\n<\/p>\n
The affordable housing crisis<\/strong> is an ongoing challenge here in the United States, but this developer<\/strong> has cracked the code in her own backyard\u2014providing more opportunities for low and median-income households <\/strong>without gentrifying<\/strong><\/a> their communities<\/strong>. The cherry on top? She\u2019s making a huge profit<\/strong> while doing it.<\/p>\n In 2005, during Hurricane Katrina, Terrica Lynn Smith<\/strong> couldn\u2019t scrounge up a few hundred dollars to evacuate her and her two children from New Orleans. After this traumatic event, Terrica was determined to break the curse of generational poverty<\/strong> and create a better financial future<\/strong> for her family. Little did she know that she would be creating a better life for countless people in her community as well. After seven failed attempts, Terrica passed her real estate exam <\/strong>and started selling homes. <\/strong>She jumped at any opportunity to learn something new, which allowed her to advance from a real estate agent<\/strong><\/a> to an investor<\/strong>, and finally, to a developer<\/strong>.<\/p>\n If you want to have a powerful impact<\/strong> with real estate but lack the resources<\/strong> to do it, this episode is for you. Terrica provides the blueprint for delivering affordable housing<\/strong> to your community at a profit. She also shares the best ways to bring value to a real estate investing<\/strong> partnership<\/strong><\/a>, how to get bank financing<\/strong> for large developments, and why cultivating the right <\/strong>mindset<\/strong><\/a> is so crucial to your success as an investor!<\/p>\n Rob: Henry: Rob: Terrica: Rob: Terrica: Henry: Terrica: Henry: Terrica: Rob: Terrica: Rob: Terrica: Rob: Terrica: Rob: Terrica: Rob: Terrica: Rob: Henry: Terrica: Henry: Terrica: Henry: Terrica: Henry: Rob: Henry: Rob: Terrica: Rob: Terrica: Rob: Henry: Terrica: Henry: Terrica: Rob: Terrica: Henry: Terrica: Henry: Rob: Henry: Terrica: Rob: Henry: Terrica: Rob: Terrica: Rob: Terrica: Henry: Terrica: Henry: Terrica: Henry: Terrica: Terrica: Rob: Terrica: Rob: Terrica: Rob: Terrica: Rob: Henry: Rob: Terrica: Henry: Terrica: Henry: Terrica: Henry: Rob: Terrica: Henry: Terrica: Henry: Terrica: Rob: Terrica: Rob: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast show 883. Hey everyone. I\u2019m here with my good friend Henry Washington for a very, very powerful investor story today.<\/p>\n
Man, that\u2019s right, Rob. We are here talking to Terrica Smith. Terrica is single-handedly solving affordable housing in Louisiana while turning a profit. This is one of the best episodes that I\u2019ve ever been a part of. It is an understatement. Terrica is an investor who started out with nothing in terms of resources, in terms of finances, in terms of understanding what real estate investing is. We hear all the time that affordable housing is this puzzle that no one knows how to solve, and she\u2019s literally doing it right now in her backyard and started at ground zero where a lot of new investors find themselves right now without money and without knowledge. And so if you are in that boat where you know I want to do something extremely powerful with real estate and I just don\u2019t feel like I have the resources to be able to do that, this is the show for you because this is somebody who was in your shoes and is now changing her community and it\u2019s now changing the lives of the people within her community and building wealth while doing it.<\/p>\n
And she\u2019s solving affordable housing for Louisiana and actually turning a profit, which just makes this whole story all that more inspiring. So you\u2019re going to definitely want to stick around until the very end. I know you\u2019re going to love it. And without further ado, let\u2019s bring in Terrica.
Terrica, to start the show, can you tell us a little bit about your upbringing in New Orleans?<\/p>\n
Oh yeah, absolutely. So for those who don\u2019t know, my name is Terrica Lynn Smith. I\u2019m a real estate developer and coaching. So I actually got started in real estate back in 2005, and that was the year of Hurricane Katrina. We were trapped in the city and honestly thought I was going to die. I thought it was the end of the world during that time. And so I had two kids at that particular point in my life and I knew that I did not want to leave them here without a mother. I also didn\u2019t want to lose our lives because we didn\u2019t have any money. So it was a life-changing moment for me being trapped in the city. And I said, \u201cIf I can get out this city, then I\u2019m going to work and not rely on the government ever again in my life.\u201d
And that\u2019s what I did. We relocated to a foreign city called Lafayette, Louisiana. I didn\u2019t know nobody, didn\u2019t have no referrals. I had nothing. I started with nothing and I ended up at CENTURY 21, and I got started selling real estate. I think the key point of that though is I didn\u2019t just go get my real estate license. I knew absolutely nothing about real estate at this time. I just knew I was trapped in the city for a few days and I did not want to experience that again. I wanted to be able to fly out the next time a natural disaster happens. And so because I knew that and I knew because I didn\u2019t have no money, I couldn\u2019t leave the city, I was one of those people who was poor in New Orleans at the time. I had to do something to be able to better my life for my children.<\/p>\n
So you mentioned you didn\u2019t really know much about real estate or anything like that. What were you doing? Tell us a little bit about some of the careers or some of the jobs you had growing up.<\/p>\n
Well, I was homeless at 17, so I didn\u2019t really have no career. I didn\u2019t go to college and have no fancy degrees or anything like that. At that point in time in my life, I was working at a temp service during Hurricane Katrina and I would hold stop signs at the construction sites early in the morning to be able to let people know when to stop and slow down and do different things like that. So I absolutely knew nothing about real estate, but before Hurricane Katrina, I actually traveled the road selling magazines going door to door. I would ask people what they did for a living, and these people would always say that they were in real estate. So the term real estate always stuck inside my head because I never knew what it was. I always thought it was buildings. I never knew it was actual dirt.
So after Hurricane Katrina and being trapped in the city, when I realized I needed to find something to be able to make money, I remembered all those people doors I was knocking upon and they lived in these big beautiful homes and they all said they were in real estate. And so for me, that\u2019s why I ended up going into real estate because of the simple fact I was a door knocker and that\u2019s really how I got my start in real estate.<\/p>\n
I think that\u2019s super cool. There\u2019s a lot of people who get their start in real estate because they, through whatever profession they have, see people closing real estate deals and they end up on that. I\u2019ve talked to people like title agents, they\u2019re closing transactions all day long and they\u2019re all of a sudden they\u2019re like, \u201cI want to be receiving some of these checks. How do I do that?\u201d And then the same thing, people see real estate agents, they know they get commissions and that\u2019s kind of what gets them in. It\u2019s interesting too that you were knocking on doors because as real estate investors, that\u2019s still something we have to do and we\u2019re getting started sometimes.
So I wanted to kind of clarify, you said you were trapped in the city during Hurricane Katrina. I just want to clarify for the audience what you mean by that. You don\u2019t mean trapped in the city in terms of like you couldn\u2019t get out because traffic was bad. You mean you were trapped in the city because you just financially didn\u2019t have any way to leave? Is that what you\u2019re saying?<\/p>\n
Right. Both. So when I say trapped in the city, I mean that, one, we did not have no money to be able to leave ahead of time to be able to evacuate when they told us to evacuate. If you don\u2019t have much money and you\u2019re living on welfare, that is a lot of money when you have to up and leave and you have that small amount of income. So not only that, it took us three days to be able to get to a city called Breaux Bridge, Louisiana, which is only two hours away from New Orleans. That\u2019s how bad traffic was, and that\u2019s how long it was taking people to be able to evacuate because people was running out of gas, the gas stations wasn\u2019t opening. So we stayed trapped in the city literally in the same area until we was able to get assistance with the police, the army, and all those different people that came in to help us evacuate. But we literally was trapped in the city.<\/p>\n
Okay. So essentially, what you\u2019re saying is, because of the conditions and your financial situation, there was no other options for you. And then you kind of put two and two together and said, \u201cI know all these people that have this money are in real estate and I never want to put myself or my family in a position where I can\u2019t get away from trouble like this if I need to due to my own financial circumstances,\u201d so you said \u201cI\u2019m going to get into real estate because of those situations\u201d?<\/p>\n
Absolutely. Let me tell you this. They were asking for our city council and all these different people and they were like, \u201cYo, they flew out already.\u201d So it just planted a seed when I heard that, right? So we asking for help from our leaders, but they not there. They already gone. So it\u2019s like, \u201cOkay, well I don\u2019t want to be here next time something like this happened.\u201d So it just really resonated to know, yo, people really did leave. And if we would\u2019ve had money to be able to leave, we wouldn\u2019t be in this situation. And so it was a big eye open for me.
You never know what you need until you really need it. And at that time, if we had the resources to be able to evacuate\u2026 And I\u2019m talking just a few hundred dollars, I\u2019m not talking thousands of dollars. If we had a few extra a hundred dollars, we could have left and evacuated and stayed at a hotel again. For those who don\u2019t know what evacuation is, you got to literally leave your house. You got to go and stay at a hotel room, you got to be able to afford the hotel room. You got to afford the food when going to that. So it\u2019s not just oh, up and leave and go by a cousin or a relative. It\u2019s also counting the cost of that as well.<\/p>\n
Absolutely. It\u2019s hard. I think it\u2019s hard for anybody to move so you put in any kind of financial constraints or stress and it\u2019s super, super difficult. So thank you so much for sharing that with us, Terrica. I want to move along a little bit in your story because eventually you do end up getting into real estate. Did you know getting into real estate when you were doing this, did you know what it would become? Did you have an idea? Were you like, \u201cThis is my way out\u201d? Or were you like, \u201cI\u2019m going to try this and see how it goes\u201d?<\/p>\n
Rob, I was poor with a negative bank account, okay? Let me just be clear. I just needed some money at the time. I didn\u2019t join real estate because I was going to be Warren Buffett or Donald Trump. I joined because I needed some zeros in my bank account and I seen people with big houses and it looked like they put zeros in their bank account with real estate. I failed that exam seven times. I could not pass that exam. I did not know what a mortgage was, a lien was, an encroachment, an encumbrance. I knew no real estate terms. So for me to literally know nothing, be the dumbest one in the classroom, asking the most simplest questions to those who got family who\u2019s been owning real estate, it is unheard of, right? So I had no clue that I would be a leading woman in my area, pioneering smart girl. I just didn\u2019t know that. My mind didn\u2019t comprehend that. It comprehended I needed a few more zeros at that time. So I started where I was.<\/p>\n
Cool. And give us a little bit of clarification. When did you go to real estate school? Give us what was that timeframe relative to Hurricane Katrina? Yeah, give us some context there.<\/p>\n
That\u2019s a great question, Rob. So I got started in real estate. So Katrina was in August of \u201905. So right after Hurricane Katrina, we got relocated to a place called Lafayette, Louisiana. By December, I was already going to real estate school. I was sitting in the class trying to figure out what the heck real estate was and just trying to figure out how to pass exam. In early \u201906, I got my license and I finally passed it. Got my license and I became a real estate agent during that time.<\/p>\n
Got it. Okay. And you said you took that test a few times?<\/p>\n
Seven.<\/p>\n
Okay, seven times.<\/p>\n
Let\u2019s not dismiss that seven, okay?<\/p>\n
Okay. Okay. I love that by the way. Most people would not do that. So that just honestly just goes to show your tenacity and how much you wanted this. You pass. I\u2019m sure that\u2019s a really big day for you. And you get into your first year of being a real estate agent. What was that like?<\/p>\n
I made a whopping $5,000 my first year. I could have made more money working at McDonald\u2019s is what my exact thought was. I\u2019ll never forget that moment. I just knew when I passed that exam hearing\u2026 I just knew that I was going to be rich. I just was like, \u201cOh my gosh. I got the paper that everybody had been getting to get these big houses.\u201d And my first year I was a WOB. I call that walking around broke, okay? I did horrible my first year. But, I didn\u2019t give up. I went back to my roots. I found my niche in real estate. I door knocked for business. You know what I\u2019m saying? I door knocked to sell magazines. I door knocked to get my real estate doors and I went on to be CENTURY 21 Rookie of the Year Top Producing Agent, and then they honored me with the Centurion Award and different things like that. So my second year was a lot better. I did over a million dollars in sales.<\/p>\n
Wow, okay. Yeah, that\u2019s a big jump.<\/p>\n
When you said WOB, walking around broke?<\/p>\n
Walking around broke. That\u2019s right. I was a WOB.<\/p>\n
Man, it made me chuckle because I\u2019m like, \u201cI think there\u2019s a few real estate investors online right now look like who look like they got it, but they\u2019re wobbing around too.\u201d<\/p>\n
Yeah, that\u2019s it.<\/p>\n
But no. So you talked a little bit about 5,000 the first year and then the second year, Rookie of The Year, and all these awards. So obviously, a lot went into how you go from one to the other. But you said to yourself, I could have made more working at McDonald\u2019s. What made you stick with this plan that didn\u2019t work like you thought it would in the first year versus just going ahead and saying, \u201cYou know what? I\u2019m going to go get a different job.\u201d What drove that decision for you?<\/p>\n
So I always tell people this, \u201cI\u2019m street strong. It take a lot to break you, girl, okay?\u201d I\u2019ve been through hell and back. I feel like you literally got to kill me to take me out this game. And so I refuse to go down. I refuse to be defeated. I didn\u2019t get this far just to get this far. And I knew that if I went and took that test seven times and I eventually passed, I can eventually pick up how this is supposed to go into real estate and start making money from it. So I was always very conscious of my mindset and the way I thought about things because the moment I say I\u2019m done with something, the moment I don\u2019t want to do something, I\u2019m done and I\u2019m not doing it. So I had to be very careful not to let those words come out my mouth because I would\u2019ve walked away if I would\u2019ve been like, \u201cOh, I give up,\u201d or \u201cI quit.\u201d
I made $5,000 this year. This is horrible. But when you see people around you doing 1, 2, 3, 5, $10 million, you\u2019re like, they\u2019re no different than me. And I\u2019ve always told myself that I\u2019m no different than the next person, other than they just kept on going to the next opportunity. If I stop here, I won\u2019t get to my next opportunity. So I think that\u2019s what was different for me.<\/p>\n
There\u2019s a lot of value in what you just said. There\u2019s a lot of lessons for new investors in what you just said because what you expressed is really the mindset that people need to have when they\u2019re not just approaching real estate, but any new business venture. It ain\u2019t supposed to be easy. It\u2019s not supposed to be easy. The only thing in my opinion that sets apart successful investors from those who haven\u2019t found success yet, it\u2019s not that the successful people found the super secret sauce or super secret bag of money nobody else found or the super secret deal source nobody else found. It\u2019s just that they didn\u2019t quit. They didn\u2019t quit when it got hard. They didn\u2019t quit when they didn\u2019t make any money. They didn\u2019t quit when they spent money and didn\u2019t get a return. They didn\u2019t quit when a tenant destroyed their property. They didn\u2019t quit when the deal fell apart at the closing table. It\u2019s the tenacity.
When people say you have to have the right mindset, I think a lot of the times it kind of just goes in people\u2019s one ear and out the other. There is so much gold in this story already. We\u2019re about to learn how Terrica has used that grit and tenacity to learn how to turn any deal into a yes and build a massive portfolio right after this break.<\/p>\n
And we\u2019re back. We\u2019re here with Terrica Smith who is sharing her astounding story on how she got into real estate on the heels of one of the hardest times in her life. She committed to real estate hard. She took the real estate exams seven times to get her license. We\u2019re about to see how that tenacity paid off throughout her journey.<\/p>\n
That\u2019s huge. Not allowing yourself to say, \u201cHey, this isn\u2019t going to work,\u201d or \u201cHey, I\u2019m done with this.\u201d Even playing it in your mind can really change the actions that you take, so I love that. I think that\u2019s valuable lessons for people.<\/p>\n
I mean, I think pretty much what it comes down to is like, we all suck when we get started at something and the really successful people are just willing to be bad at something for a lot longer. And that\u2019s really the big difference in this world. I think people look around at real estate investors and they say, \u201cOh, they\u2019re all smarter than me.\u201d But it\u2019s like, what are the chances that every single successful real estate investors actually smarter than you? And it\u2019s like zero. They\u2019re all just regular people that who are willing to be bad at something for a long time until they\u2019re good.
Terrica, I don\u2019t want to gloss over this whole thing. I mean, you said the first year you made 5,000 bucks. It sounds like this is rough math here, but that means you sold roughly 150K worth of homes that first year. Then the second year you said you did about a million dollars in sales, which rough math here would say you almost 10X your revenue or your closed sales. So what was that? What happened? What was the big moment there that was like, \u201cOh, okay, I\u2019m just going to 10X the amount of output that I\u2019m doing this year.\u201d<\/p>\n
I\u2019ve always been big on research and education. I have self-taught myself a lot of things. Literally, it\u2019s by giving myself access to information. And I remember the big change for me was buying this CD. It was like a comeback CD. It was literally being able to get over every single objection that a seller and\/or a buyer would face you with. I would listen to that. It was like how I read my Bible from sunup to sundown. Soon as I get in the car, I get out the car. If I\u2019m in the shower, I have the cassette playing in the bathroom. I\u2019m constantly doing it and I\u2019m constantly role playing. So now when I get on the phone, I need enough tenacity to be able to get prepared for these notes I\u2019m about to get, because I already know Ms. Jones is about to tell me no. I already know I\u2019m about to get 10 of them nos, right? So I got to prepare myself to be able to get to the yes with all of those notes. And for me, once I had that mindset, I was like, \u201cYo, that\u2019s really cool.\u201d
The second thing was when I door knocked, I ended up getting my own subdivision from a lady because she was impressed with me door knocking. She wanted to know why should she go with me versus going with the top agent that she was going to go with, and I said, \u201cWell, I can tell you. Number one, I have time, okay? I got way more time than anybody. I\u2019m out here knocking on doors trying to get your business. Okay, your realtor\u2019s not knocking on doors. That\u2019s the first thing. The second thing is, you\u2019re not going to be a number to me. You\u2019re going to remember me.\u201d So I made my relationships more personable with the sellers. I treated them as if they were actually a friend of mine and that their property was the only property in the world for me, and it landed me my first subdivision. So-<\/p>\n
Hold on really fast, Terrica. What do you mean by that? When you say it landed you your own subdivision, is it one of those subdivisions where a lot of them are pre-built and you\u2019re just the exclusive agent?<\/p>\n
Yes. At that point in time, yes. This was a lady who she had, I think it was like 60 lots or something like that. And so she literally allowed me to be the listing agent for that community. Every single property she built, I was the listing agent to be able to sell those homes back there.<\/p>\n
Wow.<\/p>\n
Whoa.<\/p>\n
Yes. So that went for me. And this is important for those that\u2019s on here, that\u2019s in real estate, I went to a foreign place. I knew nobody, I was not a Thibodeau or Recio or a B [inaudible 00:18:52]. I didn\u2019t have a popular last name. I didn\u2019t have no referrals in the pipeline. I literally just started with what I was good at. And some of us have superpowers that we just don\u2019t access, but I think if we start accessing the superpowers that we have, we\u2019ll realize our talents is more than enough.<\/p>\n
So what a cool\u2026 Well, first of all, the story\u2019s amazing, but you knock on the door and you kind of have, this lady kind of gives you your moment, right? She said, \u201cOkay, tell me why you.\u201d There\u2019s not many people that can point to a very specific moment that probably changed their life. But that 30-second elevator pitch moment right there was probably extremely life-changing for you because it seems like, and I\u2019m speculating here, but it sounds like you being the listing agent for this developer probably gave you a lot of insights and education into the other side of the real estate world on the investor side. Is that kind of how you transitioned?<\/p>\n
Well, yeah, absolutely. So this is a funny story that goes into this, right? So of course it gave me name recognition in the area. When you have a whole subdivision, of course people are going to see your names. Real estate is its own world, so everybody know everybody in real estate who\u2019s doing something. If you ain\u2019t doing that, nobody know you, right?
Well, long story short, I had started working with investors only. I realized there was a niche for investors that agents wasn\u2019t really working with. And so I would start working with investors. I remember sitting at the closing table with one of my investors, and I literally would do all of the work on these projects for them. Meaning, I would find a property, I would bring the contractors in to fix up the property, I would oversee the contractors, pick out the paint colors. I would do everything, list it, sell it, everything, right? I was sitting at the closing table one day and the attorney gave me the folder, the closing folder, which was supposed to have my commission check in it as a realtor.
Now I should be grateful because I have investors that\u2019s let me come in or whatever, and they\u2019re buying it with me, they\u2019re selling it with me. I should be very grateful. Well, they end up giving me that investor folder. And when I seen those zeros in his folder, I couldn\u2019t unsee what I see. I was like, \u201cYo.\u201d
Now mind you, I said, \u201cOh, I\u2019m sitting at the wrong end of the table. I need to be on that end where they\u2019re getting the big zeros and doing the least amount of work.\u201d So I had a conversation with all my investors at that time and I said, \u201cHey, I\u2019m going to work for you guys, but we\u2019re going to split it 50\/50 and I\u2019m not putting up no money. I\u2019m not putting up no money. I\u2019m going to do all the work, I\u2019m going to do everything I\u2019ve been doing, but you got to split it with me 50\/50.\u201d I lost all my investors except one. One investor stayed with me. Me and him did about 10 homes following. And then he started telling all his friends about me. And guess what? When his friends came to the table, they knew if they was going to work with me, it was going to be a 50\/50 deal and I wasn\u2019t putting up no money.<\/p>\n
Okay, all right, so let\u2019s go back because I love this. So you\u2019re basically saying, \u201cI want to use OPM. I want to use other people\u2019s money to fund my real estate journey,\u201d I suppose. So you go, you\u2019re a listing agent and you\u2019re starting to talk to investors. And basically you come in, I don\u2019t want to say making demands, but you come in with your terms. You say, \u201cHey, I want this.\u201d And you had a group, I think you said, of 10 or so investors. Most of them said, \u201cYeah, those terms don\u2019t work for us. Thanks, but no thanks.\u201d They all left. And then one person was like, \u201cActually, I\u2019m good with this.\u201d And then that was kind of the beginning of working with someone to fuel the empires of that. Did I hear that correctly?<\/p>\n
Yeah. It was way more than 10 investors. I lost all my investors except one. But that one investor went on to do 10 deals with me, and that got the attention with his other friends.<\/p>\n
And the draw for the investor was you were the workhorse. You were finding them the property, managing the build, the renovation, the contractors. All they had to do was show up and get paid essentially.<\/p>\n
That\u2019s it.<\/p>\n
Okay.<\/p>\n
I like this. Were you negotiable at all on this or were you like, \u201cThis is what I want\u201d?<\/p>\n
Rob, Rob, have you been on this interview? Do you think she was negotiating?<\/p>\n
Rob, let me just tell you something. I mentioned earlier, right? I said, I\u2019m street strong. One thing I know how to do is make it out of a struggle. So if I had to struggle back from the beginning with zero to get to where I\u2019m at, I was willing to do it. And pretty much I did. I only had one buddy that stayed with me. Shout out to him. We still rock together to this day.<\/p>\n
Well, I ask because most of the time we\u2019re like, \u201cHey, this is what I want.\u201d And when someone\u2019s like, \u201cNo thanks,\u201d it\u2019s always like, \u201cOh, okay, well, I mean, what do you want? And then maybe I can come down a little bit.\u201d But you didn\u2019t take.<\/p>\n
I love it. It is sticking to your guns. This guy did 10 deals with you. Of those 10 deals, it was a 50\/50 split for you and him, but he didn\u2019t have to do any work. And so you said you did 10 deals, but you guys are still working together now. Is the relationship different? What?<\/p>\n
Oh, it\u2019s much different. Yeah, it\u2019s much different because I\u2019m a developer now, so\u2026<\/p>\n
You make him do the work.<\/p>\n
I think I\u2019d impasse him on what he\u2019s comfortable with doing. But yeah, no, we still work. I mean, we still hang out. We go out and eat. We do things like that. But I\u2019m pretty aggressive in this market. I like filet mignon. So that mean I like to eat good in this market. He still does a lot of the fix and flips. And from here at everyone, I feel bored in developments, I go dabble over there. We go make it like old times. But for the most part, we\u2019re just really good friends.<\/p>\n
Okay. So you keep revealing just massive aspects of your story that I\u2019m like, \u201cHold on, wait.\u201d So you\u2019re working with these investors, you do the work, you split it 50\/50, and then there comes a moment in this, I guess, transition of doing renovations and flips where you\u2019re like, \u201cI want to start developing.\u201d Tell us a little bit about that. What was that moment or that change in your career?<\/p>\n
So what happened was-<\/p>\n
Wait, let me guess. Every transition in her career, it\u2019s because she saw somebody was making more zeros and she said, \u201cI\u2019m going to go figure out how to be better than you at that and get them zeros.\u201d<\/p>\n
That\u2019s right. That\u2019s right. So I was at a builders meeting and I was sitting on the UDC board, which is the Urban Development Committee. That\u2019s a committee where all of the builders and developers and everybody like that join together. They give input on ways that they can get different developers to come into the areas and things like that. And so I was sitting there and one builder was talking about the new home he was going to build. Now mind you, I never thought about building new homes. At this point in time I\u2019m just a fix and flipper. He was saying how he was buying lots and he was just putting them up in different communities and I\u2019m like, \u201cWait, you\u2019re building new homes in older communities? I never even thought of that.\u201d
So I went and partnered with a builder. What that partnership looked like was, I found the lots and I paid for the lots and then I had the builder come in and we would build on those lots together and we would split the profit 50\/50. The reason why I did that was because I needed to understand how to build new construction. I knew nothing about it. And being in a fix and flip, depending on the type of home, you\u2019re pretty much rebuilding it anyway. So I knew that I could possibly do it, but I wanted to make sure that I had some type of experience from someone with experience. And so I partnered with a builder. We built four homes in an existing community. We sold those homes before we even finished building them. And I\u2019m like, \u201cYo, this is some really great money.\u201d
So then I was like, \u201cOkay, if I can do this, then I\u2019m sure I can be a developer.\u201d But I didn\u2019t know how to be a developer until one of my friends at a dinner said, \u201cHey, I\u2019m putting my grandchildren name on the street sign\u201d and I\u2019m like, \u201cWhat? You can put people name on the street signs. I didn\u2019t even know that was a thing.\u201d I didn\u2019t know people sit down and have conversations about that, right? It\u2019s about being in the right room and having the right access to the right information you start learning these things. So me being who I am, I\u2019m like, \u201cI want my children name on the street sign too.\u201d So I go and I develop a community, it\u2019s called Madeline Cove, and then I put my son name on the street sign.
Now, I didn\u2019t just become a developer. What I did was I actually worked with the builder. We built a few more properties, and then I eventually ended up in a few more development partnerships with other builders who wanted to be developers. So I was able to witness on the back end that operation, and then I was like, \u201cOkay, I felt confident enough to be able to go do my own development.\u201d And that\u2019s how I was able to start Madeline Cove and put my children name on street signs.<\/p>\n
First of all, I think you\u2019re just a good storyteller because within these stories, there\u2019s so many great lessons for people if they\u2019re wanting to get into real estate or into development. I think one of the lessons that we\u2019re hearing here is you didn\u2019t just say, \u201cI\u2019m going to go be a developer and jump off the cliff\u201d because there\u2019s a lot of risk in being a developer, right? Especially if you have to go acquire the land and you don\u2019t know what that land has use for or if you can even do what you want to do and the cost of it. There\u2019s so many variables and so much money gets spent with development before a 2X4 is ever put in the ground. And so what you did that was super smart was you said, \u201cI\u2019m going to go partner with somebody who knows how to do this and I\u2019m going to structure it in a way that\u2019s beneficial to that partner and myself so that I get a lesson while I make money.\u201d
I always stress to people, if you\u2019re going to get into something that\u2019s not your bread and butter, there are people who are good at it, and there are ways that you can set yourself up to partner with those people or be successful. You need to bring them the thing that they don\u2019t have. I wanted to do a self-storage deal. I wanted to do one so bad, and I thought the only way I\u2019m going to do a self-storage deal is I got to go find a self-storage deal. Because if I get a self-storage deal, I know I can find a guy who does self-storage to come be a 50\/50 partner with me. And that\u2019s exactly how I did my first self-storage deal. I got a lead and it just so happened to be a lead on a self-storage facility that this guy had been trying to market to.
And so once I got the lead, I called him and I was like, \u201cHey, I think this is a good deal. How do we take it down? And if we do, do you want to be 50\/50 partners?\u201d And that ended up netting us our first storage deal. So I think that there\u2019s a valuable lesson there. Find someone who\u2019s doing it and bring them some value and you can get a deal. And then you worked with this developer, you built this relationship, you did a few projects until you felt like, \u201cOkay, I know how to go do this,\u201d and then you went and found your neighborhood to put your family\u2019s name on. Is that what I\u2019m hearing?<\/p>\n
That\u2019s absolutely correct.<\/p>\n
It gives me goosebumps.<\/p>\n
Yeah, it\u2019s amazing. So can I ask a little bit about the details of working with the developer? I think you mentioned you found someone, you said, \u201cHey, let\u2019s split this 50\/50.\u201d How does that work? Do they have a fund or do they have a commercial line of credit with the bank and then they fund it all through there and they\u2019re basically on the hook for that commercial loan financially? And then yeah, basically after all that loan is paid back and you make your sale, you\u2019re just splitting profits from there. Is it that easy or is it even more complex than that?<\/p>\n
No, it\u2019s not even complex. So I think it all depends on the builder\/developer, whatever, whichever route you want to go. For us, we had a relationship with a local bank. So this is how development goes, whenever we find a partial of land and we do the subdivide and we do all of our civil, we are already pre-selling lots. So by the time we get to 50% sold in our community, before we even do shovel, before we even shovel ready, we\u2019re already 50% sold, we go to the bank and we pledge that book of business with the bank.
And they see the LOIs, the letter of commitments we have, letter of intent, but the letter of commitments we have from other builders in the area who has agreed to purchase these lots from us. And then they give us the finance and for the hard costs to be able to get started with the infrastructure. And then of course, you got your lot allocation with the bank where they\u2019re going to have a certain portion that\u2019s due on each lot. Every time you close, you got to pay down your loan on it. And then from there, we\u2019re able to split the profits.
Now how you come in as a partner, for me, I\u2019m adding value is I\u2019m going to do all the city council meetings. I\u2019m going to go to all the civil. Most developers, they want to do that anyway, but if they have somebody that\u2019s going to be in the weeds with them, it\u2019s a great partnership opportunity. And so I\u2019m also going to put in whatever the bank requires for that 20% down. I\u2019m going to come in, I got to bring in my 10% of the portion if I want to be an equal partner in that deal. And that usually looked like me bringing in other investors on the back end of under me creating some type of GPLP situation to be able to get my 10% if it\u2019s a multimillion dollar development.<\/p>\n
For anybody at home that may not know that is, that\u2019s general partner and limited partner.<\/p>\n
Thank you, Rob. Thank you, Rob. Yeah, and so we put those together. And then from there we\u2019re able to go and acquire it and split the profits at the end whenever we sell the property.<\/p>\n
Very cool. Very cool. Okay. This is really amazing, by the way. I mean, I think you know. This is such a cool story. Obviously, you\u2019re crushing it. You go into the development world. I\u2019d imagine it\u2019s a little competitive. So what was sort of your angle or what was your idea for making your neighborhood different or your subdivision different from some of the competition in New Orleans?<\/p>\n
So just so we cleared, this community is in a few hours away from New Orleans. People be trying to dagger you on the internet. But anyways-<\/p>\n
Yeah, I do know, unfortunately.<\/p>\n
Yeah. So I\u2019m big on prevent and gentrification and I\u2019m big on community projects and allowing people that come from situations such as myself, low income, Section 8, affordable housing subsidy. I\u2019m big on catering to that audience. So Rob, I see no competition in my lane. There\u2019s nobody in the United States that can compete. And I say this aggressively. Now, this is national builders. If they want to come on down to this level, I think it\u2019ll be a party for 80% of Americans, right? But there\u2019s nobody building homes less than $200,000 in this marketplace today, but me. So I am okay with making 40,000 to $60,000 on a real estate deal. New construction home, brand new, three bedrooms, two baths. I\u2019m talking a garage. I\u2019m not even putting these people in carports. Granite countertops, energy, fish and windows, architectural shingles. It\u2019s a really nice home that we\u2019re building for the people. There\u2019s nobody who can compete with that.
And so whenever I\u2019m bringing these communities to these neighborhoods, I\u2019m door knocking back to my roots, back to my superpower. If you put me in front of you, Rob, I can sell your furniture back to you when I go to your house. That\u2019s how good I am. I really believe that. So because I know who I am when I go and knock on these people doors and I\u2019m addressing their pain points and I\u2019m letting them know, \u201cI\u2019m not coming in here to push you out your neighborhood. I\u2019m coming in here to include you in your neighborhood. What is it that you would like to see in the neighborhood?\u201d
\u201cOh, we\u2019ll like to see the violence calm down.\u201d
\u201cOkay, great. How about we create an opportunity where, one, we create some type of recreational activity where kids have a place to go and play.\u201d Maybe we have a bookstore in the area because bookstores don\u2019t go into the hood, period. So maybe I create bookstores that go into these neighborhoods that don\u2019t normally get bookstores. Maybe I create a coffee shop where kids can go sit down, study and want to learn. Maybe I create these environments that these neighborhoods wouldn\u2019t normally see, and now you\u2019re able to address the pain points of what some of these people have.
Another pain point they have is that they don\u2019t feel like people are here now. Their voices are not heard. So I\u2019m like, \u201cNot only do I hear you, I am here physically. I\u2019m from where you from. I come from where you come from.\u201d So I\u2019m not afraid of these gang bangers and all these other people that may scare people in the area. I\u2019m not scared of them. I\u2019ll just look at the drug dealer. I don\u2019t care. I\u2019ll stand up to him, period.
So because I have that tenacity about me and because I\u2019m that hometown girl and because I\u2019m not an outreach developer, people in the community, they rock with me more. We went door to door explaining to everyone what we was doing, passing out flyers, but also just doing neighborhood cookouts, community events, making them know that, \u201cHey, we\u2019re here for you guys. We want this to be for you.\u201d And my audience, the people who I build home for, the people who I\u2019m selling homes for is the cafeteria workers in the hospital. I\u2019m focused on that median income of anywhere from 30,000 a year to about 60,000 to 70,000 a year. That\u2019s who I\u2019m focused on building homes for, because that\u2019s kind of like what the middle class in the south is making. So if I can focus on providing homeownership to those individuals who\u2019s been working at the same job for 10 to 15 years, then I feel like there\u2019s no competition in my lane, Rob. I hope that answered that question.<\/p>\n
It did. It absolutely did.<\/p>\n
I\u2019m just going to be frank. This is why I wanted to have you on here telling this story, because all we hear right now is there\u2019s no affordable housing. There\u2019s no way to build affordable housing. We can\u2019t solve this problem. No one wants to solve this problem. And you\u2019ve essentially laid out a blueprint for how people can solve this problem. So I think what you\u2019re proving is that, yeah, this problem can be solved, right? This problem is being solved. What it\u2019s taking is for somebody to get down and go meet people where they\u2019re at. And I think that\u2019s what sets you apart from everybody else, is nobody else is willing to do that.
And you are building homes and improving communities without displacing the people within that community. And so many times we see people come in and build these beautiful homes and these beautiful neighborhoods and these beautiful amenities, but they\u2019re not for the people in that neighborhood. They price them at a price point where the people in that neighborhood can\u2019t have access to those amenities. And you\u2019re doing the exact opposite. You\u2019re building these beautiful communities, but building it in a way that allows the people within that community to have access, and I want to commend you for that. I think that that\u2019s incredible. More people need to see that it is currently happening and can be done and can be profitable.<\/p>\n
That\u2019s huge. I think a lot of people get super scared to go into the affordable housing side of things because they think that there\u2019s no money to be made. But you said that these are, I mean, each build is a relatively profitable build?<\/p>\n
That\u2019s right. And I don\u2019t use the government money. So a lot of people associate affordable housing with subsidy. I don\u2019t use government money. This is my own money that we use to go to the bank. I\u2019m using traditional funding just like anybody else. So I\u2019m not getting no tax credits, I\u2019m not getting any of that. This is literally us working with Home Depot and working with the Lowe\u2019s around the world and getting corporate discounts and being able to sit down and have these hours at a time meeting to drive the pricing down, price per square foot so we can build them at the price that these people need. And also not just focusing on building homes. It\u2019s more than that, right? There\u2019s a food desert, there\u2019s a healthcare desert.
In the area that I\u2019m building it, if a railroad train is passing, there\u2019s no healthcare. That means you can\u2019t get to an emergency room if a train is passing. So we\u2019re more focused on bringing those type of opportunities back into these communities where these people don\u2019t have transportation. They rely on public transportation. So if we can provide food, housing, and medical, I think that that\u2019s a start to getting our community back to where it needs to be.<\/p>\n
This is incredibly powerful and there\u2019s a lot more depth to explore here. Now that we\u2019ve uncovered how Terrica is single-handedly tackling the affordability crisis, let\u2019s dive into how she opens up opportunities for other investors in her region. Plus, we\u2019ll discuss the insightful advice she offers to new investors. Right after the break.
One thing you mentioned was that you go door to door and you talk to the people in the community and you ask them what they want. Obviously, I think strategically that helps you know what to build. But are you also doing that because is it a way you get approvals for the things that you need from the city based on what the community members are asking for?<\/p>\n
I do it because they be having my back, Henry. I\u2019m not going to lie. People be stealing in these neighborhoods and robbing you blind. You know what I\u2019m saying? So I\u2019d be needing a few people to have my back in this neighborhood. So if they know Terrica is in here and I\u2019m trying to help them, and I\u2019m trying to keep them in an environment that they\u2019re used to, that they\u2019ve been there for generations, but I\u2019m just trying to uplift them and bring them better product in their community, then I need for them to have my back. But also if they have a particular pain point, like for instance, they want children to be able to have a basketball court or things like that, I do put those into my designs because that is so important for them and it helps them know that I\u2019m a woman of my word and that I\u2019m going to be true to what they\u2019re asking. Absolutely.<\/p>\n
Irritates me, every time I go into a community and I see somebody build a park and not put a basketball court because then I know you ain\u2019t built that park for the people that\u2019s there. You\u2019re trying to push the people that\u2019s there out. If I see a new park go up with a basketball court, I\u2019m like, \u201cThat\u2019s for my people right there.\u201d<\/p>\n
Yes. Yes.<\/p>\n
I love it.<\/p>\n
So let me ask you, Terrica, because you\u2019re building and you\u2019re developing a lot of new homes, what does that do to the equity of existing homes? Does that help them? Does that hurt them? Does it build up the entire community? How does that look from a grander view?<\/p>\n
Oh, that\u2019s such a great question, Rob. So where I build that, nobody want to come at right now anyway, unless they want to come bulldoze everything down in the area and then just start fresh. So everything that I do, like where I\u2019m building at, before I started building, home values have not increased in over 10 years. Could you imagine not having appreciation in your house in over 10 years, right?
So we took a property, these homes didn\u2019t sell for more than 30,000 to $40,000 in this area. Now they\u2019re selling at about $85,000 because of our new construction homes that we\u2019re building in proximity. Not only are those home values increasing, now we\u2019re increasing the property value in those areas so you just can\u2019t come and steal it from nobody anymore. You got to pay what it\u2019s worth. And so now with us having homes that\u2019s being built at 175,000, 180,000, everything of under 200,000, now people are like, \u201cYo.\u201d First, the bank didn\u2019t even want to give us no money, Rob. I didn\u2019t tell you that. They was like, \u201cYo, nobody\u2019s going to buy over there.\u201d So the first 12 homes we had to build out of our own pocket without the bank. Now they\u2019re throwing money at us because we can\u2019t keep them on the ground. It\u2019s a high need for, it\u2019s a high demand. So that\u2019s why I say we don\u2019t have no competition because nobody can build and do what we\u2019re doing right now. They can, they just don\u2019t want to.<\/p>\n
And I believe that somebody listening to this is going to be inspired. I believe that you are going to light a fire under somebody who\u2019s going to hear like, \u201cOh my goodness, this is what I need to be doing for my community. This is what I need to be doing in the community around where I live.\u201d And so what advice or what would you say to those people who are new and they want to implement a strategy like what you\u2019re doing in 2024?<\/p>\n
I would say this, get around people who\u2019s doing exactly what you want to do. This is to me\u2026 I mean I can be biased, but I think BiggerPockets is the number one podcast in the world on real estate information. I don\u2019t know of another podcast in the world that gives as much resources as this podcast. And it\u2019s not to fluff y\u2019all feathers because I\u2019m on here. It\u2019s true.<\/p>\n
No, go ahead.<\/p>\n
Right. It\u2019s true, right? And so being in rooms like this, listening to conversations like this, going to BiggerPockets and looking at the fix and flip calculator, looking at the multifamily, all of the resources and tools, if there\u2019s an article on anything real estate, I bet you your last dollar, it\u2019s on BiggerPockets. And so, just becoming a sponge with all of the information and the resources that are already given to you, I think people dismiss that. They dismiss all of calculators that you guys give just for free. I\u2019m like, \u201cYo, I\u2019d be charging for this. I don\u2019t get this away for free.\u201d So you know what I\u2019m saying? So to know that it\u2019s a platform out there that\u2019s a hub of information that\u2019s given this, I would say start there.
The second thing I would say is get a coach or a mentor. If you hear my story, I had to learn it through someone else, and I was okay with paying for what I needed to learn. I was okay with paying to take my real estate exam seven times. So I think it\u2019s important to know that you have to be willing to make some type of investment in yourself to be able to get where you want to go and not be afraid to make that investment. And then I would say the most important thing is to believe in yourself. Everybody\u2019s going to tell you it\u2019s crazy. They\u2019re going to say it don\u2019t make sense. They\u2019re not going to understand it. But I think I go to the bank more than anybody in my family, and now they can appreciate advice from me when it comes out my mouth.<\/p>\n
That\u2019s amazing. Well, Terrica, we so appreciate this. This is what I always dub as an instant classic. I think a lot of people are going to listen to this and they\u2019re going to be super inspired to take action today. And for anyone that was at home that if you\u2019re in need of some of these tools and resources, you can always head over to biggerpockets.com. There\u2019s a little tab there that\u2019s called tools. If you click on that, it\u2019ll take you to all of our calculators. And if you want to connect with Terrica or Henry or myself, all of our contact information, all of our good stuff for connecting on the internet will be in the show notes at the bottom of this podcast. Thank you again so much, Terrica. We greatly enjoyed having you on.<\/p>\n
Thanks for having me.<\/p>\n
Yes, of course. And we\u2019ll catch everyone on the next episode of BiggerPockets.<\/p>\n