sense. So I actually started with new homes. Of course, when it all depends on the market, when the market collapsed and foreclosures were what was for sale, we pivoted, but we’re pivoting again because it is so hard today to find foreclosures, to find existing inventory. So new homes is what you get, and fortunately you can negotiate with builders because they’re business people, right, they need to make sales. So I think it’s important for investors to not take that off the table and not think, “Gosh, if it’s easy, I shouldn’t do it.” That doesn’t make me a good investor.
The other thing we talked about on another episode is that you can get better insurance rates on a new home, and that matters a lot when you’re doing your proforma. That matters so much today. So it can make a lot of sense today.

Dave:
Yeah, and you just hit on something, then we’ll promise we’ll bring Nikolas in. But you said something about them being business people, and I think that’s something that not everyone immediately understands is that builders have to sell their homes. I mean they don’t absolutely have to, but they are strongly incentivized to sell whatever they build. And unlike a home seller who maybe if they don’t get their price, they’re just like, “You know what? We’re going to wait a year, or we’re just going to pull it off the market. We’re going to wait for more bids.” Builders, that’s not how their game works. They need to be constantly selling money to get cashflow in to pay off their debt, to build new properties, to acquire new land and their business in some ways, sort of like a flipper, is to sell these properties as quickly as possible.
And so we will definitely bring this up with Nikolas, but there’s been a lot of incentives to help buyers purchase new homes, which is giving it a further advantage over existing home sales. So a lot to uncover here and I think we got the right person to help us understand it. It’s Nikolas Scoolis from Zonda, and we’re going to bring him in right after this break.
Nikolas Scoolis, welcome to On the Market. Thanks for being here.

Nikolas:
Thanks so much for having me. Excited to be here.

Dave:
Well, let’s start by having you tell us a little bit about yourself and what you do at Zonda.

Nikolas:
Yeah, so my name’s Nikolas Scoolis. I’m the Manager of Housing Economics at Zonda, which is residential and some commercial real estate data provider as well as consultancy. We work with a lot of the big public builders as well as the investors behind those companies who are looking into invest in secondary and tertiary companies in housing, so like appliance providers, paint providers, etc. like that. My job is a lot of data analysis model building. I build our public facing indices as well as helping with consultancy projects.

Dave:
Awesome. Well, it sounds like you are the guy to talk to. Thank you again for joining us. So your team just released the new Home Monthly Update. Can you just tell us a little bit about this report, first of all, what you’re tracking in it and what the most recent findings show?

Nikolas:
Yeah, for sure. So we released this, as it says, on the new home market, trying to cover all the primary points. So we talk about sales, pricing, supply, and we do so on a monthly basis because we at Zonda have in-house research team and we survey about somewhere between 60 to 70% of the entire new home market each month, and so we’re able to kind of get really valuable insights that way. For example, the census, which publishes a version of new home sales, only surveys about 10% of the market. So our data collection is really comprehensive.
So this month what we’re seeing is a little bit of maybe surprising if you’re thinking about the housing market as a whole, but the new home market has been really, really strong over the last few months, and it’s been really benefiting from the lack of supply on the resale side. Builders also have been able to take advantage of being more flexible, meaning they could bring products to market that buyers may be willing to compromise on because there’s nothing available on the resale side, and they’re also able to maybe build smaller and right size and bring that price down. So we’re seeing really strong new home sales across the country right now. We’re estimating about an annualized pace of about 720-ish, which is a relatively strong historical number, and it’s up about 30 to 40% from where it was in the slowdown last year because last year rates were beginning to rise and buyers were beginning to pull back and there was maybe a little bit of panic, but recently we’ve seen it kind of come full circle and seeing a lot of strength there.
At the same time, we are seeing prices continue to come down and a lot of that has to do with the historical affordability crunch we’re seeing in the market. Obviously, rates just surpassed 7% last week on a national average for a 30-year fixed. That is high when you’re considering where prices are. But we have data that splits the market into price thirds, so we’re talking about entry level, move up, the high end market. And the bottom two price points, which are where most of the people are shopping across the country, are basically just flat year over year.

Kathy:
Are you seeing that on a national basis with prices coming down or just in specific markets?

Nikolas:
No. Yeah, national basis. Some places across the country are actually seeing fully negative year-over-year changes, but obviously prices have appreciated so much over the past two or three years. Calling it negative is almost disingenuous, but we’re seeing prices flatten out. And part of that is of course because of rates, but as I mentioned earlier, builders are building smaller and so they’re trying to keep this top line number down, but we’re still seeing price per square foot go up. So you’re kind of having a trade-off there, but the top line number is what’s important to buyers when they’re trying to pencil out what they can afford on a monthly basis.

Kathy:
Yeah, I was just going to ask that. It seems like over the past decade there’s been under-building compared to household formation, but for builders obviously they want to make a profit and they weren’t really making that profit with affordable housing, so they were building higher end. Would you say that that’s true and is that changing?

Nikolas:
I think it’s broad-based. Obviously you have builders who are targeting different price points. We are seeing the most appreciation on the high end still, but I think maybe there’s less price sensitivity there, maybe less rate sensitivity, because a higher end buyer might be more inclined to pay cash or a larger down payment with a higher portion of the total sale price in cash. But we are seeing a lot of more affordable units come on, and I think that’s just the nature of the beast of the market at the moment.

Kathy:
Yeah, we just saw that Warren Buffet is investing in KB Homes and they typically build starter homes or more affordable homes, so definitely a push there to bring on more affordable housing.

Nikolas:
Definitely. Yep.

Dave:
Do you expect that trend to continue, Nikolas, that more builders are going to be able to build affordable homes profitably and will focus their efforts more in that area?

Nikolas:
Yeah, I think the opportunity is there for them because I think traditionally if you were a buyer, you would be more inclined to historically if you’re looking for a cheaper house, look on the resale side. But over the last few years, because there’s so many people who got new mortgages or refied and locked in a rate at two, two and a half, 3%, there’s very little incentive for anybody to put their home on the market at the moment. And so that entry level price point or maybe a fixer upper or something like that that a first time buyer would be looking to pursue just doesn’t have that option really at the moment. There’s just nothing for sale on the existing side.
So builders have a really, really unique opportunity to dictate their own market, and so even if you look at maybe the square footages being built now, which are even under sub two on average in some markets, like 1500 square feet as an average unit size and some of these projects, that gives opportunity to these buyers to afford something. But it gives builders more margin to kind of push a higher price per square foot and still make good profits.

Dave:
Yeah, that makes sense. Kathy and I were actually talking earlier and we were chatting about how difficult it can be for builders to build affordably and make that still profitable. I’m curious, because your survey has such a wide breadth of respondents, do you see that small builders are also able to build these affordable homes? Or is it really the large publicly traded ones that can achieve a level of scale that a lot of other types of builders cannot?

Nikolas:
Yeah, we’re definitely seeing more success for the big publics, and a lot of that is due to how they can scale. As you said, they can buy more land in bulk, they can afford to hold onto land if they have to, but the privates still do have some flexibility because you can be building in the infill units where there isn’t just much land available at all. So you can be doing these smaller scale developments but in more desirable areas and attracting very good dollar for that because of that.

Kathy:
In the report, it was really shocking that some markets were seeing a pretty strong recovery and one of those was Sacramento and San Francisco. Explain that one.

Nikolas:
Well, I mean there is some strength there right now. Just again, we’re going to deal with the lack of supply and builders being the primary option. Because if you’re just looking broader nationally, we’re only seeing about national pace of existing home sales, about 1.4 per month, even if you’re factoring in the stronger new home numbers relative to that. Still, total housing sales across the country are down about 15 to 20%, so it’s kind of hard to reconcile the two between the strength in the new home market and the weakness in the existing. But with these west coast markets primarily, they were hit so hard negatively last year that a lot of this has to do with the base effect. They were just so down a year ago that doing moderately well now looks extremely good. That’s what we’re seeing a lot. The top five markets for us among major metros were all west coast and that’s because of that base effect.

Kathy:
San Francisco in particular, there’s not a lot of room to build, you’ll be building on the water. I do have a niece who’s a real estate agent there, and she said she has people on a wait list, but there’s just nothing available. And when something comes up, it sells immediately, so fascinating.

Nikolas:
Really tricky stuff for a buyer.

Dave:
I am curious, have you seen Nikolas, the demographics of the buyers change? I know you mostly survey the builders, but are the type of people who are attracted to new construction relative to existing homes changing given these inventory dynamics?

Nikolas:
Yes and no. Obviously, the primary buyers historically are the people looking to start a family who need more space, want to commit to a payment on their own schedule rather than being subject to whatever their landlord changes their rent to. But as we know with the pandemic and stuff, we saw a lot of retirees looking to push into smaller units as well to be closer to their family. We call it baby chasing, moving where their kids are having kids, and we’re still seeing that widespread in some of these hotspot markets.
And from a very slight personal anecdotal experience, I was pursuing with my girlfriend out here in Southern California, a very small two, three bedroom, single level home, and every other bidder on that house was a recent retiree looking to downsize from their old home into this smaller home.

Dave:
Interesting.

Nikolas:
So I think it’s kind of like a weird situation because I don’t think a lot of these people who are looking to move into these smaller homes as a baby boomer or Gen X are going to then further sell their home. I think because their rates can be so low in their current holdings, they’re just holding onto it as a rental unit, and then that’s another unit that comes off the market and further hinders the supply problem.

Dave:
Yeah. Also if they do, they probably have a lot of equity from a previous home that they can outbid first time home buyers?

Nikolas:
We saw that a lot over the last two to three years. People, especially from California where homes are obviously a lot more expensive than Texas or places in Florida or Raleigh and Charlotte have been really big hotspots, you can just basically roll that equity into a rate free purchase if you choose to.

Kathy:
Yeah, BiggerPockets just did an article on baby boomers and I believe I saw that baby boomers hold 50% of the wealth and they’re just a quarter percent of the population or something like that, and they have a lot of cash. I would hope so after 30, 40 years of working that you’ve got some cash built up. So this market doesn’t maybe scare them as much. They’re looking more for lifestyle. Sorry, they’re beating you out on [inaudible].

Nikolas:
I know. It hurts me, but I mean good for them I guess.

Kathy:
So where are you seeing the best incentives and what kinds? I mean I know that a lot of builders are paying to buy rates down, paying points so that buyers can afford the property with a lower rate. Are you seeing that type of incentive or like you said at building a smaller house that might be more affordable?

Nikolas:
Yeah, that’s a really good question because rate buy downs have been super, super important. And that’s another thing the new home side has over the existing side is that builders are willing to work with buyers to get the cashflow going. And so interest rate buy downs, they’re not like a new idea, but those share of projects that we’re doing that over two years ago compared to now has just risen dramatically. We’re currently seeing across the country about 60% of all the projects offer some kind of incentive, and the most commonly that we’re hearing are interest rate buy downs.
And that’s an interesting topic as well because obviously that helps with the immediate affordability relief, but as interest rates keep going higher, it’s kind of a question of how long will that strategy continue to attract buyers? Because if there’s not any signs that rates are coming down in the year or two years, will that still continue to move the needle for people? We’ll have to see. But before that, we would see incentives like closing cost coverages done by the builders or appliances included or something like that.

Dave:
And do you expect those incentives to continue even though … It’s sort of this weird dichotomy where builders seem to be in this position of strength, but they’re also offering a lot of incentives. So do you think those incentives might be going away?

Nikolas:
I think, yeah, if builders have their way, they’ll be dwindling down sooner rather than later. But even though builders’ biggest competition is the resale market, they are still competing with each other. So it is still a marketing expense to say, “Why would you go for that home and that builder’s project when you can come to ours?” We’ll do this little bit to move you over the line.”

Kathy:
Yeah, builders don’t want to cannibalize themselves. They’d rather do an incentive than a price reduction every day because then they’ve just made a new comp that’s not good for them.

Nikolas:
100%.

Kathy:
But it seems like it used to be, “Hey, you’re going to get these gorgeous new countertops or this upgrade. That’ll get you to pay this price,” but now it’s a better deal to get a lower interest rate. Like I’ve said way too many times, I just got a four and three-quarter percent interest rate because the buyer was willing to pay a bunch of points and it really makes the numbers work from an investor perspective. Do you have any data on how many of these new homes are being sold to investors looking to rent them versus first-time home buyers or buyers?

Nikolas:
Not exactly. It’s something we’re pursuing to look into on a larger scale. We’re trying to isolate in the deeds which are investors, but there’s just a lot of gray area in facts because people do … The best way to isolate it out in the deed itself is kind of looking at mailing addresses, but there’s still a bunch of gray area. But obviously we do know investor activity is extremely high, especially from an institutional standpoint, and that is somewhat concerning if you’re a buyer. You’re competing with not only people with big pockets, you’re competing with companies with gigantic amount of cash on hand. It’s a little scary.

Dave:
And is that just true across the board that institutional investors are participating more in the new home market?

Nikolas:
It definitely varies market to market. It has to obviously make sense as a rental for a lot of these places depending on what price they’re paying. So you’re looking at a lot of activity in the more affordable places where there’s room for rental rates to increase at a higher rate. And then obviously on the further end of that, you have full projects that are build to rent. They’re building these projects themselves to just rent them themselves and operate as a landlord, which is obviously a very complicated process because the land price has to be exactly right for it to work, but it does give these builders ad out also. If they need to liquidate, they also have the price appreciation they’ve gained in value of their rental units. So it’s kind of a very interesting prospect, but as I said, it has to work exactly right in terms of land value for it to really make sense.

Dave:
Well, just to clarify, when we talk about your survey and the data, does that include build to rent as well?

Nikolas:
No, this is new for sale.

Dave:
Okay. Okay. So that’s just a different class of sale?

Nikolas:
Yeah, completely different. We do work on a lot of build to rent projects, but these are for sale units.

Kathy:
So we’re seeing builder confidence has been up, but I think it just declined a little bit recently because of the recent mortgage rate increases. Do you see that trend continuing of builder confidence versus a decline in the future?

Nikolas:
Yeah, I think you’re right. I think it recently declined to about 50, which if I’m recalling reading it right, I think it was declined to 50 and 50 is the marker of how they indicate positive confidence or negative confidence. So it’s right on the border right now and I think it’s a cautious confidence. There’s so many dynamics that are good for them, but that price and affordability crunch is still just weighing down on their heads. And especially if rates keep going up, at some point there’s just diminishing returns in what buyers can afford.
So I think it’s kind of weighing those two aspects because if you look at the supply, look at what was happening in the resale market, there’s so much going well for them, but they still have to make sense for people to buy it. They still have to be able to afford it. And so it’s just tricky. It’s a very weird environment I have to say.

Kathy:
It is tricky. I mean I syndicate and we have a development just outside of Reno, and we were so excited because we’re building affordable housing there, and sales came to a stop. It was a shock. Of course, Reno may have got hit harder than other markets, but starting to pick up again. But it is, it’s a crapshoot. You don’t know. We’re also building “affordable” in Utah, but it’s still expensive for most people, affordable for the area maybe. How do you build what would be considered affordable today and how can you build at that price and make a profit? It’s tough.

Nikolas:
Yep, super tricky.

Dave:
One of the things I keep hearing about the new home market is that builders are building more, and this is going to help us alleviate a national housing shortage that depending on who you ask is somewhere between three and seven million homes. But when you look historically, we’re not really at the height of building, and obviously new homes make up a small portion of total inventory. And so I’m just curious, do you believe that there’s any hope that building is going to pick up to a level where it would actually help increase overall housing supply?

Nikolas:
I definitely don’t think they can bridge the gap if resale supply is this little as well. New home market is traditionally about 10% of sales. It ranges obviously. Currently, it’s about 15% and that is the highest we’ve seen in a very long time. And like I said, we’re still down when you’re factoring in total market sales about 20% from where we were last year. So with the resale market and the resale supply being so low, currently the new home inventory of standing inventory makes up about 30%, which is way up. And we’re still so under-supplied, new home building would have to increase to such a dramatic level while resale supply is this low that I just don’t see that being feasible.
I think there are gains they can make, it doesn’t have to be talking in absolute, like any supply improvement is good supply improvement if you’re talking about from the buyer’s perspective. But bridging that gap on the new home side alone is just I don’t see that happening. There’s got to be some kind of incentive to get the people with the low rates to want to move or want to sell and trade in those loan mortgages. And that’s the impossible conversation I think is how do you do that?

Kathy:
What communities, what areas, are seeing more activity in subdivisions? I mean I know subdivisions kind of went down, the count went down, because I think builders didn’t want to take that kind of risk. But are we still seeing areas in the country where builders are coming in, creating big communities? And if so, where?

Nikolas:
Yeah, so the places that we’ve seen the most gain on a year-over-year basis are Austin. Austin’s been a weird market as well because it was so dynamically out of this world hot, and now it’s slowing. It’s still seeing sales, but obviously uncomparable to what we saw over the last couple of years there. Riverside, there’s land there, and also I think a lot of the buildings were building for demand that people were seeing early in the pandemic when they were willing to kind of move out of the higher cost lifestyle markets because of remote work. And then Minneapolis, but all three of those … Or sorry, bar Minneapolis, but Austin and Riverside are still down double digits compared to where they were prior to the pandemic in terms of supply. So we’re seeing gains, it’s just still lower than where we started.

Dave:
That’s super interesting. Are there any places where builders are fleeing?

Nikolas:
Fleeing is a good question. I’m not exactly sure pulling out completely. I think there are markets that are a little bit trickier. Of course the Bay Area is tricky in how they’re going to manage their employment base. Are tech company is going to be able to bring all their employers back? And if they do, obviously that’s very good for housing because those incomes are so high and people will be moving and flowing into it. I think generally there’s room for a builder in any market. It depends on your execution and how you are marketing your product and what you’re bringing and delivering because I think the execution is what is most important.

Kathy:
And even in smaller markets like the tertiary ones, let’s just say, I don’t know, Columbus or Cincinnati or Huntsville or some of these smaller markets, are you seeing builder activity in those areas?

Nikolas:
That’s actually a good point. Boise is one that stands out as being a little scary just because there was so much inflow and so much slowing down in terms of building there. And anytime I look at the numbers on how much things have changed over the last bit, Boise is always a standout of something that’s seeing crazy changes.

Dave:
Yeah. Nothing against Boise, but they’ve certainly been hit hard, not just in new homes but in existing home sales as well.

Kathy:
But if I were a betting gal, I would say it’s going to come back because that money’s coming from California and you’ve still got people retiring who don’t want to do it in such an expensive market and they’re going to go to a beautiful place like Boise. So it’ll probably come back, but it’s going to take a while for that.

Nikolas:
Yeah, relative affordability is one of the biggest drivers there are, just how much farther your dollar goes.

Kathy:
Yeah.

Dave:
Yes, relative being a very key point because people, they look at Boise and they’re like, “It’s not affordable,” and is true for the majority of people. But to Kathy’s point, if you’re a wealthy Californian, maybe it’s extremely affordable.

Nikolas:
Relative is the key for sure.

Kathy:
Or even not wealthy. I mean my daughter is just starting her career and the rents are $4,000 or $5,000. It’s tough.

Dave:
In California?

Kathy:
Oh, yeah. Yeah, and California is so going anywhere else, and she’s looking and that would break my heart. I want her near me, but it’s not just wealthy who live in California, it’s people trying to survive with rents that are just ridiculous. And at some point, you just give up and just go away. You’re just going to go somewhere where it makes sense.

Nikolas:
That’s the current battle we’re living. As I said, we were trying to pursue a house when we were getting quoted rates in 2.8, and obviously the prices are high, but we didn’t find something that worked out or we got outbid. So we’re in this weird flux point. We can’t see ourselves leaving California, but our rent is so under market at the moment, so we’re kind of almost locked into a rental unit, which is extremely bizarre because anywhere we want, if we want to get a different rental unit, it’s like an increase of $1,000 a month, which we can’t justify.

Dave:
That’s crazy. Yeah.

Nikolas:
We could do it, it’s just the trade-off isn’t worth it. And then so we’re saving for a house and there’s nothing available. It’s like-

Dave:
It’s tough.

Nikolas:
It’s very tough for buyers out there.

Kathy:
Well, that’s why you’ve got to invest in property and then you could live in California and rent, but own property elsewhere. That’s been what I’m encouraging people to do for so long because it just doesn’t make sense.

Nikolas:
That’s good advice.

Kathy:
Yeah, especially at these rates to own in California. It’s tough for a starter home or a growing family.

Dave:
All right, well Nikolas, I’m curious, is there anything else you and your team are working on or studying that you think our audience of small to medium-sized real estate investors should know about?

Nikolas:
The other big bit of work we’ve been doing is trying to capture how much square footage is changing, but we kind of talked about the right sizing that’s building smaller, just being able to keep that top line number down. And it really is dramatic how much square footages are declining. We’re seeing basically every market around the country end up being smaller and smaller by average listed unit size. And it’s something I think will keep happening until there’s some kind of pullback in demand because it’s just too small, but I expect that trend to continue, so there’s going to be even more premium on bigger houses on the existing side I think.

Kathy:
Well, I just want to thank you guys so much because you’ve been offering so much information and data ever since it seems like you really went hard during the pandemic trying to help the rest of us understand what in the world was happening. And you’ve been really accurate, so thank you. Thank you for that. And with that said, what are your thoughts about the coming years and where things are headed? That’s a big question.

Nikolas:
Like I said, especially for builders at least because that’s so much what skews our viewpoint, I think it is cautious optimism. I think they’re in a good position with both supply as well as demographics pushing demand forward, but just got to be nimble and flexible and especially on that affordability side, there’s just always going to be that weight pushing back down on you. So we got really good, kind of not good on the affordability side, but I think they’re in a good position because I think that resale supply side is just a problem that’s not going to be alleviated in the near term. I think the lock-in effect is just so brutal.

Kathy:
Are you seeing any government assistance or incentives for affordable housing? I thought I saw something recently with the Biden administration trying to get builders to build affordable.

Nikolas:
Yeah, we’re seeing some more activity in terms of altered zoning ideas. So it’s basically being able to build multifamily in single family areas. And that’s obviously an idea I am pro of, but how much of an impact it will have in terms of alleviating, I’m not sure because typically the multifamily person is a different demand segment than the person looking to buy a single family house. Maybe those are just compromises that have to be made on the buyer side, but that’s something we’re seeing for sure.
One more thing to keep in mind in the near term is how student loan payments coming back affects the demand side because that’s been such a good tailwind for the housing market for the last two plus years. So with those payments coming back, I believe next month, how that impacts demand because a lot of the underlying data, it’s still really strong despite what you hear a lot of people experiencing in the economy. So we’ll see how that has impacts, if any.

Kathy:
And then what about technology that can make the process cheaper? I am going to look at a 3D printed community in Palm Springs on my way to a concert.

Dave:
Oh, cool.

Kathy:
Yeah, it’s going to be really cool. I’m going to get some footage for you guys, for BiggerPockets.

Dave:
Awesome.

Kathy:
But it’s not cheap. I thought, “Oh wow, this is a great way,” but it’s like these homes are in the million dollar range that is not helping. Granted, maybe that’s cheap for California, but yeah, what kind of technologies might be coming around or that builders are looking into that could make it more affordable to build?

Nikolas:
What you’re talking about is something builders have been very interested in for a long time. Basically, since I’ve been in the industry, we’ve been researching it, talking about it. It just is still a little far away because it really has to make the numbers work. If I don’t know you want to call it manmade housing is still cheaper and there isn’t a big price drop, then it’s not going to make sense for builders to fully invest in it. But if it brings prices down, then that’s something they would lean into for sure. It just seems like it’s a really interesting cool idea, but not quite ready for a large scale use yet. Maybe it’s a case by case development basis, like it makes sense for some, maybe not for others, maybe depending on the labor availability, who knows? But it is interesting. I think it’s fascinating how they’re able to do it. It’s really cool.

Dave:
It’s super cool. I hope it gets scaled up. I think right now it’s just too small scale in one-off communities, individual lots. But if they started applying this at a large scale, maybe it could help bring down costs. Let’s hope.

Nikolas:
Yeah, let’s hope. I hope so.

Dave:
Kathy, you got to get us some footage of that. I’m very curious. It’s a whole community you said?

Kathy:
Yeah, it’s a whole community. It’s in the desert. It’s built in a way that it’s fire resistant and you don’t need as much AC because it cools itself. It’s really cool. I will definitely be there. I’m already meeting with the agents there, and we were so excited about it until I saw the price tag. I’m like, “This isn’t helping anyone. It’s still so expensive.” And same thing, Nikolas, the person who presented to me lives in Southern California and can’t afford to own a property there, so was excited about this possibility, but it’s still expensive.

Nikolas:
One thing they do really well though that I’ve seen is the time those developments take, they can be really fast, which is interesting from a builder’s perspective if you’re trying to target a certain market really quickly because it gives them that speed. But again, pricing is still an issue.

Dave:
All right, Nikolas, well, thank you so much for joining us. We appreciate all the work you and your team have done and coming here to share your insights with us.

Nikolas:
Thank you so much for having me. I enjoyed it.

Dave:
And if people want to check out your work or learn more about you, where should they do that?

Nikolas:
Zondahome.com. We publish blog features of the more unique research we’re doing there consistently. And then obviously we have the New Home Market Update, which we’ll release monthly, that has all these stats that can be sent to your email.

Dave:
All right, great. Well, thanks again, Nikolas.

Nikolas:
Thank you so much.

Dave:
All right, another big thanks to Nikolas for joining us for this episode. I learned a lot. Kathy, what were some of your highlights from the interview?

Kathy:
Oh, gosh, just that it’s fascinating that some areas are having a comeback bigger than I thought, and that I think part of that report in certain places, home sales are more robust than they were in 2019, which is a good year to compare things to. So look, this seems very positive from my perspective. I left the interview feeling positive.

Dave:
Good. Well, you’re always the most positive of all of us.

Kathy:
Oh, why not?

Dave:
I’m always glad when you’re feeling good, but I agree. I think in general, I don’t have a good sense like anyone of what’s going to happen six months from now or a year from now. But in the next two or three years, I feel pretty good about the way things are heading. What happens in the short term? I don’t know. I think the one thing that I was a little sad about is just, not from an investment perspective, it’s just like even if builders build a lot, it’s not really going to alleviate the housing shortage problems. And so I really have a hard time understanding how we fix that. If even an uptick in building improved economics for builders we’re seeing right now is not going to get us to that point, I just don’t really know what will.

Kathy:
Yeah, I know California tried to bring in some laws where a new builder, I don’t know if it ever passed even, but that institutional investors and investors would have to wait like 30 days, like you got to let the open market and the first time buyer get in first. There’s ways. Do you charge? I know other countries charge investors higher property taxes and higher acquisition. It’s harder for investors in other countries, but here it’s frustrating because families should come first. And I don’t know how we do that here, but I could tell you from a builder perspective, it makes no sense to build affordable housing. We are getting killed on that in our projects. So why would you go out and do it again if you’re not making money? It’s hard. It’s really, really hard. So there has to be some kind of government assistance or incentive to make that happen.

Dave:
Yeah, it’s a really tough situation. Here in Amsterdam, they make it more difficult for investors. It’s an interesting system. Here, you pay tax when you buy actually, which is kind of interesting. It’s 2% for a home buyer, it’s 8% for an investor. So it’s a very significant increase. And this went into effect since I’ve been living here, and what you see is the percentage of rental properties has plummeted, which has actually been decent for the housing market. It’s still up a lot, but it’s moderated a little bit. But for renters, like myself, I rent in Amsterdam. It’s been a huge problem. And so rather than new home sales being unaffordable, rent just becomes unaffordable. And in my mind, the only solution to any of these things is more supply. There could be these interventions that might put a little bit of a bandaid on something, but I don’t know. They got to figure out a way to get these builders to just build nonstop.

Kathy:
Just incentives to builders to create affordable housing, that’s what needs to happen.

Dave:
Yeah. Well, we’ll see what’s going on. But Kathy, thank you as always for your time and for your insights. We appreciate you. If people want to connect with you, where should they do that?

Kathy:
You can go to realwealth.com, that’s our company, or on Instagram just Kathy Fettke. And I think there’s just one of them, just me.

Dave:
Good, good. No imposters trying to sell you crypto.

Kathy:
Right. They might still try, but trust me, it won’t be me.

Dave:
And I am at The Data Deli, there does seem to be some imposters, but I have a blue check now. I’m very excited about that.

Kathy:
Yay.

Dave:
So just The Data Deli. Well, thank you all so much for listening. We appreciate all of you and we’ll see you for the next episode of On The Market.
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, research by Puja Gendal, copywriting by Nate Weintraub. And a very special thanks to the entire BiggerPockets team. The content on the show On The Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.

© 2023 CNBC LLC. All Rights Reserved. A Division of NBCUniversal

Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes, and Market Data and Analysis.

Data also provided by

The #1 VC fallacy in venture development is that getting VC means venture success. The reality is that 80% – 90% fail with VC.

The #2 fallacy in venture development is that first movers dominate. Research, and entrepreneurs like Steve Jobs, Sam Walton, Michael Dell, and Brian Chesky suggest that they do not. You need to be a smart mover, not just a first mover. To develop unicorns, product innovation is not as important as strategic innovation and unicorn skills on an emerging trend.

The 3^rd Fallacy of Venture Development from Lisa Su: Now here is a third fallacy stated eloquently by Dr. Lisa Su, the CEO of AMD, and a Ph.D. in electrical engineering from MIT: “I saw that MIT Ph.D.’s worked for Harvard MBAs, and the truth is that made absolutely no sense to me.”

2 Key Questions

This raises two questions:

· Can smart technologists be trained to start and build more unicorns, and

· How do you teach unicorn-building skills to smart technologists?

With her skills, expertise and talent, Su has made it to the top of one of the world’s most important companies, at a time when artificial intelligence and the need for AI chips is exploding. And she has proven her genius at taking a small, failing semiconductor company and turning it around to one of the leading companies in a key industry.

Three lessons from Lisa Su’s experience for potential CEOs and Unicorn-Entrepreneurs.

#1. Examine your assumptions. There is no reason to give a free pass to Harvard and Stanford MBAs. There is talent elsewhere. Just because someone chose to get an MBA degree does not mean that they are great leaders. What they have learned in full-time business programs can be taught quite easily in executive education programs.

#2. Technical expertise is important in tech-based industries. In tech-based industries, technology skills may be more important than sales and marketing skills. Even great salespeople cannot sell obsolete and poor products in tech-based markets. Nearly every billion-dollar entrepreneur had some degree of technical skills in the emerging industry he/ she entered.

· Sam Walton (Walmart) and Dick Schulze (Best Buy) knew retail.

· Gordon Moore and Robert Noyce (Intel) knew semiconductors.

· Bill Gates, Steve Jobs, and Michael Dell knew PCs – they had played with them as teenagers.

· Mark Zuckerberg knew coding – he was offered $1 million to improve the software he developed as a teenager.

#3. Adding leadership skills to tech experts may be easier than adding tech expertise to MBAs. If the executive has leadership traits and interests, it is easier to teach finance and leadership skills to those who have technical skills than it is to teach highly technical skills to finance experts. The basics of finance can be taught in a few weeks.

Unicorn Skills for Talented Technologists

Using the experience of Billion-Dollar Entrepreneurs, who built businesses from startup to more than $1 billion in sales and marketing, here are eight skills that can help all executives and entrepreneurs, including technologists, develop unicorns:

· Technical and operations skills are a paramount need, and especially in emerging industries, to know how to develop the right products and to stay in the lead in the future.

· Sales skills to sell without wasting scarce capital on wasteful marketing strategies.

· Financial skills to finance right and invest wisely in order to do more with less.

· Launch (or re-launch) skills to takeoff with less wasted capital — before the cash runs out.

· Control, organization, and leadership skills to control the company, find and motivate the right people, and lead to win against formidable competitors.

Finance skills to lead unicorns can be taught in a few weeks. Tech skills to build unicorns and lead the world take much longer.

MY TAKE: Finance and leadership skills and finance-smart unicorn strategies are not the sole prerogative of MBAs, Harvard or otherwise. All entrepreneurs can be taught the needed finance and leadership skills and not be replaced by the VCs as happens in up to about 85% of VC-funded ventures. For corporate boards it is imperative that they abandon their prejudices about pedigree, school, race, and gender, and evaluate potential based on talent, skills, track record, and character.

Scale FinanceReplacing CEOs in VC-backed Companies – Scale Finance

CNNFrom the brink of bankruptcy to a 1,300% stock gain: How this CEO turned around her company. | CNN Business
MORE FROM FORBESLisa Su Saved AMD. Now She Wants Nvidia’s AI CrownBy Iain Martin
Federal Reserve Bank of BostonTo Market to Market
NytimesVenture Capital Firms, Once Discreet, Learn the Promotional Game (Published 2012)

David:
This is the BiggerPockets Podcast, show 815.

Soli:
The homes that we’ve been buying are primarily $100,000 and less. I started investing in 2020. Interest rates were about three and a half percent, and buyers flooded the market. Nowadays with seven, 8% interest rates, I think a lot of people have told themselves that deals just won’t work. Because of that, we’ve been able to make a lot more aggressive offers, less buyers in market, more deals for us.

David:
What’s going on, everyone? This is David Greene, your host of the BiggerPockets podcast, coming to you from Downtown LA at Spotify Studios where I’m joined by Rob Abasolo and Soli Cayetano doing a real estate podcast. If you didn’t know, we are the biggest, the best, and the baddest real estate podcasts on the planet, and I’m joined today by some talented real estate investors. Today, we interview Soli and we get into how she built a portfolio of properties all across the country using long distance investing techniques and got her start with cheaper price properties that made it easier to scale at scale. Rob, bring us to today’s quick tip.

Rob:
Today’s quick tip, find a way to keep yourself accountable. If you want to get into real estate, document the journey. You can do that so many different ways, but in today’s story, we talk about how if you document it on Instagram and you put it out there for the world to see, then you sort of have to stick to it or else people are going to ask you questions and you’re going to have to report back to them that you never actually did the thing that you said you were going to start to do. So go out there, start an Instagram account, document the journey, and let other people follow along and it’ll keep you on track.

David:
I like Rob being under a time crunch because he made a mistake on the quick tip, but he just kept rolling.

Rob:
Kept going, baby.

David:
For the first time, he got it in one take, everyone, leave a comment-

Rob:
The show must go on.

David:
… on YouTube and let Rob know how proud of him you are for not needing to be perfect. And since you did so great on that quick tip, Rob, I’m going to throw you another one. What’s something of value that people can pay attention to that will help them in their career?

Rob:
I think that’s a very good story in starting small. You don’t have to go out there and buy these mega, crazy expensive houses. You can go out, buy a more affordable house, get your reps in, and scale your way up accordingly, so that you don’t necessarily have to get into a big, scary purchase. I think getting into a purchase takes confidence, it takes courage, and it doesn’t mean that it has to cost $1 million. It can be a $100,000 house.

David:
Thank you very much. We’re going to get to the show shortly here, but before we do, make sure you listen all the way to the end because you do not want to miss the blood battle between Soli and I as we go head-to-head in a brutal fashion with Rob refereeing. Really in a terrible way, you should have stopped the fight many times. You just let it get out of hand.

Rob:
She annihilated you, that’s why.

David:
There you go, so listen all the way the end to hear how that goes. Let’s get into it. Today’s guest, Soli Cayetano has been investing for three years. She has 40 units across Ohio, Georgia, and South Carolina. Her strategy include BRRRRing, flipping, and affordable housing.

Rob:
Fun fact, Soli, I hear you’re going to write the foreword to David Greene’s book if he ever publishes an update to Long-Distance Real Estate investing, is that true?

Soli:
Is there one coming out soon?

David:
At some point, I am going to update it. It was the first book I ever wrote, so I’m sure it could have been written much better.

Soli:
I think the story is that I kept on tagging David in way too many posts and he got annoyed and finally said, “You can write the forward,” and I have a DM to prove it.

David:
Can confirm, Soli likes tag. She likes tag, she’s good at tag.

Rob:
We’re going to show it in the show notes, the screenshot, which is a legally binding, David-

Soli:
Legally binding.

Rob:
… Agreement. I don’t know if you know this.

David:
Every man loves this, the thought of having his screenshot shared for everybody to see. This is a very popular thing to get into.

Rob:
Well, before we get into your story, can you tell us in just a few quick points, what’s working for you in your current market?

Soli:
So, I’m primarily investing in Augusta, Georgia and it’s a lot more affordable market. It’s about two hours outside of Atlanta. I do have properties in Cincinnati and Aiken, South Carolina, which is right outside of Augusta. The homes that we’ve been buying are primarily $100,000 and less, so very affordable market. The one thing about high interest rates, a lot of people are sitting on the sidelines right now. So, I started investing in 2020. Interest rates were about three and a half percent, and buyers flooded the market. It was super, super competitive, so try winning a non-cash offer and it was almost impossible. And so nowadays with seven, 8% interest rates, I think a lot of people have told themselves that deals just won’t work, and so they’re just not going to even try. So because of that, we’ve been able to make a lot more aggressive offers, less buyers in the market, more deals for us.

Rob:
And do you feel like the deals are working at the price points that you’re currently purchasing at more than more expensive premium, mid-tier properties?

Soli:
I think so. I think that interest rates affect proportionally, they affect less the cheaper markets than the more expensive markets from just a dollar amount on a mortgage payment on a $60,000 mortgage it’s, I don’t know, maybe like 100 bucks if the interest rates go from 3% to 7%. But in the Bay Area where I live, if you have $1 million house and the interest rate jumps from 3% to 7%-

Rob:
It’s significant.

Soli:
… That’s probably like, I don’t know-

Rob:
Thousands of dollars.

Soli:
1,000, 2,000, $3,000, and so disproportionately the interest rates don’t affect the smaller markets.

Rob:
So, is that going to be more of a cashflow game going kind of the lower tier interest doesn’t hurt as much, versus the appreciation side of it, or are you still getting the appreciation side of that in some of these markets as well?

Soli:
So, I think we can argue on this, David, of cashflow versus appreciation a little bit, but I think these markets are first and foremost cashflow, but you can find good pockets of appreciation in certain areas. Those are my favorite areas to invest in, are the ones that have the path of progress, there’s a bunch of renovations going on, you can see that they’re about to turn from a class C to a class B, those are the neighborhoods that I like to invest in because you can get both the cashflow from the affordable markets and the appreciation from investing in strategic locations.

Rob:
That makes sense.

David:
Is your position that cheaper markets equal more cashflow?

Soli:
It depends on your strategy, but from a long-term rental perspective, I would say generally.

David:
What do you think, Rob?

Rob:
I guess it’s going to vary depending market to market, but for me, I’ve always been in the mid-tier side of things. I haven’t really done kind of the $100,000 purchases all too much. I’m actually doing one right now as a wholesale in Houston, Texas, but that’s meant to be more of a flip, not an appreciation play for me. So for the most part, my lane is mid-tier, usually all the houses that I’m buying are going to be $300,000 to $1 million and a few a little bit more expensive than that, it just kind of depends.

David:
And are you buying short-term rentals or traditional rentals?

Soli:
Of the 40 units I own, I would say five of them are mid-term rentals.

David:
Cool.

Soli:
I don’t have any short-term rentals. I transitioned all the short-term rentals to mid-term rentals just because the quality of the tenants for short-term rentals in a place like Cincinnati I feel like are maybe a little bit questionable, and then I have 10 flips going on right now.

Rob:
Nice. Actually, going back to what you were saying, I’ve got a buddy who does short-term rentals in very rural markets and he buys houses for $100,000.

Soli:
They do well.

Rob:
They do super well.

Soli:
The Airbnb I bought was $125,000. It was a duplex. We put in about $60,000 of renovation, $20,000 of furniture, so all in for just about $200,000, and I think on our best month we made like $10,000 of rent.

Rob:
Wow.

Soli:
Incredible, right?

Rob:
That’s crazy, and you turned that into a mid-term rental?

Soli:
Yes.

Rob:
Goodness.

Soli:
It was very cyclical. I think that during the summer months it was great. It doesn’t really get that snowy, but it’s not really a place people go in the winter that much, and so we’d have anywhere from 3,000 to $10,000 of bookings, but as a mid-term rental, we can get a steady five to $6,000.

Rob:
That’s so good. What’s the mortgage on that?

Soli:
That’s about maybe $1,700. So, cashflow is about $1,000 a unit as a mid-term, and it stays steady the whole year.

Rob:
I think that’s totally fair. Mid-term rentals really are the saving grace a lot of the times, especially if you are doing short-term rentals. You find out it’s a lot of work and then you don’t necessarily want to switch your strategy until you get a mid-term rental guest. I stumbled upon it on accident. I had a travel nurse come and book my place and I got paid pretty much the same amount of money and it was way easier. They never texted me, they never did anything.

Soli:
They’re great guests and we have a guy who is there for an entire year paying a mid-term rental price, but his home had some… I guess it burnt down or something. So, insurance claim rented the whole place for an entire year and we’re locked in at that high rent.

Rob:
Man, nice. So my buddy, his strategy is buy 100,000 to $150,000 homes more on the $100,000 side. His mortgage is always like, I don’t know, 800 bucks, whatever it ends up being, but he’s booked 90% because no one thinks that it would be a good investment to buy an Airbnb in these towns. And he’s like, “All right, I’ll just be the only Airbnb.” He’s booked like 90% and he basically grosses like 2,500 to 3,300 bucks a month. So, he’s usually cashflowing like 1500 bucks at a minimum.

Soli:
It’s not bad.

Rob:
It’s not bad.

Soli:
I would say bad. Most of my mid-term is cash around $1,000 mostly. Actually, all of them are in Cincinnati, and then long-term, when I bought at 3.5% interest rates, those are like three to 700 bucks, and now in Augusta it’s a little bit lower. We’re like 150, 250 bucks [inaudible].

David:
That’s what I was getting at. When we’re saying cashflow in cheaper priced homes, we’re not only talking about traditional rentals, we’re talking about short-term and medium-term rentals. I would agree with that, that you can cashflow much stronger on cheaper houses if you’re doing medium-term and short-term rentals. Traditional rentals, you end up usually getting a couple hundred bucks, which gets eaten up by CapEx and maintenance. That’s usually when I’m critiquing the idea that cheaper properties equal more cashflow, it’s because the cashflow gets eaten up by the property again, but if we’re talking about running them as a short-term rental rental, I don’t think that same logic applies.

Soli:
Unless you save up for maintenance and CapEx along the way too, or if you’re renovating this property, so that they are lower maintenance and all your CapEx have been replaced, then your 150… My 150 is after all reserves, all CapEx, all maintenance, all vacancies. So, what actually goes into my pocket is probably more like 500, but I’m taking out all of those reserves and putting them into an operating expense account-

David:
You’re keeping 150, right?

Soli:
And I’m keeping 150 into more of an owner pay account.

David:
So, that ends up being $1,800 a year. So over five years, you’re talking about $8,000 or something.

Soli:
It’s not life changing,

David:
That’s my point.

Soli:
But when you buy in the right markets and in the right neighborhoods in those markets, you do get that mix of cashflow and depreciation.

David:
Which is where the wealth comes from.

Soli:
Which is where the wealth-

David:
Once again, we thought we were arguing, but we’re really not. You’re seeing the same thing that wealth comes from the property going up.

Soli:
Yep.

David:
So, I understand that you had just graduated college when you started investing. What was your day job at that time?

Soli:
So, I started working in commercial real estate when I was a sophomore in college, pretty young. I just needed a paycheck basically, and I was helping lease office space for pretty big companies. And so, that was what I did sophomore year through senior year, and then when I was a senior, the pandemic hit, and that’s what really propelled me into real estate. So, I was a senior and I was going into a fully commission-based job as a commercial real estate broker, leasing office space, and nobody wanted office space in 2020. It was like a dying industry. And so, as I sat in my-

David:
Why?

Soli:
Why? Everyone was working from home, but I think as I was thinking about this, I could make $0 for the next how many ever years I was going into a profession that was maybe going to be crushed. And so as it lasted longer and longer, my school was shut down, college was shut down, work was shut down. We didn’t really know what to do, and I started thinking about how I could build some type of passive income, anything, so that if I got $0 of a paycheck for the next year, at least something was coming in.
What was really weird about the pandemic for me is I was always used to hustling and working two jobs, so in high school I worked at a coffee shop and I went to high school, then I went to college and got a brokerage job. So, I was working basically full-time and going to school, and so when the pandemic hit and school shut down and the world shut down, it just felt weird. I had all this time all of a sudden. I tried to cook, tried to… Everyone had their pandemic story about what they did and ultimately decided that I needed something more. So, I looked into real estate investing. I started my Instagram, I posted that I was going to buy a property, and that’s how it took off.

Rob:
Wow, so you started your Instagram account, which is really great, a lot of great content for anyone that’s looking to get into the world of real estate, and was it really more of a, hey, I want to document this journey, you’re pretty excited to just put it out there?

Soli:
Absolutely, I think a lot of people wait to start their Instagram until there is a story to tell, but for me it was just vlogging. I just wanted to one, maybe hold myself accountable, put it out there into the world. I’m going to buy this real estate investment property and watch me make it happen. And then secondly, I was really trying to find a community for myself. And so again, I was stuck at college, but everyone had pretty much gone home. So, I was literally alone, by myself, and isolated because you weren’t supposed to hang out with anybody. And so, my internet friends became my real friends and I talked to them, I completely changed my circle where before I was hanging out with commercial real estate brokers who don’t really prioritize passive income. They’re just always grinding and college students who are partying and not thinking about retirement age. Instead, I was surrounding myself with all sorts of real estate investors who were prioritizing delayed gratification and taking big risks in order to buy these rental properties, and that shifted my whole mindset. My whole circle changed.

Rob:
So then you decide, I’m going to buy a property in my backyard, get started small work, my way up from there?

Soli:
I lived in the Bay Area, California, and so homes there… I think the average home now is $1.5 million or something, and so I was thinking I had about $50,000 saved up from working for three years essentially.

Rob:
Wow, that’s good, that’s a lot.

Soli:
It’s not bad.

Rob:
It’s not bad at all.

Soli:
And I have a full scholarship from my college, and so I didn’t have any debt.

Rob:
Oh man, I’m jealous. That’s cool.

Soli:
Lucky me, I was a very lucky person, but I thought about, what could I buy in the Bay Area? Because usually what people think about is, if I’m going to invest, buy in my backyard, and I was like, “I can maybe buy a condo and then I would be tapped out from a debt to income ratio standpoint and I would have no more money, that would be it.” And so, as I started reading more of the Long-Distance Real Estate Investing book and thinking about how I could make my money go further, I thought maybe I could do the BRRRR strategy. In order to do that, I would have to be in a more affordable market.

Rob:
Cool, so the big shift in your mindset living in the Bay Area was just, “Hey, maybe it’s not as obtainable to live here.” You read this book, you picked up some of the principles that my friend David Greene has outlined and influenced so many people with, and was that scary? Was that like, oh, I could do it, was the book like, hey, man, this seems like a pretty clear strategy, why not give it a shot? What was that even doing your first investment out of state?

Soli:
I think I didn’t know what I didn’t know. So, I went into it a little blindly, but I did a couple things. So, I was listening to BiggerPockets Rookie a lot. It had just come out in about 2020-ish, and listening to just like everyday people buy their first rental property. And I think from that I was like, “If these everyday people can buy real estate, then why can’t I do it?” So, that was more of the confidence piece, and then I think the book was more of the tactical piece. So, how do you go out and find the market? How do you go out and build the team? How do you actually go analyze these deals? And so together, I think it was the confidence, mixed with the tactical that came together and was like, “I’m just going to go do this,” and a little bit of recklessness, just why not? Worst thing that could happen is I lose $50,000 and I’m just where everybody else is starting in probably graduating school with $0. So, I thought worst case scenario, it’s really not that bad.

Rob:
50,000 is a lot to lose, but I think that’s the right attitude. A lot of people get into real estate and they analyze all the things that could go right, but then they overanalyze all the things that could go wrong, and so that always stops them from doing it. Whereas I’ve always been the kind of person, and Brandon always used to say it so well, which is like, “I jump out of the airplane and I assembled a parachute on the way down.” And for me, that’s always how I got to the next property because I was like, “I have no idea,” but other people that presumably aren’t geniuses or all… They can’t all be smarter than me, maybe a couple of them, but they all seem like normal, regular people that are just good and consistent, and you really do have to be a little reckless, I think. It’s a slippery slope.

Soli:
That’s why I like to share on my Instagram too because I feel like a lot of people think about real estate investors and they think older, maybe male or something, but seeing people who look like them and who are younger them really adds a lot of inspiration for people that if I can do it, then they can do it. I’m a totally normal person, no one special, but if I can do it, they can do it.

Rob:
David, what do you say that you’re… On the spectrum of reckless… Following your gut, I guess would probably be a better way to say that, versus the analytics and data analyzation, do you find yourself more on one side, right in the middle?

David:
I’m not as reckless as I think I appear when I’m giving advice, I’m more strategic. I want to line up all the dominoes, I want to have a good idea what I’m doing. I want to know where the pitfalls are and how to avoid them. I know that it could go wrong and oftentimes it does go wrong. We’ve talked about that, but I don’t know that things going wrong ever catch me by surprise.

Rob:
Yep.

David:
That could have happened, I knew.

Rob:
That’s a good way to frame it, for sure.

David:
I don’t like to jump out of the plane and build your parachute on the way down because sometimes you don’t know where you’re landing. Even if you build the right parachute, you’re like, “Well, this is a market that sucks. Why did I succeed here?” And you kind of have to start over, but I do think that there could be benefit in parachute building. So you invested in a market, now you’re investing in different markets, but you learned a lot about the fundamentals of real estate investing in that additional market. So, there’s still value even if the properties themselves aren’t crushing it. You take that information, you go to another market where they will. Now, you can 10X how much money you made in the next five years that you made in maybe the first two or three. So, there is value in taking action, 1000%.

Rob:
I think it’s like… And half the audience is listening to you and they’re like, “Oh my gosh, I’m so glad you said that.” I’m also glad you said that. I think reckless is definitely the wrong term, but I think parachute building to an extent… But taking action, you’re never really ready to take action, much like you’re never really ready to have a kid, but then you have a kid and you figure it out.

David:
You’re never ready to go to the gym. I was like, “I could be in much better shape before I have to go.

Soli:
I think there’s something to putting your feet to the fire though, because unless you’re forced to figure something out, then you’re not going to figure it out. So, I had a really good connection in Cincinnati, which helped me choose that market, incredible market, glad I chose it, but I didn’t have any contractors, any property managers when I went under contract for my first property. But because I went under contract, I was like, “Oh, shoot, I got to figure that out,” and I figured it out. So, it really forced me to take the necessary action.

Rob:
Obviously, this is a big investment for you, getting started into it, doing all that kind of thing, did you have family to fall back on, family to help you, people in your sphere that were willing to co-invest or anything?

Soli:
At first, no. I think I was really adamant on doing it by myself more, maybe from a pride perspective. I don’t have any family members really who invest in real estate, don’t understand it. My dad’s an immigrant from the Philippines, my mom’s from the Midwest. She was a violinist, doesn’t know anything about real estate either, and so that was kind of the background that I came from. I came from very little money, and so all I knew is that I didn’t want to feel the insecurity of not having money, so I needed to go build myself a financially stable future.
So, that was sort of the family background from, I guess, a mentorship background. I had a couple of friends who invested in real estate and the person who introduced me to the Cincinnati market was a real estate broker, and he owned eight or nine rental properties. And so, that’s how I actually ended up picking Cincinnati. He was kind enough during the pandemic to jump on a Zoom call with me, show me the market, show me what areas to look at, where to avoid. He introduced me to an agent and that was in to that market.

Rob:
So, your broker sets you up with part of the dream team here, but how did you find the broker?

Soli:
So, we were actually working with him for a deal in commercial real estate. So, about six months before I bought my first property, it was November 2019, I flew out to Cincinnati for a big build to suit development that we were helping lease up and we toured the market. So, this is how I fell in love with Cincinnati. I went out there, we were wined and dined by all the developers. I think coming from California, California is I feel like maybe a little bit not super friendly to business owners and not really into people running their businesses her a little bit. But in Cincinnati, I was shocked. They were so encouraging of business. They invested, I think it was like $1 billion over the last 10 years. There was Kroger headquartered there, there was General Electric headquartered there. They were giving huge tax credits to incentivize business coming into the area, and it was such a lively city.
So, we heard all about the history of Cincinnati, how it used to be one of the most dangerous cities out there, and then they were having trouble recruiting talent, students to stay in Cincinnati. “I don’t want to be here in the city.” So, they invested like $1 billion to create a thriving… And I was like, “Wow, what a story and what a place,” there’s a lot of young people out there, the food is incredible. It’s very lively, and so from that I think… And I looked on Zillow and I was like, “$100,000 houses? What? That exists out here?” And you just don’t know because coming from the Bay Area, all I did was look at Zillow in the Bay Area and all I saw was $1 million houses. So all of that combined, it was the friendliness to business, it was the investment into the neighborhoods. It was walking around, seeing it was lively, and then seeing that the homes were about $100,000 and the rents were pretty high, all of that together kind of convinced me to invest there.

Rob:
That’s really cool, so you’re ready to go. You’re like, “I’ve got the broker, I’ve got the connections, I’ve got the dream team.” You mentioned that you came from more humble beginnings on the family side. When you went to your family and you were like, “I’m going to do real estate,” were they like, “Great,” or was there a little bit of, I don’t know, dissonance or tension even pitching that to the family?

Soli:
My mom actually followed me on Instagram and I think she thought it was fun because I feel like she’s always wanted be the mom where I call her every week type of thing. And so, I think she felt it was a good way to keep up with what I was doing in life was just to watch me on my stories every day. And so, she knew everything, every step of the way. She’s always been really supportive, and so when I got under contract on my first property and closed on it, I closed on it without seeing it and then I was like, “I should probably fly out there and see what I bought,” and she actually came with me for a few weeks.

Rob:
Oh, that’s nice.

Soli:
So, I think she’s really proud. She doesn’t know much about real estate, but she was really supportive of the journey. My dad, I think, doesn’t understand real estate investing that much, but he’s somewhat supportive.

Rob:
Well, you’re getting into this, investing into real estate, going long distance. Were there any strategies that you used to help keep yourself accountable? Because we were talking a little bit before the podcast, there’s taking action, but then actually holding yourself accountable to the action that you’re taking and getting into your first property is a huge step. So, how did you keep yourself accountable and actually create systems around that and all that stuff?

Soli:
So, to go back and set the scene a little bit, it was again, 2020. Everybody was super isolated, no one was hanging out with each other, and so that’s where my Instagram, I guess, family came into play. And so I kind of put it out there, here are my goals. I think my very early goals were, “I’m going to buy 45 units by 30 years old,” and I’m almost there and I’m 25, but I put it out there. I think I wrote that when I didn’t even own one rental property. So, to me it was putting out my goals, putting out my intentions into the Instagram universe, and that actually held me accountable for taking action. Even though I maybe only had 500 followers at the time, it was 500 people that I felt like I had committed to something and I wanted to actually show them that I’d follow through.

Rob:
I think on the podcast we have the opportunity to share our life and our investments and stuff, and oftentimes I talk about things that I’m doing and I don’t really like doing it because it puts it out in the universe and usually… When I talk about a house that I’m an escrow on, I’m like, “Oh, dang it’s going to fall into escrow.”

Soli:
You’ve got to close on it.

Rob:
And it falls out escrow all the time, and that’s why I’m like, “Dang it, I wish I hadn’t said that on the BiggerPockets Podcast or on the Rob channel,” but I do find that saying it out there kind of formalizes it, it makes it official that you’re actually doing it and people ask you about it. People are interested in your life and they want to know, “Hey, Soli, you said you wanted to do 45 units. How’s it going?”

Soli:
There’s a statistic from a study that was done and it was saying that if you think you want to do something, your chances of actually doing it are maybe like 1%. And if you commit to somebody that you’re going to do, it jumps up to like 60, 65%, and then if you have an actual accountability appointment set, then it jumps up to 95% likely to achieve that goal. And so for me, I was at least at that commitment level on Instagram, but for me, I felt like it was also my own accountability appointment set for myself that I was going to post every day and show up and show people I was taking action.

Rob:
And that’s why I always say David and I are going to do a Zumba class together because I want to put it out there to keep us accountable. Do you know what I mean?

David:
I thought we were doing Orangetheory.

Rob:
That’s fun too, you’ve got to stay in the orange. What did you feel like… So, that’s the whole thing with the heart rate, you have a green, orange, red, and you want to stay in the orange.

Soli:
I didn’t get that one at first.

Rob:
I only know because [inaudible]-

Soli:
You’ve got to stay in the Greene.

Rob:
… Five times a week. That’s right. Well, David, that’s right, you’ve got to stay in the Greene. That’s actually the name of his memoir.

David:
Greene Theory.

Soli:
Greene Theory.

David:
I’m starting a fitness bootcamp.

Soli:
I like that.

Rob:
So now that you’re on Instagram, you seem to kind of have the meteoric rise blow up very quickly. Did you feel the support relatively quickly or was there a ramp up time to actually build your audience and kind of take them through this journey?

Soli:
I think it took a little bit of time, but I do think that everybody loves to hear a good story from rags to riches kind of story type of thing, and so people were following me, I moved to Cincinnati, well, for maybe four weeks for my first property. I slept on the floor of a construction zone. I got food poisoning, I got my window broken into and through all of that, and I didn’t know how to do anything. So, I learned how to use a drill, tried to take cabinets off. People were texting me like, “You didn’t prime the cabinets.” And so-

Rob:
There’s always those.

Soli:
I was like, “I didn’t know you had to prime the cabinets, but thank you.” There was just a lot, I didn’t know anything starting out. And so my Instagram community, they were further ahead than me and trying to teach me how to be a real estate investor, and they were very supportive of I would have daily freakout moments on my stories and we became real friends. And so I think through all of that, I really felt like a true community. I had friends that were in real estate and those were my people. So then when I grew my Instagram, I really wanted to give back because they had taught me so much that now it was my turn. Now, that I had grown my portfolio so quickly, how can I turn around and teach other people how to do the same thing?

Rob:
That’s cool. You’re getting the help, a little reciprocity there between you and your audience because I’m sure you followed people that helped you through everything as well.

David:
So your portfolio today, do you own it yourself or do you own this with partners?

Soli:
So, I only own four doors by myself, and then afterward I had to take on partners to grow my portfolio. So I own the other… I guess, what is that? 36, some of them with one partner, and some of them with two partners. I really liked using partners to grow because I was really stubborn in the beginning doing everything by myself, but as I found partners, they really complemented my skills. So, one thing I was really bad at, we were talking about contractors, and how difficult it is to work with them. I was not fantastic at managing renovations, and so one of my partners actually manages all the renovations right now. And then on the deal hunting side, I was fine at it, but I wasn’t the best at it. And so, I now have another partner who does all of the acquisitions work, and that frees me up to do a lot of the capital raising work for our projects, which kind of coincides with social media and how I raise money on social media, so we’re all able to focus on the things that we’re best at.

David:
So, how do you guys split up the ownership?

Soli:
We just divide evenly.

David:
Evenly?

Soli:
Yeah.

David:
So, you have a partner that finds the deals and analyzes them, a partner that executes on operations with the rehabs, and then you raise the money that goes into the properties, and then how do you manage them?

Soli:
The partner who manages the renovations also owns a property management company, and so it’s-

David:
You pay his property management company to manage the properties?

Soli:
Yep.

David:
So, you’re sort of the capital raiser in this group, which is why you focus more on creating the content that you’re talking about, building a community because that’s where the money gets raised to put into the properties?

Soli:
Right, it’s all kind of symbiotic.

Rob:
That’s really cool. Instagram is a really great place not only to document it, but effectively you’re showing that you’re a hard worker, that you actually are doing this real estate thing, you’re sweating, you’re struggling, you’re succeeding. So, it always feels like it’s a really good place to build trust with potential investors and people that are partnering up. So, did you ever have people just reaching out organically or are you now more on the side of really pushing partnerships and finding investments that way?

Soli:
I would say most of them have come very organically. Social media is a really great way to nurture relationships kind of passively. So, I have a lot of investors who have followed me since the very beginning. They’ve watched me become what I am today, and through that they’re like, “Wow, I’ve been with you for three years.” They know everything about me, they know my cat’s name, my brother’s name, they’ve just been there through it all. And so, I think the credibility is really high, and so people will always reach out and say, “Hey, I would love to partner with you on a deal,” and I think I don’t really want very many active partners anymore. It’s just going to be-

Rob:
It’s tough.

Soli:
You have to be very picky with your active partners. So I can change the conversation to be a, “Hey, I’m not looking for active partners right now, but I am looking for passive partners if you want to be a passive investor inside my deals or passive private moneylender,” and that’s how I get a lot of my… Mostly through DMs, I would say.

Rob:
So walk us through the funnel, if you will, someone sends you a DM, you respond, you chat a little bit, obviously qualify I’m sure on the DM side of things. What’s the next step after that?

Soli:
So, I have them fill out a Google Form, and if you go to my bio, you will find that Google Form, and I’ve had a lot of people just copy paste it because it works. And so, it kind of acts like maybe a CRM, but a super simple one. I try to keep it simple, and it’ll ask them certain things. How much are you wanting to invest? Are you looking for debt or equity? What is your experience with private money lending? What’s your experience with real estate? And then from there, I have a whole list of people that I can actively reach out to one by one if I want to, or I have an email blasting where if I have a deal that pops up, I can say, “Hey, I’m looking for a private lender. These are all the details,” and blast it out to, I think I have 850 people on there.

Rob:
Nice, and obviously warm leads that have reached out. What does it take for you to hop on the phone and really chat with them? Is it like a dollar amount? Are you like, if they’re under 50,000, they go into this bucket, but if they have two to 500,000, then I make the phone call. Do you have a system for that?

Soli:
So, we try to have one lender for every deal, so it depends… Usually, they’re above $100,000, and so it depends on how many deals we have in the pipeline, where we jump how many calls we jump on, but we’ll usually ask for proof of funds to actually prove that they have the money and it’s liquid, and then we’ll jump on a phone call with them if it’s usually over $100,000.

Rob:
Do you get a lot of falloff from people when you ask them for their proof of funds?

Soli:
Not really.

Rob:
Really?

Soli:
I don’t find that people really lie about it. There’s a lot of people who want to invest under $50,000 and I think those are better suited for maybe syndications and I’ve done one syndication, so those are helpful to have those leads in the CRM, just in case I ever do one again, but I would say people are generally pretty honest about how much money they have.

Rob:
Well, I don’t even mean the honesty side of it. I just mean are they willing-

David:
Nervous about sharing.

Rob:
Yeah, because a lot of people get very finicky or defensive about showing a screenshot of-

David:
Bank statements, stuff like that.

Soli:
No, I think it just really comes down to the level of trust and them being with me for… I’ve raised money from friends of followers, and that’s a lot harder because there isn’t that inherent trust built in.

Rob:
Sure.

Soli:
They haven’t been watching me.

Rob:
You’ve got to pitch yourself.

Soli:
It’s actually pitching, right, whereas as if they are a follower and they know me and they’ve seen me and they’ve heard me talk, they’ve seen my face, they know who I am, they know I show up, then I think it’s a lot less of a pitch and more just a conversation.

Rob:
I’ve been in those calls before where it’s an acquaintance and they’re like, “Hey, meet this person. He’s got 200,000.” And I’m like, “Okay, sure.” And then they’re like, “All right, give me your greatest strength and your greatest…” I’m like, “This isn’t an interview pal, I’m sorry.”

Soli:
I just did one like that and I was like, “Wow, I forgot how hard this is,” when they ask for everything, your social security number, your bank statements, your assets, everything. And it’s like when you have that closer relationship… And you don’t have to be an influencer to do this. There are people who I know who have maybe even 1,000 followers, but they’re tight-knit. There are always people looking to invest their money who might just not have the time to invest their money.

Rob:
I think the warmest leads that you have in your system are always going to be friends and family that see you post on Facebook, Instagram, and that’s really how I got my first set of partners was just I was always talking about my properties and they reached out and they’re like, “Hey, I like your properties. How do I do this?” And I was like, “Well, let’s partner up.”

Soli:
My first private lender was my mom, and she reached out from watching me on Instagram, and I would never have thought to ask her for money or to invest in a property ever, but she texted me and was like, “Hey, I’ve been watching you on Instagram. How do I get invested in your next deal?” And I used to have all my money on my first property.

David:
Did you take your birthday money and just say, roll it into this and I’ll make a return on my own birthday money?

Soli:
A little bit more than my birthday money, but she still invested in that deal, and I think that’s kind of when everything clicked for me because I was stuck like, “How am I going to buy my next property without any money?” And then after my mom’s like, “I’ll invest with you,” I think it clicked, I was like, “Oh, I can use other people’s money,” and it’s a win-win. So, she takes her interest payment every year and takes a vacation off of it, and I love that. I’m like, “I get to fund my mom’s vacation and she gets to fund my real estate.”

Rob:
It’s cool, it’s a win-win

Soli:
Huge win-win, and then how it started is I started talking about private money on Instagram. People were like, “How did you buy your next property so fast?” It was maybe three months later, and I said, “Oh, private money,” and then it became a whole education process of what private money is and because a lot of people don’t even know that it’s an option, that education process is what brings people to actually ask you to invest with you.

Rob:
That’s awesome. Well, that’s an amazing story and I really appreciate you sharing it. Now, I’m really excited about this next piece of the podcast because it’s a segment that we’re calling the Battle of the BRRRRs, and you, Soli, are going to go head-to-head with my friend DG here. Soli, you’re team low price points in smaller markets, scale units, DG you’re higher price points in bigger markets, appreciation. So I’m going to ask you first, what are the advantages of each?

Soli:
So, I think that there are a couple advantages. One is the amount of reps that you’re able to take with smaller deals. So, you can buy a $1 million house or you can buy 10 $100,000 houses with the same amount of money and with every single deal you’re going to learn something new. And so when you are doing 10 reps as opposed to one rep, you’re learning 10 times the amount of lessons. So as a beginner investor, especially for me, I was able to do a lot of deals. I think I bought like 25 units in one year, and I learned an incredible amount from that amount of deal flow and all the lessons that came with it. If I only bought on $1 million property and whether it went well or not well, I wouldn’t have learned as much as I did.

Rob:
Very good, solid answer. DG, what are the advantages of each?

David:
I think Soli has got a good point, that when you’re doing cheaper real estate, you get in more reps, which there is value in when you’re learning in doing stuff, but once you’ve learned how to do it, you just need having value than just killing yourself doing $100,000 properties. The advantages of buying more expensive real estate is that A, it tends to be in markets with less supply but more demand.
So, we’re in Southern California right now, everybody wants to live here, which is evidenced by the hour-long Uber drive that we had to take to get three miles to the studio, weather is amazing, very difficult for them to build more real estate out here. We’re staying at a really nice short-term rental up in the hills. There’s nowhere else to build a house. It’s all filled up. So as wages increase and as people move into the area, but there isn’t anywhere to build, your supply and demand get off balances as what you really want as a real estate investor, you find that the prices are going to go up more in areas like that proportionally than in the cheaper areas, which tend to have a lot of land, a lot of areas to build, and there’s not a ton of demand. People aren’t falling over themselves to move into Cincinnati, Ohio like they would be to move into the best parts of Los Angeles or San Diego.

Soli:
It’s the San Diego of the Midwest. Have you heard that?

David:
That’s funny though. I wonder who came up with that.

Rob:
The Paris of the Plains.

David:
San Diego is a great example of a market that everyone wants to live in, and maybe Cincinnati’s the wrong example, but lower priced markets in general are that way because you can’t push prices higher because they’ll just build more homes, there’s plenty of supply. When the prices go up, say 20% on a $1 million house, that’s $200,000, on $100,000 house, that’s $20,000.

Soli:
But when they go down 20%, that’s-

David:
When’s the last time you saw San Diego real estate go down?

Soli:
San Francisco real estate has gone down.

David:
That place was completely mismanaged. San Francisco real estate has gone down, but I wouldn’t consider San Francisco to be like prime real estate.

Rob:
She got you there, she did name one. You said name one, she named it named.

David:
How much is it [inaudible]-

Rob:
Winner of round one, Soli. Two, what are the pitfalls of each in the short run and in the long run? Soli, you first.

Soli:
Should I defend mine or should I try to get his-

David:
You’d be better off to just keep attacking me and keep the attention off of your argument.

Rob:
This is the clip right here. This is the viral clip on Instagram.

Soli:
I think the biggest downfall is the risk. I have a lot of acquaintances, friends who invest in or who flip homes in the Bay Area. You can lose $100,000 on $1 million house and it’s just 10%, but when you’re investing in the Midwest and it’s $100,000, you have to price cut 10% to sell your house, it’s $10,000. And so, I’m a very risk averse person and I try to take minimal risk for maximal returns, and for me that means investing in lower cost markets because I can spread my risk amongst multiple different properties. And on any one of them, maybe I lose $10,000, but I’m never going to lose $100,000 because those properties are only worth $100,000.

Rob:
I like it. David, what are the pitfalls of higher price points in bigger markets in the short run and in the long run?

David:
Well, they’re harder to get into because more people want them. So, like we interviewed Jason yesterday and he was talking about how San Diego real estate where he is, it’s incredibly hard to get the thing in contract at all. So, your returns in the short term are often lower and it’s more difficult to get in because it’s more of a delayed gratification and where you win in the long run. And then it can also be tougher to find contractors that are going to work in those areas because they’re also in demand. So, pretty much every single element that makes real estate investing tough becomes tougher in the higher price markets.

Rob:
Fair, fair, fair. Soli, which of these strategies is better for new investors?

Soli:
Absolutely, I think the cheaper markets, even David agreed that when you’re a complete beginner and you’re trying to get reps in, you’re going to get more reps in a cheaper market. I also really believe that the risk is minimized because you’re not going to lose as much money as if you are potentially investing in a Bay Area market or a San Diego market and those price wings are like $100,000, $150,000. So, if you want to get reps in to learn more about real estate and minimize your risk, I think you’re better off in cheaper markets.

Rob:
Good answer. David, same question to you.

David:
Thank you. Rob, why did you adopt this accent when you’re [inaudible]-

Rob:
I’m a host now. I’m like a ding, ding, fight.

David:
You became British?

Rob:
Fight.

David:
I’d say the better strategy for an investor isn’t necessarily the price point. I don’t know that I would recommend that. It’s probably more the execution, so house hacking can work in expensive markets just like it can in cheaper markets. I’d probably lean away from flipping as a newer investor in general. So, I think strategies like rent by the room, house hacking, trying to add value to the real estate you buy, that’s a better strategy for a newbie. I probably wouldn’t tell a newbie it matters if it’s expensive or it’s cheap. I just think that’s irrelevant.

Soli:
I would agree with that partially. I feel like house hacking, if you really want to dip your toes into real estate and you’re in an expensive market, great way to do it because it’s minimal risk and you’re living in the house. And so honestly though, also turnkey rentals out of state are a really easy way to start as well, and you can do it in cheap markets, you can do it in mid-tier markets. I would say those are your best bet. No, you don’t like turnkey rentals?

David:
I hate them.

Soli:
Why?

David:
You can’t buy equity with a turnkey, you can’t add value or force equity with a turnkey. You usually don’t get market appreciation equity, you can’t force cashflow. All the ways that I look to add value to real estate usually aren’t happening, and you’re buying a property from someone else. You’re basically buying convenience and in life-

Soli:
Do you think though that beginners should always buy value add properties to start?

David:
I think everyone should buy value add properties. I don’t think you should take on a whole new development, but no, I’d rather see a beginner buy an ugly house with terrible carpet that smells bad for below market value and go do a cosmetic upgrade, than buy a house that a flipper already did that on and the flipper makes the $50,000 and they get in for maybe higher than market value and then they have to wait a really long time for it to appreciate. If they do it all, they can’t get out of it. I guess from my perspective, I’ve heard so many horror stories of people that got in on turnkey and couldn’t get out, that has put a little bit of a bad taste in my mouth for that.

Soli:
I’ve had a lot of friends start with turnkey just because they’re nervous and to buy turnkey properties just to feel like, “I’m comfortable with the real estate buying process. I feel like I have an in, in the market.” I just get comfy with that.

David:
They’re buying convenience.

Soli:
They are.

David:
But real estate investors shouldn’t be buying convenience, we should be buying value.

Soli:
They’re buying also maybe a little bit more confidence too. So once they buy one or two, then they switch to value add and they feel like they’re a little bit more ready.

David:
So, would you tell someone to go to 7-Eleven and pay $3 for a soda or go to Costco and buy $3 for a 12 pack?

Soli:
It depends on how many you want.

David:
It depends on how convenient you want it to be, but you’re going to make money by avoiding convenience.

Soli:
That’s true, I bought a BRRRR for my first property.

David:
That’s not turnkey.

Soli:
It’s not.

David:
Which is why you’re doing good now.

Soli:
But I was ready to go all in and I think some people aren’t ready.

Rob:
That’s fair. I wish we would’ve started with this, this is great.

Soli:
We can put this [inaudible].

Rob:
Question four. [inaudible], finish him. Final question, what is the largest number of projects you’ve had at one time?

Soli:
Renovation projects?

Rob:
Yeah.

Soli:
19.

Rob:
Dang.

David:
How many do I have right now?

Rob:
18.

Soli:
Yeah.

Rob:
Ding, ding, got himeth.

Soli:
Where are they, are they out of state and state?

David:
Three in California, three in South Florida, one in Georgia, but if you added up the number of the real estate, I would bet one of them probably costs more than the 19 that you had bought.

Soli:
Maybe true.

David:
That’s part of why I like it because it’s 1/19th of the work to get the same results.

Soli:
I can see that.

Rob:
I don’t don’t know if that’s real.

David:
You don’t think so?

Rob:
Hold on, you think buying one really big cabin is 1/19th of the work is buying [inaudible]-

Soli:
How base the rehab?

David:
I buy one property for 1.9 million and rehabbing it is less work than 19 properties because that’s what we said here is the largest number of projects you’ve had at a… Projects, you’re fixing it up, you’re doing 19 homes at one time, they’re all worth $100,000.

Soli:
This is where I think I personally maybe went wrong or maybe just too aggressive is I think I bought like 25 units in one year, all value add.

Rob:
Ooh, it’s a lot.

Soli:
It’s a lot.

David:
So, what if you bought one value add unit that was the same price as those 25?

Soli:
It’d probably be less work. I’d probably be less stressed.

Rob:
Well, now I don’t know who to give it to. So, we’ll just say that you tied.

David:
I say tie goes to the guest.

Rob:
Tie goes to the guest. I say the win goes to the guest.

David:
The fatality is owned, Soli Cayetano.

Rob:
Well, before we end here, Soli, can you give us a quick snapshot of your total units, portfolio net worth, cashflow?

Soli:
Sure, so 40 units, probably around maybe $5 million. I’m a GP in a syndication, that’s another $5 million, but I like to count that in my unit count.

Rob:
Sure, yeah.

Soli:
Of that, 20 are rented. My proportionate cashflow is around $10,000. 10 are vacant because they’re being renovated and 10 are being flipped. We have four or five under contract right now.

David:
And is that the portfolio value or is that your percentage of the portfolio?

Soli:
That’s the portfolio value.

David:
I got you, then you have your partners that you’re splitting that with, that we talked about?

Soli:
Yeah, some of them are mine, some of them are 50/50, some of them are 33%, so my proportionate portfolio value is maybe like two, maybe plus the syndication percentage.

Rob:
Very nice, that’s amazing. That’s amazing in three years?

Soli:
Three years, yeah.

Rob:
That’s crazy.

Soli:
I started with $50,000 and used other people’s money to build up all the rest of it.

Rob:
$5 million portfolio and a $5 million syndication, which is crazy. People work their whole lives putting all their money into their 401(k) to retire with 2 million bucks, 3 million bucks.

Soli:
I always think about it, if I stopped investing today and they all got paid off, then you’d have probably about two, $3 million of equity and… Well, probably more because appreciation will pump those numbers up and I think I calculated like $40,000 of rent too. It’s a pretty good retirement.

Rob:
That’s amazing. Well, awesome. Well, thanks for coming and sharing everything. Thanks for giving numbers for giving tactical steps on how to raise money. If people want to learn more about you, find you on Instagram or on Threads, YouTube, all of the above, where can they reach out?

Soli:
It’s lattes.and.leases. It’s pretty much on any platform, and then lattesandleases.com.

Rob:
Awesome. David, what about you?

David:
David Greene 24 on all social media and davidgreene24.com for my website.

Soli:
That’d be my advice to David. I think we missed that question, but you’ve got to change that.

David:
Change the name?

Soli:
David Greene 24?

David:
Mm-hmm.

Soli:
What’s the 24 for?

David:
That was my number in high school and it’s easy. What would you change it to?

Soli:
David Greene Invest.

David:
That would be a big difference from 24 to Invest.

Rob:
I think so, yeah, honestly.

Soli:
I feel like people who have numbers after their name only have numbers because David Greene was taken.

David:
Yeah, there was 23 other David Greenes. That’s not a joke [inaudible]-

Soli:
Pretty much, and so-

Rob:
I think you should be Thy David Greene.

Soli:
Thy?

Rob:
Mm-hmm.

Soli:
Or The David Greene would work too.

David:
[inaudible] Cheesiness would work for what people are expecting from me.

Rob:
Thy David Greene, the ultimate BRRRR investor.

David:
Just take a picture in a knight armor and just put that as my profile picture. Protecting investors from bad advice.

Rob:
You’re the knight shining armor of real estate, my friend. We got two minutes in and we’re going to end, baby. Sign us out.

David:
This is David Greene for Rob Cheeseball Abasolo, signing off.

Artificial intelligence (AI) has been around for decades. I won’t bore you with its long history, summarized well in this article. It has even had a significant role in the marketing industry for many years (e.g., predictive analytics used in many advertising platforms). But what has recently caught storm is the use of generative AI in the creation of many marketing creatives. Largely because the technologies are more accessible and easier to use than ever before. I feel the industry is at the cusp of a major inflection point, and you better learn what is going on in this space, or you may be left behind.

Industry Research

There was a very good industry research study completed in March 2023 by Botco.ai, a generative AI cloud chat communications company. They surveyed 1,000 marketing professionals across over 16 different industries and company sizes from 1 to 5000+ employees. The results were fascinating—they learned that a whopping 73% of the respondents are already using generative AI to help create text, images, videos or other content. That was the weighted average of B2B companies at a 78% usage rate and B2C companies at a 65% usage rate (I would have guessed the reverse of that). With me being in the 17% that were not materially using AI today, I figured I needed to learn more here, and fast, to stay competitive with our industry peers.

Content Being Produced by Generative AI

The content getting created by generative AI is broad in scope. The survey respondents said they were using it as follows: email copy (44%), social media copy (42%), social media images (39%), chatbots for customers (37%), website images (36%), SEO content (35%), blog post copy (33%) and marketing/sales collateral (33%). The rationale for using generative AI being: (i) you can improve your marketing performance (58%); (ii) you can improve your creative variations (50%); (iii) it is more cost effective than traditional ways of building creatives (50%); and (iv) it is materially faster creative cycles (47%). I would add the additional benefits of better personalizing the content to the exact user, instead of applying a one-size-fits-all approach to your marketing creatives.

And to be clear, the content being produced by AI is across all forms of creatives: text, images, videos, coding, etc. It is revolutionizing pretty much everything a graphic designer or copywriter or website developer used to do for you. As an example, check out this corporate video produced for my Restaurant Furniture Plus business by Synthesia’s AI technology. It was produced in a couple minutes from a simple copy and paste of our About Us copy on our website, without any human involvement or professional actors involved. That is pretty amazing (and scary if this life-like technology is not used in positive ways).

The Generative AI Tools Most Used

According to the survey respondents, these were the technologies most used by the marketers. ChatGPT (55%) for human-like text. Copy.ai (42%) for natural language processing. Jasper.ai (35%) for copywriting. Peppertype.ai (29%) for full article copy. Lensa (28%) for image editing. DALL-E (25%) for text-to-image generation. MidJourney (24%) for text-to-image generation. I am sure there are many others to experiment with, but these are the ones that the early adopters are using today. I personally played with a few of these. I would summarize my experience as the text based solutions were a lot more impressive in terms of producing high quality output than the image based solutions, understanding we are still early in the learning curve and technology advancements here.

How to Prepare… and What Happens if You Don’t

First, it’s time to embrace the simple fact that you need generative AI and that you can’t ignore it. It isn’t going away. So, slowly but steadily, immerse yourself in some (or all) of the tools above — how they work and what they can potentially offer. And if you are working with a marketing agency, make sure that it, too, is well-versed in all the advancements (if your agency is not currently using AI to improve campaigns, it may be time to look for a new one).

The ramifications for non-action will be swift: you either jump on board or prepare to eat the dust of the other AI first-movers — you will essentially be going into a marketing battle with one arm tied behind your back. Performance will suffer (including lower engagement rates compared to competitors), as will profits.

What Does This All Mean?

Hopefully, you have a better understanding of all the advancements that are taking place in the marketing world today. Will generative AI end up replacing your human teams? Not entirely. I think it will make the humans materially more efficient, and you may need less humans than before, but humans will still be needed for strategic direction and quality control, to protect their brands. For example, if AI generated copy will upset Google and hurt your search rankings, someone will need to review that content and make sure it follows all of Google’s rules. So, think of AI as an augmentation tool built for speed and efficiency, not as a full human replacement. You will still need to engage your marketing agencies or marketing teams, but they will be doing their work in material different, and presumably better, ways.

Every decade or so, the marketing industry appears to go through a rapid period of innovation. It feels like we are in the “early innings” of this most recent revolution, and I am excited to see how these AI technologies improve from here, and what additional AI advancements we will see in the coming years. It is time to pull up your boot straps and buckle in, as it is gonna be a helluva ride! Good luck as you experiment with these technologies on your own.

—

George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.

Ashley:
This is Real Estate Rookie, episode 301 niner.

Terry:
So for me as a developer, one of my deals actually, we bought the land for 25,000. We spent another 25 to pre-develop it and all in, that’s $50,000. We just got the plans approved. That is all that I needed for my construction loan.
Now my construction loan comes in and we’re able to build the whole house. And now the choice is mine of what I want to do after if I want to refinance it and keep it or if I want to sell it.

Ashley:
My name is Ashley Kehr and I am here with my co-host Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And I got to say, Ashley, I appreciate you throwing the J in between the Tony and the Robinson.
So for our rookie audience, there’s a reason why I like the J. First, there’s Tony Robbins who I get confused for all the time, and I’ve disappointed quite a few people because they’re like, “Oh my God, it gets me Tony Robbins.” When really it’s just me. And there’s also other guys in the real estate space named Tony Robinson. So I got to find a way to separate myself. That’s where the J comes from.
Terry shares a lot about his journey of going from a real estate wholesaler to a developer, and he shares some really interesting nuggets on what it costs to develop. I’m telling you guys, you’re not anticipating, you’re not going to believe what he says when he shares the price.

Ashley:
One of my favorite things about this episode is how we go so in depth about what you need before starting new development and who you need. Terry’s going to do a great job of outlining those first steps that you need to take.
He started out wholesaling, and he’s going to explain that pivot, that transition into new development, in case that’s something you are thinking about doing.

Tony:
So for all of our rookies that are listening, we promise you’re going to get a ton of value from hearing Terry’s story for a second time, and we can’t wait to share it with you.
But before we do, I want to share a review by someone of the username, ginalou. And Gina love to say, 5-star review on Apple podcast that says, “Wealth of real estate information. What a great podcast, full of excellent real estate investing nuggets. Thank you for sharing your journeys, finding inspiring guests, and providing a wealth of information for new real estate investors. When I was looking to get started in real estate investing, I came across BiggerPockets in the Real Estate Rookie podcast and it totally changed everything.”
So Gina, we appreciate you. Thank you so much for leaving that honest rating and review. And for all of our rookies that are listening, if you haven’t yet, it only takes a minute or two, please do leave us an honest rating and review on whatever podcast platform it’s you’re listening to. The more views we get, the more folks we’re able to reach and the more folks we can reach, the more folks we can help.

Ashley:
Terry, welcome back to the show. Thank you for joining us again on BiggerPockets Real Estate Rookie. Start off with telling us a little bit about yourself and maybe a little bit about your first episode with us.

Terry:
Yeah. So appreciate you guys always. It’s always great speaking to you guys. My name is Terry Harris. I started off playing professional basketball in the NBA G-League. From the NBA G-League, I got into real estate, just kind of found a passion with real estate and just started reading as much as I could about it, talking to as many people as I could and just got into it.
Was able to buy my first home on a FHA 3% down in Delaware where I was playing. And I believe our first interview was kind of me going over of how I got into real estate and the kind of niche that I was in currently, during that first episode, which was wholesaling real estate. And through wholesaling real estate, I was wholesaling land to land developers.
And the beauty about that was I was learning from developers as well, how they were buying land, what they were doing with the land and how they were developing it. And at the same time, I was also making a little assignment fee from the wholesale deal, so it was like a paid internship for me. So now I kind of switched the gears a little bit and got into developing real estate.

Tony:
Terry, how many wholesale deals would you say you completed and are you still actively wholesaling?

Terry:
I think I completed around about, I would say about 30 wholesale deals. 30 wholesale deals. It was a point where I was doing around three to four deals a month at my prime, you can say. But now, it’s to a point where I’m looking to wholesale deals for myself, my partners, to do land deals. So the wholesaling techniques and the marketing that I’ve used, I still implemented in my real estate strategies today.

Ashley:
Terry, how long did it take you to get that first deal and what did you have to do to get it?

Terry:
That first deal? I would say it took about four and a half months for that first deal. And that was kind of with learning and trial and error and everything. It took me a lot of calls and I didn’t really know how to do it. I didn’t know how to wholesale in efficient way.
I remember I just got PropStream, I bought a list of about 1500 names and numbers, and I would sit with three highlighters, red if they said no, yellow if they didn’t answer and green if it was a lead. And I would every day call 60 to a hundred. That was my goal. And I do that and get some appointments going, visit some property, see if I can get deals on the contract. And it took about four months to close something.

Ashley:
Can you just walk us through the process of pulling a list and what a list is and what PropStream is for maybe somebody who has no idea what that process looks like? Can you kind of break it down for us into steps real quick?

Terry:
For sure. So PropStream is just a software technique, where anybody can go on PropStream, you can see who the property owners are, of properties when they purchased it, if they have a mortgage or a loan on it, what it’s sold for. It gives you a lot of data on properties.
And I use PropStream, so I picked the area that I was actually, at the time I was playing basketball and I was training in, so I picked the area that was that specific area in California, and I bought a list of about a 1500 high equity vacant homeowners. And the reason I sought high equity vacant homeowners is because another wholesaler said this was a good list to target because one, they would probably be willing to sell at possibly a discount, and if it’s vacant, they’re probably not making money off of it.
So getting a deal like that under contract could be really enticing for an investor. So that was my initial target of what I was going to look for and I wasn’t going to stop until that list was complete or I got somebody who wanted, was willing to sell their property to me.

Tony:
Terry, you said you weren’t going to stop until that list was complete, just like ballpark, how many people or calls do you think you had to make before you got that first deal?

Terry:
That first deal was probably about 600 to 700 calls. 600, 700 calls, and I was doing that. I was doing a little bit of driving for dollars, so I would put your guys’ podcast on and I would just drive around the local neighborhoods and if I see a vacant house, I just put it on the list, probably about 600, 700 calls.

Tony:
Terry, I mean, kudos to you brother, because I think so many people listen to this podcast and naturally, hear the success stories of investors and sometimes they can gloss over the hard work that goes into being on this podcast. And a lot of people would’ve given up after 100 calls or 200 calls or 300 calls or 400 calls or 599 calls, but you push through, man. So I think there’s an important lesson to take away from that for our rookie audience.
One thing I want to ask, because you mentioned this a little bit earlier, but you said that you basically had an internship in land development by wholesaling first. So I’m curious, why exactly would these developers be willing to take one of their wing and give you free education, and what were some of those things that you learned by being kind of close in person with them as they were doing that?

Terry:
So it’s quite simple. I was providing them value. I was able to give them deals, off market deals that were below market value. So at the time I knew something, I was like, “I really want to develop, I really want to build something and create a cool looking home and I want to develop.” So my thing was like, “Let me wholesale land, let me wholesale something that I want to get into.” And that’s what I recommend, honestly to anyone to go and wholesale something that they’re looking to get into.
So land deals were my way of getting into real estate, and as I started wholesaling land to developers, they were like, “Keep them coming, keep them coming.” And it was just like a relationship and they were like, “Hey, we need something in this area.” And then at the same time, I was like, “So how’s that property that I just developed, that I just wholesale to you five months ago?” And they would say, “Oh, it’s good. We just took a loan for 400,000. We’re going to build this property for 400,000 and we’re going to look to sell it for 800K plus.”
And I’m over here thinking, “Wow, I made $8,000 off an assignment fee, but you’re going to develop this and make over a 300K profit.” I was like, “Hmm, this might be a better game that I can get into.” And that enticed me. Obviously the money, that was something enticing, but then again, it was just so cool to see something, see a developer’s plans, hit the paper, come to life, and then for them to do whatever they want to, keep it, sell it or make an Airbnb. So I was just like, “Man, that’s what I want to do.”

Ashley:
Terry, a hard part of being a wholesaler is first finding deals, but the second part is finding buyers. So how did you create that buyer’s list of developers? I mean, it’s such a specific niche that you’re looking for. It’s not like you’re selling a single family home. That could be a rental or it could be a house that you’re flipping. So how did you find these developers to actually sell these lots to?

Terry:
I speak to a lot of people and they’re like, “Oh, but finding the buyers is hard, isn’t it?” I said, “It’s the easiest part. It’s the easiest part.” And it’s just the same way where I go and find the sellers or the property owners is the same way I found the buyer. So I would go on PropStream and pull a list of everyone who’s bought vacant land in the same area of where I was looking to wholesale, and probably in the last two, three years, because if you bought vacant land in the last two, three years, you’re probably buying it to develop or maybe to hold onto it to see if it appreciates over time.
So I pulled the list of all the people who’ve bought land in the last two, three years, and I would blast out a text to them of all my deals, and of course, some people wouldn’t answer. And the people who did answer, I would make sure I get on the call with them, see how they’re interested and see, “What are you looking for if you’re not interested in this land?” And that just starts to build up, slowly over time.
You start building your own buyer’s list and you start to know now specifically what they’re looking for. And now, you’re not just building a buyer’s list now, but you’re also building a developer’s eye for deals. Because now, like, “Oh, these three of the best developers in this area want properties that are this size this big and this much utilities, and they want this because of this.” So I started to get that developer’s eye as well. So it also, you build a buyer’s list and then you’re also learning how to be a developer. So it’s two full things that you can get.

Tony:
So Terry, I want to comment on that before I lose this thought. You talked earlier about why the developers were willing to give you all of this free information and it was because you provided value to them. And Ash and I have talked about this a lot on the podcast, where we oftentimes get messages from people in the rookie audience who want to pick our brain or offer to take us out to lunch or dinner, and unfortunately we are busy running businesses right now, so we don’t have a ton of free time.
But if someone came to us and said, “Hey, Tony, I know you invest in these three markets and I’ve got a deal that’s 50% discount on retail value and I want to give it to you.” That was a great way to build a relationship with someone. And I think you found that as a good path forward.
And just as a quick side story, someone actually reached out to me recently asking to partner with me on a deal. And they’re like, “Hey, Tony, I’ll do whatever you need me to, this, that and the other.” And I said, “Look, I’ve got my team in place, but if you find me a deal, I’d be happy to work with you on it.” And his response was something to the effect of, “Well, no, thanks. If I find a good deal, I’m going to keep it for myself.”
And I thought it was such a weird response because they had reached out to me asking to work with me, and I gave them a very clear like, “Hey, if you can do this thing, I’d be happy to work with you.” But their thought process was almost shortsighted in the sense they were focused on like, “Hey, if I get a good deal, I’m going to keep it for myself. Not work on this relationship lead me long-term.” Whereas for you, Terry, you now have been able to elevate your own real estate business because you were so focused on giving value to the people that were a few steps ahead of you.

Terry:
And what’s crazy is in the beginning, I was kind of the same way a little bit. Even when you say that, when you’re starting to get going, you want to establish yourself, and I was like, “I want to get my own properties. I want to be a hundred percent owner, a hundred percent owner.” And when I sat back and really thought about it, “Okay, if me doing my own properties.” I have the capacity at the time to do two at max on my own. That’s it.
But I had the same kind of thing as I find deals and I found an investor who was like, “Hey, if you can find us deals, we can make you a partner and you can oversee these builds.” And now it’s come to a point where we together have bought eight properties together. So now I get two on my own and eight with them. I’m able to do 10 projects now.
So, I’m now, it’s like, “The power of partnerships can help you grow astronomically.” And that’s something that I have to mature and grow from, but it’s just in order to grow, I believe working with other people, working with partners is just the right way to do it and it’s the more efficient way to do it. But it’s so funny that you say that, because I can definitely relate.

Tony:
And Ashley and I are both smiling right now, because you said partnerships twice in that last sentence. And Ash and I just recently released a book with BiggerPockets called Real Estate Partnerships. So if you guys head over to biggerpockets.com/partnerships, you can pick up that book and learn how Ashley and I have leveraged partnerships to scale our own real estate portfolio.
So thank you for that little tea up there, Terry. I appreciate that, man. But one thing I want to go back to, you talked about building your buyer’s list and you said you would pull a list of all the folks that had purchased land in the area that you were focusing on.
My question is, Terry, were you waiting until you had a deal to present to them before you reached out? Or were you just reaching out preemptively to say, “Hey, my name’s Terry, I saw you bought land here. If I have something in the future, can I share it with you?” Which approach were you taking?

Terry:
I got the deals under contract, and I would have about two to three of my own buyers in the beginning. And then every time of course, I’d blast out to the people who I knew, but I would do the blast of just, I mean, I would not have any type of communication with them. I would just give a little bit of details on myself and give mainly details about the land. I’d give the Google coordinates and then just talk about the deal just very, very briefly.
And the thing is that I would message thousands of buyers, and I always knew two to three would be interested and about probably 40 people would answer, “Ah, not what I’m looking for maybe.” And then I would go and get that conversation going.
So I would always get the deal under contract first. But now I, in today’s market where buyers are about a little more slim, I would try to find, I would today in today’s market, try to find the buyers to find the active investors in the areas and kind of know what they’re looking for and then go after that area.

Tony:
Terry, I want to ask, so at what point did you kind of feel the confidence to make the switch from wholesaling the land to actually developing it? What was that moment or that milestone where you said, “Okay, today’s the day that I’m ready to take that next step”?

Terry:
I would say when I submitted my plans for my third project, I believe I had one that broke ground, another one that was about to be broken ground on, and then it was the amount of time that I really wanted to pay really close attention to detail. And I knew I wanted to be a developer, I wanted to be a full-time developer, and I started building partnerships and I knew a lot of people wanted to build.
So I was like, “You know what? Let me lock in on this. I want to spend time, instead of spending a lot of time on wholesaling, I want to spend more time learning how to read plans efficiently, learning how to maneuver through planning departments the correct way, read more about developing, connect with more developers.” So I really just was like, “I want this to be my full-time thing. I don’t want to be known as a wholesaler, I want to be a developer.”

Tony:
But Terry, even that first one, because you said it was like that third one where you kind of mentally made the transition to do it full-time, but I mean, even going back to that first development deal, how did you know that you were ready for that one?
Because development is such a, it’s a big step beyond wholesaling. I’m sure a lot of the skills translate in terms of finding the deal, but like you said, there’s so much more nuance that goes into the development. So when you did that very first one, how did you know you were already in that moment?

Terry:
I didn’t. No, no, it was, it’s just you’re going to learn. And the way I look at real estate is you are always going to learn. If you hold an asset long enough, it’s going to make you money and you’re constantly just going to get better and better and better. I’m not going to be, you go into anything, I’m not going to be the best right away, but you’re going to learn, you’re going to get better. You’re going to grow.
So I knew the first one was just like, “Look, it’s going to be a crazy learning curve and I’m going to just learn new things. I’m going to become, get more efficient, learn how to develop quicker, faster, and more affordable prices.” But I knew I was like, “All right, this is something that I’m going to, this is new, but I’m ready for the challenge.” And I was just super excited to get into it, really.

Ashley:
Terry, who were the first people that you brought onto your team? So as a real estate investor that’s buying rental properties, you may seek out a property manager. So were you going after architects, engineers, what did that kind of look like? What’s different from already buying a building than doing new development?

Terry:
I think the first thing was finding a good architect. That’s probably the first person that you want to get on your team, that is after you purchased the land.
And what’s good about finding a good architect and some that didn’t know before in my first development deal is I hired anybody on the first one. And it was, the challenging part was that, I had to go and find the civil engineer, I had to go find the surveyor, I had to go find, do all the other resources.
But now once I found, now on my third one, I’m using a local architect now, somebody who’s been developing the area for 20 plus years, has good image and knows how to develop in the desert. But he knows great local civil engineers. He knows a good local surveyor or a good local, somebody who could do a perc test.
So it was just doing things like that, it makes it way more efficient, it makes it easier for you. He lives right near the planning department, so he drops the plans off instead of me dropping the plans off. So that first step was getting an architect, and I think that can also find the right architect can make or break your project too. So that is very huge.

Tony:
I just want to add something Terry, because you’re kind of alluding to this, but there there’s an incredible amount of value in hiring professionals that are local to the market that you’re investing in.
We’ve had issues in Joshua Tree where we both invest Terry, with appraisals where sometimes these out of town appraisers would come in and they wouldn’t really understand the nuances of that sitting in that market. And we get these super low appraisals and we’d have to challenge them, get them reappraised and someone who’s local who better understood the market could come in and knock it out quickly.
Same with general contracting crews. They don’t understand the nuances of building in Joshua Tree, so they run into delays, that GCs that are born and bred in the desert, they already know how to navigate those things. So I think for most people when they’re trying to build out that team, if you can go local to someone that understands those nuances, there’s a tremendous amount of value there.

Ashley:
Terry, you had mentioned that you found the architect after you purchased the land. So let’s go back a little bit. If you’re doing the land purchase first, tell us about what made the land a good value. What were you looking at as to like, “These are the things I need in this parcel to be able to develop on”? And even the location of it.

Terry:
Every market is a little bit different. So I’m developing two markets right now in Joshua Tree in Los Angeles. So one of the things that’s common in every market that you have to look for though is your zoning code.
So if you’re buying in Joshua Tree most of the time or developing in Joshua Tree, you’re probably trying to develop a luxury single family home to make it an Airbnb. So what we want to make sure is, “Okay, are Airbnbs allowed in this area? Are single family homes allowed to be developed in this area?” In Los Angeles we’re developed, we’re multifamily, so we want to make sure, “Can we develop these X amount of units? Can we develop to this height? Can we develop to this square footage?” Just simple zoning codes.
So you want to make sure, I know some people, they buy some stuff on some lot, they think they can build three different homes and make them Airbnbs, but the zoning code will tell you differently. The zoning code will say, “No, only one house can actually be on this lot.” That’s it. So I think knowing your zoning code is the number one thing you want to do while you’re in escrow or even before really, before you even make an offer for the land.
The next thing you want to do is also know utilities know, “Okay, I’m buying this land here, does this land have water? Does this land have power? Does this land have sewer? Or do I need to put a septic or do I need to do a perc test and get a septic tank here?” Knowing this prior, so you don’t have any of these big hiccups coming into the process.
And then Joshua Tree specifically also is you have to be 40 feet away from a Joshua tree. So you also want to look, we can look at the satellite image and kind of tell how many trees are on a lot. So that affects us if we want to build or how big we want to build. So there’s a lot of little things that you have to look at, but you can do a lot of your due diligence while you’re in escrow before you purchase the land.

Ashley:
Terry, where are you finding this information? Where can you suggest somebody’s just starting out, they want to look at the code and find out this information? What are some resources they can go to?

Terry:
Oh, for sure. Well, first I think whoever’s looking to develop, know what you want to develop first. So if it’s that single family home and you know that’s what you want to develop, and let’s just say it’s somewhere in Florida, Boca Raton, Florida, you can look up easily Boca Raton city zoning and the city, it’s all public information. The city zoning code should be right there.
And if it’s confusing, I mean it takes a little time to read it through, but if it’s confusing, another thing that somebody can do is easily, you can call up the local city building department, say, “Hey, I’m looking to develop or build a single family house in this location.” You can give them the address, they won’t shame you or anything. “I’m a new person I don’t really know developing. Can I develop a single family house here?” And they’ll tell you straight up, “Yeah, you can build something here.” Or “No, you can’t.” And even I do this till this day.
I just bought actually something in Los Angeles, I made an appointment with the Los Angeles building department. I came in with the paperwork, “Hey, this is the land I’m looking to buy. This is, I haven’t bought it yet, but I want to make sure, can I build what myself, what I think I can build?” And when my architect says, “We can build.” And that’s just extra due diligence just to make sure that we’re not going to buy something and come to find out we can’t build anything whatsoever.

Ashley:
Terry, I think one of the points you made too, will play value into this as far as figuring out the code is if you are hiring a local architect who knows the area, they’ll also know the codes, but they may also know the code enforcement officer.
What can actually be a huge advantage if they’ve already worked directly with this person, have a personal relationship with them too. I think has been, in my experience, a huge advantage of seeing those relationships play together as far as getting your project continued on.

Terry:
For sure. And to piggyback on what you just said, when I first went to a local architect, one of the things, what I had issues with with my first architect was all the time you get corrections from the city and when you get corrections from the city, the architect has to fix those corrections, then you have to resubmit them. And that can make the process a bit longer.
So when I went to the local architect, I said, “Well, how long are you going to take to actually do the corrections when the city gives you corrections?” And the first thing he said to me, “I’ve been doing this for over 20 years with the city, I don’t get corrections.” So I mean to hear that.

Ashley:
Love the confidence.

Terry:
Yeah, I loved it too. And he still got corrections to this day on my project, but needless to say though, it was like he knows the city, the city knows him. It’s always a little more comfortable when you’re in that process and when you have respect for somebody.

Tony:
Terry, I just want to comment on the whole corrections piece because I’m good friends with the builder out in Joshua area as well, and he’s third generation and he’s been building out there for decades now. So he knows the ins and outs of everyone at the county’s office and he’ll bill the same exact blueprint, the same exact property on multiple parcels at the same time.
So he’ll have three lots that he’s building on in different parts of the city. He’ll submit three sets of the same exact plans to the city for the same exact property, that’s getting built in just three different locations. Each set of plans will go to a different plan checker and he’ll get back three different types of revisions on the same set of plans. Makes no sense, right? So there’s a lot of, I think nuance and depends on who you get that determines on what kind of corrections you get back.
But Terry, I want to go back because, you talked about how to find the zoning code, but what about the utilities? If I’m looking at a parcel of land, how do I know if I have water, power, sewer or what it’ll cost to get that installed if it’s not there?

Terry:
Two ways. In my local market in Joshua Tree, you can actually go online to the water district and there’s a map that shows you the waterline on every single street. And for a newbie though, to kind of define that website and kind of get into that, that can be a little tricky.
But another thing they can do is you can call the local water district. You can call them up, say, “I have this parcel of land under contract and I want to make sure we’re connected to water.” And they’ll tell you straight up like, “No, you’re not connected to water. It’s going to cost you 50,000, it’ll cost you 5,000 or it might cost you…” I’ve heard water parcels coming up to 150 grand. So you can find that with a two-minute call easily in your water market.
Electricity, electricity is pretty easy. You can kind of see the electric pole on the parcel maps and if you’re unsure either like for SoCal, SoCal, Edison out here, you can call them up and just say, “Hey, just wanted to make sure this parcel has electricity or is it going to be a process to connect to the electricity here?” Simple as that. And those are the two main utilities that you have to look for and it’s really quite simple for the single family houses.

Tony:
Yeah, interesting. We’re working on some development right now as well, and we have to call the local electric utility to try and get some cost estimates for that as well. So glad to know I’m doing it the right way.

Ashley:
Tony, I have a follow-up to that too real quick, is sometimes on the tax record it will actually say if there is a well or public or if it’s public water or the well, or a septic or a public sewer system too. I haven’t seen that it says that there’s electric access to it or not. But another thing near us is gas.
So if there’s natural gas that may heat the house or if there’s propane. Where propane, you actually have to come and get propane delivered to your house too, which can actually be, first of all a huge inconvenience but also can play a part into the cost of having the propane versus having the natural gas supplied to your property too.

Tony:
Terry, I want to ask about the architect piece because you said that once you found this local architect, that person knew the civil engineer, they knew the surveyor, and that just kind of became your linchpin for the rest of your team and that market.
So the million-dollar question is how did you find that architect? Was this person on Yelp? Is there a resource or database of architects that build in markets? How did you find this person?

Terry:
Referral for this one. Now, when I find architects though, what I do now is if I see a home or I see a building that I like, I really like, I’ll do research, I’ll go put the address in, I’ll go and find that architect. I’ll figure it out some way somehow. But the reason I do that is because if that’s the style of build that I like, and that’s kind of the vision, more than likely me talking to that architect will help to encapsulate that vision or what they’re trying to create.
And most of the time for somebody, if they’re trying to develop in Joshua Tree, go drive around, find the houses that you really like. Just a quick little pie, 30 minutes of some investigating. I’m sure people do more investigating with their partners or whatever, but if they just do a little bit of investigation, they’ll be able to find out, they’ll be able to find out who that architect is. But for mine, definitely it was a referral for one, but now I like to find an architect whose vision is very similar to my vision.

Tony:
So I just want to pull that thread on the investigation piece. So say, I find 123 main street in the city that I’m looking at, am I then going to the county and saying, “Hey, who is the architect that submitted these drawings?” Or what is that? Is that the right next step?

Terry:
You could that. I think you could do that. So Los Angeles, the data’s public, so if there’s an address or a building that I like, usually if you look it up on, there’s this website website called Urbanize. Urbanize writes to article about every building that’s being proposed, who the architect is, who the developer is, and I’ll go and gather.
I’ll say, “Okay, that’s the architect. All right, let me call him. Let figure out. Let me try to work with this guy, see what he is saying.” And most of the time they’re willing to work with you.

Tony:
One other follow-up question on the architect piece, are you finding the architect developing the plans and then looking for the land? Or do you find the land and say, “Okay, what can I build that matches this land?”

Terry:
I would say depends on the market, but I’ll find the land first. I’ll find the land first. And then for instance, if somebody put me in Tony’s lap, a beautiful land in South Joshua Tree right near the park, let’s say two acres, Tony. We’re going to need a very, very sophisticated architect that can do a magnificent build, because we want to maximize the opportunity of that lot.
Now, if it’s another lot that’s let’s say way up north in Joshua Tree and a bit of an okay area, not that many views, we’ll use a good architect, probably a smaller build, but it’d be a different architect than the one over there by a greater area. So I feel like there’s an architect for every project or there could be an architect for every project. So I like to find the land first.

Ashley:
Yeah. So let’s talk about pivoting into development. For somebody who’s listening to this and now has shiny object syndrome and how they want to go into development, what are some things that somebody can actually do to switch these roles, get into this strategy?

Terry:
I think the first thing really, is I think a lot of people think that developing is a lot of money out of pocket. And actually I’m developing some single family houses that have been less money out of pocket for me, less investment than some of the rehabs and flips that I’ve done. And at the end of the day, I’m putting a better product on the market.
So I think that one thing I want let a lot of listeners know, I remember I was speaking to somebody they told me, “Don’t develop unless…” Somebody said, “Don’t develop unless you have a million dollars cash.” And that was complete absurd to me. And then I found out that person didn’t develop, but it is just absurd.
So for me as a developer, one of my deals actually, we bought the land for 25,000. We spent another 25, let’s just concise number, 25 to pre-develop it and all in, that’s $50,000. We just got the plans approved. That is all that I needed for my construction loan.
Now my construction loan comes in and we’re able to build the whole house. And now I get to build the whole house. And now the choice is mine of what I want to do after if I want to refinance it and keep it or if I want to sell it.
Does it happen all the time like this? Maybe, it can, but my initial investment was about close to $50,000 just for one development deal.

Tony:
Terry, can we talk about the debt that you’re using? You said construction loan, what is that? What are the terms? How are you only able to allow the land costs in your pre-development costs to be all you have to put in, walk through the terms of that debt?

Terry:
So, I work with a couple construction lenders, but I found a new construction lender that works at 60% loan to value. So what they’re going to do is once you get your plans approved, then they can come in and the way that they come in at 60% loan to value, is that they’ll take your plans or your renderings of what the house is going to look like when it’s all said and done, and you will pay for a local appraiser to appraise those plans as if the home was built today.
So when they do that, so one of my homes for example, got appraised for a million dollars and at a million dollars the lender’s able to give me 60% loan to value. So they’re able to fund me $600,000. The contractor bidded the home to be built for 500K. So now what I’m allowed to do that, what I’m also allowed is I’m allowed to put the fees of the loan in the loan as well. And on top of that, the interest, obviously the interest will probably be six to eight months.
I also prepay those interests inside the loan as well. So now my initial investment is just the land and the pre-development costs, and if we build it on time, we don’t have to expect to being incurring other months of interest. And personally, I like the 60% loan to value because it gives me two options.
It gives me an option to refinance at 70 or 75% LTV. Now, I know I can pay the first back and then I get a little bit of money, cash out, refinance for myself. And then option number two is to sell it. And I always want to have two options when I’m doing development deals because I don’t want to bank on a sale, especially with high interest rates while I’m paying on these construction loans, things can get out of whack. So I just like to have two options to know I’m safe in these deals.

Ashley:
Terry, how many have you kept and how many have you sold?

Terry:
I’m keeping all of them. I plan on keeping all of them, and I like the strategy. I like the strategy to keep it because it also, a lot of times when you have to sell, you put it at a price where you have to sell it for. When I hold these properties with an intent to keep them, some of them I just throw on the market. I’m like, “Hey, if it goes at this price, it goes, if not, it’s the Airbnb and it’s still going to be cash flow for me.”

Ashley:
Do you want to walk us through the numbers on one of your deals and your experience of it? Doing a new development? Okay. Yeah. You got a deal in mind?

Terry:
Yeah. Similar to the one I did, but I’ll be more precise on the numbers.

Ashley:
Yeah. Yeah. We want to hear the numbers’ breakdown.

Terry:
Okay. Actually I want to show this. I want to really, really go deep into it with how I was able to develop this with no money out of pocket for me.

Ashley:
Okay. Yeah. Cool.

Terry:
So I found a deal, I got a deal under contract. I wanted to wholesale this deal for $22,000.

Tony:
A land deal.

Terry:
Land deal, correct. I blasted it out, I blasted out and I thought it was such a good deal. I blasted out. It was such a good deal. These two investors, never met them before. They were like, “Hey, come show us the land.” And usually I virtually wholesale land so I just like, “I don’t need to go out there.” But they were really adamant like, “Hey, show us the land.”
So I drive out there, I show them the land and I was looking to make, on this one, I was looking to make about 15, $20,000 assignment fee from wholesaling it. So they come out, they check out the land and they’re like, “Ah, what do you think you can do with this land?” I’m like, “Ah, this is a really good lot. I think you can get a nice single family home here. You can put it on Airbnb. If it’s a three bedroom with a pool, you can do upwards of high hundred thousands a year.” And they’re like, “What? You could do all that?” I said, “Yeah, for sure.”
And then I started showing them numbers of my Airbnbs performing and then I started showing them, what I was looking to CALCAP on my new constructions. And they, at first they didn’t want the deal, so they were like, “Huh?” They were like, “You know what? How about this? What do you have the property for under contract?” And I was just completely open. I said, “I have it under contract for $22,000.” They said, “How about this? We buy it at the price that you have it under contract for, but we bring you in as an equal partner and you run the show, you bring in the construction loans, you run the Airbnb and you’re an equal partner.” And I’m like, “Man, I don’t got the capital right now. This is everything I wanted.” There was a no-brainer for me, no-brainer, no-brainer for me.
Although, I haven’t really met these guys for a long time. The partnership just worked out so perfect and I was so grateful for it. So we go, we buy the land for $22,000. We spend about $25,000 for plans, permits. Plans and permits and all the pre-development fees. And we’re all in about 47. So you can say, let’s just say 50 for these numbers. And we bring in the construction lender. The construction lender comes in, and our property appraises for 1.05 million, so $1,050,000 and they give us the construction loan for 660.
So we had so much extra cushion in there. We packaged six months of construction loan interest in there. So really that’s all we’ve invested so far in the project. Can we go a little bit, can we splurge and probably do a little extra stuff here and there maybe and come out and be a little bit more money out of pocket? Yeah, we could, but that’s just the power shift of understanding how to use debt and understanding how to work with partners and to bring value to other people.
And these were older gentlemen, so a lot of the older generation, they don’t really understand the Airbnb game and they don’t understand short-term rentals. So it’s like a lot of us, like the newbies, rookies in this game, this is what we understand and this is real value that we can bring to other people. And for me it’s a deal that I’m $0 out of pocket for. So it’s a win-win in my opinion.

Ashley:
And that’s a super great point at the end that they put on the older generation as to, they didn’t have BiggerPockets when they were just starting out. They started building, they were just doing real estate investing and now that there’s BiggerPockets and you can reach out to people and find out all these different things that are going on, especially if they’re not on social media either, then it’s a lot harder to learn about all these different things that you can actually do with real estate investing.
So I think that is a huge advantage of knowing of all these new creative strategies that come out. Even midterm rentals, 30-day stays for traveling nurses, how that has exploded in the last couple years too. And that’s something someone may not have even have heard of or thought of that you could do. Or there’s somebody that has been doing that forever and they don’t know that you can put it on Airbnb. They’ve always just rented it to somebody else and all these things. But I think that’s definitely an advantage.
And Tony even and I have been talking about that a lot as to how not just the capital that you’re bringing to the table is the biggest benefit. There are so many other things you can bring as a rookie investor and knowledge is one of those for sure.

Tony:
And the only other thing I’ll add to that is that, I think that there’s, it just goes to show that a reinforce our point earlier about when you can provide value to people, they’re more willing to give you value in return. You bought these guys not only an amazing deal, but you brought them a skillset that they didn’t have. And that’s a big part of any successful partnership is that there has to be puzzle pieces that fit.
The second thing, Terry, was that you kind of had the courage, I guess, to partner with people that you didn’t know all that well. And I think sometimes people have this hesitation around, “Okay, I just met this person. Is this the right person to work with?”
Honestly, typically Ash and I would probably say like, “Maybe date them a little bit first.” But if you get a good vibe from them and it all works out, it just goes to show what happens when you kind of take that leap of faith. So just kudos to you man, for what turned out to be a really, really awesome deal. I guess last question on that piece, do you plan to continue working with them?

Terry:
Yeah. It’s actually a great partnership. It’s just like, “Look, we’re retiring, we’re trying to lay by the beach. You handle it.” And they come in obviously, and they put their input in here and there, but it’s one of those good partnerships where they see value in what I bring to the table from bringing in the construction financing to bringing in the Airbnb knowledge, all the data analytics that I put together for them. So they see a lot of value and a lot of upside to it. And I definitely see myself work with them.

Ashley:
Yeah. What a huge advantage, especially if somebody who’s looking to retire, they don’t want to go and take the time to learn and do research on everything you need to know to do this, when you can just partner with someone.
And I think a lot of people that have already become successful in one thing, that’s their next step is they go and partner with other people in other things that are successful at what they’re doing. So they don’t have to go and become an expert at a whole different business. So I think that definitely adds a lot of value.
So one last point I want to touch on here is what environment did you need to succeed? And do you think there were transferable skills that you gained from wholesaling?

Terry:
Mm-hmm. I think the environment in developing, there’s always obstacles. There’s always little hiccups here and there. It’s just part of the game and it’s really part of it. And just like wholesaling, there would be obstacles, things, but you’re constantly problem solving. You’re really constantly problem solving.
And I think I made sure I kept the circle of developers and if they needed value about the market or anything, I was always super adamant, I was going to give it to them, just be on the phone talking to them. But at the same time I knew that, “Hey, this is my first one. I need a little help here. Do you mind checking it out for me or going by?” And I made some really good friends from it.
And I remember one of my buddies, he’s a GC, he would just come by and check on the project, because he had some projects nearby and some days I’d be like, “Oh my gosh, these guys are doing this wrong. The inspector’s not passing this. What’s the deal?” And he’s like, “Brother, relax. It is developing. It’s supposed to be fun.” And sometimes it’s just in life in general about anything that we’re doing, it’s like, “Yeah, you’re right. Just have some fun. We’re developing. It’s fun.”
So I think being able to just do that is probably one of the most important skillset that you can have. And I would say developer, just anything, just to enjoy it. So that’s the skillset I’m working on the most of this day. It’s, once you get past that learning curve, you can really just say, “All right, cool. Now this is fun.” So that’s what I’m kind of veering to, but.

Tony:
Just one comment on that piece. I think it’s a super important point because it is easy to get overwhelmed. But I was reading some book recently, I can’t remember which book it was, but it was talking about how the version of you 10 years ago would probably be excited to deal with the stress that you’re dealing with today.
Because it’s, think about the ways you had to grow and evolve as a person to even be in a position to deal with that kind of stress. And when you can kind of frame it that way where, “Hey, the things that are kind of on my plate today are a result of the progress and growth that I’ve had as a person, as an entrepreneur, as a real estate investor.” It kind of reframes a situation. So yeah, man. Just a thought that came to mind.
Terry, dude, so much good conversation, but I’m so glad that we were able to get you back on the show. Before we let you go we got a couple more segments here.
All right, so Terry, our question today comes from Voltaire Gannet and Voltaire says, “Can you 1031 exchange into new construction homes?” So have you ever had any experience doing a 1031 exchange? And if so, do you know if you’re able to do that with new construction? I

Terry:
I keep most of my properties to be honest. So I haven’t had that experience yet. But I do hear that with 1031s, Tony, you would know probably better, but you have to kind of 1030 worth up into a property that’s worth more. Correct?

Tony:
Yeah. To an extent, right? So I’ve done one 1031. Ash, have you done any 1031s yet, also?

Ashley:
Not for myself, but for another investor, I did.

Tony:
Yeah. So there’s some limitations on what you can do. It has to be a kind exchange. So I couldn’t sell my single family home and go buy a car wash. So it has to be a single family home for another type of real estate. And I’m not a 1031 exchange expert either, but you can’t necessarily go, there are limitations on the value of what you’re selling versus what you’re actually acquiring.
I think based on what I’m looking at here, I think you should be able to 1031 into new construction as long as you’re able to check those boxes of kind exchange. So the biggest thing Voltaire is that, if you are thinking about doing a 1031, you need to use a qualified intermediary. So you can’t just go out there and sell your property and then tell the IRS, “Hey, I didn’t touch it, it’s just sitting in my savings account.” You have to hire a qualified intermediary to hold those funds for you, and there’s a bunch of paperwork they fill out to make sure that you executed the right way.
So if you’re thinking about doing a 1031, Voltaire, my first piece of advice would be go find a 1031 exchange intermediary who can help you facilitate that process.

Ashley:
Yeah. One 1031 exchange I did with another investor, I helped him with is he sold, I think it was a 20-unit apartment complex, and he ended up buying two commercial buildings and a vacant piece of land. And then he actually ended up keeping, I think $50,000 in cash that he ended up paying tax on that.
So he didn’t even 1031 exchange the whole amount. He did keep some of that, and that was just because he couldn’t find anything else and he was hitting his deadlines. But he ended up getting those, which a 20-unit apartment complex, which is a residential commercial property to two other commercial properties that were retail stores and then also vacant land.
So I mean, those weren’t exactly the same type of property, but they still fit into that model of kind exchange.

Tony:
I’ve also heard, and actually this is from a mutual fund of ours, Ashley Taro, but he told me about a reverse 1031 exchange where you can, there’s a way to do it backwards. So if you’ve already sold and bought the new property, there is a way to kind of go backwards and retroactively apply at 1031 as well, which I didn’t know about. But anyway, Voltaire, go talk to a professional. Ash and I are just podcast host, who knows if you can trust us.
Anyway, moving on to the next piece. It’s the rookie exam. So the three questions we ask every single guest. Terry, are you ready for question number one?

Terry:
Yes. Ready.

Tony:
All right. Now that you’re a developer, what’s one tool, software app or system that you use in your business?

Terry:
As a developer? I still use PropStream a lot. I still use PropStream. I like to look at the satellite images of all the properties. I like to know the comps. I want to know what new developments are selling for. I’m always constantly looking at what new developments are trading at or what’s going on. So definitely still PropStream, still PropStream.

Ashley:
What is one actionable thing that rookies should do after listening to this episode?

Terry:
I would connect with developers. I would connect with developers in your local market that you’re looking to develop in, and I would just talk to them and say, “Hey.” Whether it be starting to wholesale or, “Hey, is there any way that I can find you some land or anything? I have a marketing vehicle that gets me great off market listings and deals. So you guys are looking for anything?”
And then reel them in a little bit and then say, “What are you working on now?” See what they’re doing, and so now you’re able to start building that developer’s eye yourself. So that’s what I would definitely say. Just start connecting with them.

Tony:
All right. And question number three, Terry, where do you plan on being five years from now?

Terry:
Five years from now, I want to be building skyscrapers in New York City.

Tony:
Dang. I love that. That’s a good one, man.

Terry:
Yeah. Five years. I need my first skyscraper in the city. Yeah.

Tony:
Harris Tower.

Terry:
That’s a good name. We’ll go back to this podcast in five years and see that.

Ashley:
Well, it’s not quite five years ago, but a couple years ago. You can go back and listen to Terry’s episode on biggerpockets.com/rookie153. And I don’t think we had this segment then, but it’d be interesting to know how, if we did, what you’d be on track for that five years. So we’ll definitely have to have you back in five years to talk about that skyscraper development.
Terry, where can everyone reach out to you and find out some more information?

Terry:
I think the most responsive on Instagram. Instagram is terryharris15. I kind of did a little pause on Instagram, because I was learning a lot of developing and in the ground, but I’m starting going to get back on YouTube and putting more content out there as well.
So YouTube page is TCash, T-C-A-S-H, and those are the two, I, where on the YouTube page, I teach a lot about wholesaling, really go in depth of every software and everything I use in wholesaling. So if anyone wants to get into wholesaling, I think that’s a good little, check that out. And then Instagram if you want to reach out and just ask questions on developing in general, I’m there for that.

Ashley:
And for today’s social media, shout-out. I want to give a shout-out on Instagram to account I found, and this one is ladygina_real_estate_investing. And here we have Lady Gina shares her investment journey. She is a full-time real estate investor and she specializes in apartment buildings. So go give her a follow and see her story.
I love that we do these social media shares because sometimes it’s people that we see that are sharing value, they’re sharing their tips, and then other times it’s just literally telling you what they’re doing day-to-day or as what they’re doing as an investor. And I think both of those aspects are so valuable to keep you motivated, keep you inspired. So clear your feed of meme accounts and start following more real estate investors.
I’ll tell you a funny story real quick. So our partnership book came out, Real Estate Partnerships, and my mom was telling her friends about it. My mom was telling her friends about it, and she texted me and she’s like, “Oh my God, so-and-so was freaking out that you co-authored a book with Tony.” Blah, blah, blah. And I knew right away. I knew because I was like, “There’s no way my mom knows. My mom’s friend knows who Tony is. There’s no way.”
And so I was just like, “Oh yeah, how?” And she’s like, “Oh, she’s read his books, listens to his podcast, all this stuff.” I’m like, “Does she mean Tony Robbins?” And she’s like, “No, no, no. I’m sure I said Tony Robinson.” And I was like, “Okay, well Tony’s podcast is my podcast. So she listened to my podcast?” And she’s like, “Oh yeah, it was Tony Robbins.” She thought, but her friend was ecstatic. “Oh my God! Ashley’s associated with Tony Robbins? That’s amazing!”

Tony:
Add another name to the disappointment.

Ashley:
Yeah. Maybe it will sell more books because people will keep making that confusion. Maybe we should have left the J off the book title. A slight blur off the ending there.

Tony:
That’s funny. Yeah, I should lean into that more often. That’s true.

Ashley:
Thank you so much for joining us on the Real Estate Rookie Podcast. I’m Ashley, @wealthfromrentals, and he’s Tony J. Robinson, @tonyjrobinson on Instagram. And we will be back on Saturday with a Rookie Reply.