← 🎙️ Local Real Estate Developers
🎙️ Local Real Estate Developers
From Physics Student to Building an Iconic Development | EP#62
00:43:50
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- [00:00]
A
This is the Local Real Estate Developer Podcast, where we share the stories of locals across the country who took that empty lot or that old building and turned it into something awesome that their community needs. I'm Christy Candle and I've been a real estate developer my entire career. My co host, Rafael is a commercial broker. And together we're sharing the stories of locals making a huge impact on their communities. And what we've learned is you don't need millions in the bank or decades of experience to get started. You just need the confidence, tools, and the right people around you. This pot podcast is your chance to gain the confidence to get in the game. Because real estate development isn't just for the insiders anymore. It's for people like you, too. Welcome to the Local Real Estate Developer Podcast, where we share stories of locals who are doing awesome projects in their communities. And you just might think that it's possible that you could do one, too. I'm Kristi Kandle, one of your co hosts. I'm a real estate developer investor and I teach locals how to become developers in their own community. And today, I am so super stoked to have our guest on the pod. We actually had his partner on last year at one point and we've been following them on social media and just really loving what they are doing. So I'd like to welcome Renzo to the show.
- [01:13]
B
Super, super pumped to be here. This is an amazing experience for me. First podcast ever, so thank you for being an amazing host.
- [01:20]
A
This is awesome. So one of the things we like to do when we start is give people a little bit of background on who you are and where you're at. And so maybe some background on how you even first got interested in this.
- [01:32]
B
Could be like a 15 minute, like, monologue. But I actually started college as a physics student.
- [01:38]
A
I didn't even know that. Okay.
- [01:40]
B
Yeah. And I just graduated college, so I'm about a year out of school. And physics was like a perfect fit for me, or at least so it seemed coming out of high school. And it wasn't until I realized that all my work was going to be invisible for the most part. And I wasn't the brightest student, but I had a passion for it. And I wasn't going to be Einstein and I wasn't going to be a high school professor for the rest of my life. So it was after that freshman year where I had to think, all right, what am I going to do? And that's when I picked up a construction degree, did like a complete 180 because I wanted to see, like, the product of my work in the physical world. And, like, construction just made sense. But what I didn't know is that there wasn't enough creativity in the construction space to satisfy my brain. Like, I wanted to be there from the start. And that's enough, like, enough questions asked. And that's like, where you learn about the job of a real estate developer. They are the people that birth buildings. And that's what I wanted to do.
- [02:36]
A
And then get to. What I loved is that from the start, like, you're designing what the building looks like. You're designing where windows are. You're. And like, we're not architects, we're not engineers, but we're designing where the parking space is and the landscape and the playground. And it's like, wait, what we get to do that?
- [02:51]
B
It's so, like, multifaceted. And it's hard to answer the question, what do you do? Like, what does your day look like? Like, I. I still don't know how to answer that question because every day truly is different. And that's. I always thought that was such, like, a. I hated that answer. Yeah. When I would speak to developers, but now doing it, I can say it's, like, so true.
- [03:11]
A
Yeah. 100%. My sister, I. I laugh because my sister would ask me all the time. She's like, so what do you do? And I'm like, I solve problems. I create cool things. And I, I never really actually understood. And it's like, we, we actually. We make our communities better by providing spaces that people can live, work, or play in. And it's. That, that part is so cool because, I mean, growing up, did you ever. Or at what point did you realize how communities were actually formed or built in the first place? Or.
- [03:38]
B
It was. It was a conversation I had with my. My cons or my real estate professor. I was a sophomore at this point, and I had done my first real estate class. And the professor was soliciting interest for a real estate case study competition, and it was held exclusively for seniors. But that lit a fire under me. I was like, okay, no, I should be on that team. I was just like, a sophomore with one year, and I did get on that team. But he asked a question at the end of our discussion which really changed the course of my life. He said, the point of this whole competition is to answer one question. You're going to be given a parcel of land somewhere in the United States. And you answer the question, what do you build here and why? What do you build Here and why. And then on that walk home from having that discussion, it's about a 20 minute walk home. Every building I looked at, I asked myself, why did this get built here? Like, how did this get built here and why? And, and that's like the job of a real estate developer is to first answer that question when looking at a piece of dirt. And, and I think, yeah, you can spend your whole life trying to figure out that question.
- [04:39]
A
That is such a good thought provoking question because then it makes you start thinking and then, and then you go, interesting, okay, well then I see this and that and this makes sense. But then I'm sure you saw stuff on the way home that you're like, why would, why is this here? It seems a little bit out of place or something too.
- [04:53]
B
100%. Like there's so many things that go into answering that question, like financial markets, the physical conditions, the zoning, what the community says. And that's like the most interesting part about development is, is how many things have to come together for a project to be built.
- [05:10]
A
Yep. I like to say it's like being a detective playing a poker game, also a chess match and just kind of compiling it all together because there are so many stakeholders. So like you said, I mean, you've got, if you're buying the dirt, you're finding a property owner willing to sell to you at a price and terms that you want. You're also working within the city to go, okay, well, what zoning, which basically what is allowed to go in this area both by right or with a conditional use and then also with the local community. Because even though you'd like to think I'm a property owner, I can own the dirt. Well, your neighbors have something to say about that as well as, like, where are the utilities at to the property and how big is it? Are there rivers on it? Are there power lines or above ground or below ground? And it's, once you start breaking that down, you're just like, whoa. So as you, as you switch degrees and you start to go into that in, in college, how, what was, what was the college and training and courses like? And did you get any boots on the ground experience to intern or do stuff like that?
- [06:06]
B
It was the best experience ever. I really think Virginia Tech has like the best real estate like development program in the country. So, like circling back to that case study competition, it was a national competition and our team won.
- [06:19]
A
Oh, okay. Tell us more.
- [06:21]
B
And our school, Virginia Tech, actually has either placed first or second three to the last four years.
- [06:28]
A
Okay. So, and so when they gave you the dirt, did you guys all have the same piece of property so they could compare between schools?
- [06:35]
B
So all 24 teams have the same piece of dirt.
- [06:38]
A
Okay.
- [06:38]
B
And so you submit your. It's essentially like a pitch. Like an equity. Like an equity. You're like kind of like wanting to raise equity for your deal. That's like how the, the competition is. So you have like a 20 slide deck, and then you submit that deck to get into the finals. And then once you're in the finals, you go to Philly. It's hosted by Villanova, the Mulroy Case Study Competition, or the Mulroy Real Estate Challenge. And then you have like a 20 minute presentation that you give to like their industry board. And eventually like, they, they vote on you. So that's, that's the competition. Um, and then there was an, there was another question in there.
- [07:10]
A
Well, like, what was the project itself and how did your. And maybe what was the project first? And then we'll go into like your team you had with you.
- [07:18]
B
Okay. So the, the piece of land was in Asbury Park, New Jersey. It was right on like the last developable. Developable, like lot on the whole strip. So it was right.
- [07:29]
A
Did you guys. Did your team know anything about this market to begin with?
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B
No.
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A
Yeah. Okay. Not at all.
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B
I think we had like one. One of the girls on our team had visited there for leisure because like she was from Jersey, but most of us didn't know. I think the Villanova team had an advantage because they were like closer to it and so they were able to actually like go to the site and like see it. I thought that was so cool. Like, I, I would still love to go to the site because I think it remains undeveloped. But the cool part is that this parcel was submitted by one of the Villanova alumni who was thinking about how to approach building it. So it was a real site. And that's the cool thing about the case study competition is that each of the sites that you're like putting together your proposal for are the. Our sites that developers are actually thinking about how to approach it. And so we proposed a 320 million dollar mixed use building. We had 150 keys, I think 90 condos, and then some like ground floor retail. And it's been about three years since then. And I think winning that competition, it was a realization to me that like, okay, I might be okay at this. I should, I should double. I should double down and really dedicate myself to it. And since then, and I Think even before then, like, I really have been obsessed about real estate development. And that's like a joy to be able to say because I don't think a lot of people have that like fiery passion about, about the thing that they do, 100%.
- [08:57]
A
I think there's a quote that, that someone said, died at 25, not varied yet. And it's, I mean it's a little morbid, but it's also like how many people are sleepwalking through their life and just kind of accepted, okay, this is what it is, living for the weekend and like, yeah, but you're, you're still alive right now.
- [09:12]
B
Yeah, that's, it's. I think that's a lot of people's reality and I think, I think encouraging people to, to really like listen inwards is the first step that I took to, to open myself up to becoming obsessed about something like this.
- [09:26]
A
I love that. So as you're, as you're on the team, how, how did the people get chosen for the team? Were you guys all friends ahead of time? Guessing you weren't with the age or difference. But how did they pick the team members? And how did you guys figure out what role each person was going to play? Because we know that team sport and then having the right partners.
- [09:45]
B
So we had the best faculty advisor we could. We could ask for. His name's Dr. Jeff Roberts and he's at U Amherst now. Sadly left the, the Virginia Tech program. But he is truly missed, like every day. And I'll say this, the year that he left his team at U Amherst won the. The following year. Okay, so after that happened, it made us like ask ourselves, like, were we really special or is it really just Jeff? But Jeff does a great job at, AT building, selects students. Plenty of people apply and then he takes you through like team building exercises at the start where you kind of audit what people are strong at. We had four members on the team. One had done market analysis at I think Colliers the year before. We had my, my good friend Jonathan Braun. He. Yeah, I just name blasted him. I don't know. You can go look him up. Jonathan Braun, he's, he's amazing. He was like doing a lending internship earlier and then the, the second girl on the team was a varsity soccer player, so she just knew how to be a team member. I was also the least prepared out of everybody because I was a sophomore. The only thing I had in me was like this passion to like be the best and like learn the most and to, to like win. But I Think one thing that kind of separated me from everyone else is that I was in the corps of cadets at Virginia Tech. One of the big things that I wanted to get out of my college experience was to learn discipline and leadership. And so being a part of the senior military college taught me those things. And so that's, that was my best confidence contribution to the team. And so my thought was if we just put more hours into answering this question than any other team in the country, we would win. And so we all lived out of one apartment for seven days. We had one person leave the apartment to bring food to us so we could maximize the amount of time on the competition. And we, because of Jeff, we practiced our pitch more than anyone else. I would fall asleep listening to a recording of a perfectly recited pitch about like my specific part so I could memorize it. And I think that's really what separated us was just the amount of time that we put into our presentation.
- [11:48]
A
I mean honestly, that, that truly is like if you are willing to do the work and you're willing to work harder than anyone else, you can do and be whatever you want. That, that really is because a lot of people will talk and say they want to do something, but their actions mean they actually, they don't want to do it. And if you are just willing to take action and to put in the reps. Yeah, that's. It is that simple.
- [12:09]
B
100%. I think it's like Kobe Bryant is the greatest example of that. He's the first person to show up on the basketball court and then like the last person to leave after everyone's left after practice. So we could all, we could all learn something about the Mamba mentality.
- [12:22]
A
Yeah, that relentless work ethic and just drive to, to be the best. Yeah, I completely agree. Well, that's, that's amazing. So after you finish that, you're still a sophomore. So you then your next two years did. Were you able to intern with developers or what did you do outside of schooling, if anything to finish college?
- [12:41]
B
So because of my commitment to the army, I'm in the army reserves. And so your junior year you have to be sent to Fort Knox to essentially it's like a 35 day leadership course. And based on how you perform there, you get ranked like the worst cadet, or I shouldn't say the worst cadet, just like the lowest performing cadets, like the number one. They give you like a number. And so that took a. My only other summer. And so I had one summer to do a real estate internship and I went to Austin, Texas. I worked on a four person development team. Two of them were hokies, and we were working on about $900 million of pipeline taking them through different entitlement phases in downtown Austin. And like, how lucky was I to be able to do that? I. After becoming like obsessed with real estate development, I actually got to sit next to real estate developers and work on actual deals. Like, I really felt like the luckiest kid because that's what it feels like to me still. It's like a game. I felt like the luckiest kid, like going into the office. So that was an awesome experience.
- [13:39]
A
I love that. Okay, so you, you do that. You get the experience. You, you have a degree. Was it always at that point? It was, I'm going to be a developer or what was that final switch to go, okay, here, I'm gonna go find a project now. And, and to get to that first one.
- [13:54]
B
You're such, you're so good at asking questions. Yeah, I was. So every day I would go into the office, I was like, looking at the models that we would do and seeing how much the fees that we would bring in for these projects were. And that changed me because we were four people and the fees were only going to one person, the owner. And the four of us were putting in, I would say, like, the same amount of output. There was just one person whose money we were playing with. He owned the whole process. He owned all the risk, he owned all the upside for that reason at the same time. And it was then that I, I made, it felt like I made the decision for myself what person I wanted to be on that team in the future. And I didn't want it to be 10 years from now. I wanted it to be right after college. And so it was while I was in Texas that I started looking for how I can invest my, my first $40,000 into a real estate development. And I'm not proud of, like, I won't, I won't share with you how much work I was dedicated to that as compared to my internship work. But I was definitely taking up some company hours to how I could do my, my own deal.
- [14:59]
A
I, I would be willing to bet though, that what you, that you still gave the, the output to that team and that developer to make their project happen while you were also just concurrently doing your own. Like, based on what you said about being the best you probably were doing in, you know, two hours, what someone would do in eight hours or 16
- [15:15]
B
hours already, there's a little bit of, like, longer hours on the team. Yeah. So. Yeah, yeah.
- [15:22]
A
So as you're, as you're looking for it, and, and the reason you do need to start early is the fact that development takes a long time. Like we offline, but it's serious. Like development, it teaches you patience, but you have to build that pipeline because you don't get paid, right? You find the dirt, you're not getting paid. You entitle it, you're not getting paid. You permit it, you're not getting paid. You build it and it's open. You're not getting paid until those first dollars start to trickle in if you keep it or if you sell it. But then you still have to list it and wait for someone to buy and go through due diligence to buy it from you. So. So knowing that that is 12, 18, 36 months or longer down the road, you do need to start that pipeline early. So as you were evaluating, how did you pick which market you were going to start in and then how many deals did you maybe go through until you landed on the one that you're like, all right, let's do it.
- [16:08]
B
I went back to like, the fundamentals of development, which is like finding that development spread. Like, what's the difference between your yield on cost and like the cap rate that you can sell at? And that's different based on whatever asset class you're building and location and all that. But I think the larger the deal, the less of a spread you're okay with. And the smaller the deal, the, the larger the spread is. And I don't have a lot of money compared to like doing these like big apartment towers. And so the development spread that I found greatest was in building vacation rentals, specifically, like purpose built vacation rentals. It's operationally intensive. You know, it's a hospitality asset. And we would be self managing. So that was like another way for us to add value to the deal without having to give it to somebody else. And so, and there was great evidence of other developers being very successful at it. There's one specific developer in Waco, Texas who built for 2.1 million and sold for 7. And that's like the IRR on that
- [17:03]
A
is like, his was a crazy success story to where even if you did half of that, you're like, all right, cool. But like his, his really showed you what building a brand around it and along with having that, the asset to go, oh, this is what it could be.
- [17:17]
B
Yeah, yeah. And like the name of the asset, for those that aren't familiar is Live Oak Lake. And the developer is Isaac French. And he really is, like, prolific in this industry. And he, he's him, you know, he did it. And, and our thought was if we could just replicate half, like you said, half of what he did in Texas in our market, we'd be successful. And I think, like, people aren't all that much different in Texas than they are in Virginia. Like, we all want the same thing. We want, all want, like, a cool experience to go out with, like, our loved ones and relax. And there's plenty of signs that made the Shenandoah Valley in Virginia a great market to invest in. With D.C. being like the biggest work from home city in the United States, we felt like we'd be able to attract a lot of, like, remote workers. I think more than like 30% of the wealthiest zip codes in the United States are found in Northern Virginia. And so we had like a good amount of disposable income to tap into. And then it was like where Raj and I were from. I wanted to be able to manage something close to where I was. As much as I loved Austin, Texas, my home base is in Virginia. And so being able to like, be there, visit the site, meet with the contractors was all incredibly important to me. So a lot of indicators pointed towards Virginia, but it doesn't mean that this product that we built wouldn't work in many locations, because everyone really is looking for a wellness experience in their backyard 100%.
- [18:39]
A
Okay, so you decided building your backyard. It's what we talk about a lot of local real estate developers, because it's like development is already hard. So why not take out part of the learning curve by being a local and understanding the market, having resources around you, and being able to be there, like you said throughout the process. So how did you, how did you find this specific property and what did putting in that offer look like?
- [18:58]
B
It was, it was just found on Zillow. I think it was listed for over 600.
- [19:02]
A
It wasn't off market. And like, you had that easy.
- [19:06]
B
No, I was just like searching through Zillow and there's our biggest risk in short term rentals is, is getting our short term rental permit. You know, like, everyone wants to regulate these short term rentals. And so understanding what that legal environment looked like was phase one doing like a legal diligence, like on the whole market. And so that kind of limited the areas that we could search in. And so, like, okay, easy. I'll just like draw these, like, boundaries in Zillow and only look in these areas. And then Even in those areas that the legal environment seemed like something we could navigate, there were still specific pockets in the county that we would have a terrible time trying to get a permit for. And so talking with the county, they kind of like pointed us in a certain direction. So then it kind of made our target even smaller. And so when there was a parcel for single family zoned lots that were all right next to each other, Isaac built seven. We wanted to do half of what he did. So like, four was like, okay, we could do this. And it landed within our budget. And so it wasn't but a week before we submitted our first offer. The thing was that I didn't have all the money to put up for the land. And so it was during that, that moment that I saw the land that I knew I had to start talking to people to invest in it. And that's when I made a call to my friend Raj.
- [20:19]
A
Hey, can we chat for a second? Since you're listening to this podcast, you're already thinking like a developer. You see the potential in your community and you're ready to do more than just watch from the sidelines. That's exactly why we created the Local Developer Vault. It's a free resource full of tools, templates and trainings to help you take action. And here's the best part. When you sign up, you'll also get access to our local real estate developer community. It's full of people just like you who are making real things happen in their neighborhoods. So don't just listen to the stories. Become the next one that we spotlight on our show. The link in the show notes to unlock the vault and join our movement. I love that. So just to like put this in bold and highlight, though you had a very clear buy box, you understood how to reverse engineer to figure out, hey, I need to look up where short term rentals are allowed at all. And then narrow the box. Talk to the jurisdiction to understand and the nuances that you might not just see from that and then narrow it even more. So like you said, you weren't wasting your time looking at hundreds or thousands of properties. It was this one hits the exact spot. We can get to a number that we can make the deal work in. I can't do it on myself, but let's go ahead and get the right partners involved, get a deal and then make sure we have that and then we can move forward, which is awesome. Like, that is how you don't spend your wheels and waste a bunch of time on dead deals or ones that can't ever get off the start line 100.
- [21:39]
B
But that's also not to say that it was like. It's easy for me to explain that in just two sentences, but the story has, like, history. There were about four parcels before that that I was like trying to raise far more capital for. I was like trying to raise a quarter million dollars for one at one point. And it was about like a three month process up until we landed on this one. So. And I just throw that in there because it can be discouraging when somebody's listening to this. And it was like, oh, he just like got lucky and found it. There's like a, there's a process. Yeah.
- [22:06]
A
Luck is when preparedness meets opportunity. So. And I like that you did say the, the prior ones and raising capital. So were you running into an issue where the numbers worked but you couldn't get people to invest in you because you hadn't done one yet, or they weren't quite familiar with the product, or what was the reason those didn't work out?
- [22:23]
B
I think I was really hungry to get a deal done. And so we were looking at parcels where it would feel like built like put a thing in a square peg in the round hole we were trying to make. Yeah, that's. That, that's really what it, what it ended up being. And so no wonder, like raising capital for it wasn't clear. Also, unproven track record makes it a little bit tricky. But I really believe that it was because of the parcels that were up for sale. They had their own. They had some hair on them.
- [22:51]
A
Yeah, that's a development term that if we call it a hairy deal, it means it is not straightforward. There are many nuances and you have to get them all right. And we, we say in development, it's like you're juggling 10,000 balls at once. And the hairier it is, harder it is to put them all away. So very, very true. So you've talked about Raj. Can you give a little background on how he landed on him as a partner for this project and then how you guys teamed up to, to move it forward?
- [23:18]
B
Raj and I, so Raj is my business partner now. We. We've been working together on, on our first deal for over a year now. But our friendship began when I saw him come on the tennis court as a freshman while I was a sophomore. So I'm a year ahead of him. And that's really when we first met was on the tennis court in high school. And it wasn't that year, but the following Year that we became doubles partners. So our team was pretty good in high school. And Virginia, Northern Virginia is like a competitive, like, tennis environment. And so, like, yeah, we, we like grew together as like doubles partners, but never friends. Like, beyond the tennis court. It was like we were there to do business and then like, as in tennis, and then. And then move on after that. We were, we were different grades. But it wasn't until I was in Austin, Texas, working my internship. He was in Dallas working an internship with JP Morgan. And he put up a story post on his Instagram at a bar that I would go to on the weekends. And I was laying in bed. I think it was like a Friday night, probably like 11 o'.
- [24:18]
A
Clock.
- [24:19]
B
But my friend was in town and I, I'm just hearing about it now. And so I got out of bed and like took a scooter down to downtown Austin to go meet him. And I should send you the photo, like, so you could see it. But like, we, we see each other. Like, we take a photo. And that was like, really? What? Really? Like, that was our first, like, touch point since, like the tennis court. I was talking to his friend who was in Austin, also working for JP Morgan, but in the Austin office. And after work, I'll be talking his ear off about, like, purpose built vacation rentals. Like, this is the way that, like, we're going to make it out. Like, it's so feasible to do, like, just one deal and, like, have the cash flow from that. Like, give us enough money to like, not work. And it was like going in one year out the other.
- [24:58]
A
And he was like, sticking like, come on, bro. Like, this is the future. This is. There's so much potential.
- [25:03]
B
You've definitely had conversations like that yourself. You're like, this is.
- [25:06]
A
Yeah, it's like, oh, you're not my people. Okay, on to the next.
- [25:12]
B
But one great thing that, that Nikhil did was he. He said, you know, I may not be the right person for this, but my friend Raj is. I was like, oh. I mean, I know Raj. He was like, yeah, Raj is my childhood friend. And so, like, once the right deal came along, I gave Raj a call and it wasn't that long where I, I just explained to him, like, hey, let's put this land under contract. We can. We have some. We have a reasonable path to get financing and construction. And at work, construction costs are based on my conversation with some contractors. This deal makes sense. And I was putting up my money for earnest. And so there's no risk to him if we, if we didn't close on it, so he was like, yeah, let's. Let's do it. So that was. That was really the start.
- [25:52]
A
And why did you pick him? Was it just. He just had the money or you knew from team building and how you put your college development teams and place that you had the right synergies or how. How did that come.
- [26:04]
B
I think trust is a. Is a huge part of it. I knew Raj. We. We knew each other from, like, from five years at this point. He. He also loved real estate. I don't think you can. Raising capital from someone who loves real estate is easier than someone who doesn't understand it. And I think a combination of those two things. At this point, Raj was selling shoes. That. This is. That was his thing. He was also just starting to grow on social media, trying to get to, like, I think, like, I forget what it was. Like $10,000 a month in sales selling shoes. And so the social media aspect, knowing about, like, Isaac's success was a key part of this whole play. I think Isaac says that when he went to sell this, the media assets were worth around $2 million, or at least that's how the private equity company that was buying the project valued it at. And that really spoke to Raj. I think he'll still talk about, like, that the value that media can bring to a business. And it just. It just makes sense when you. When you understand what is. What are the things that add value to a deal.
- [27:05]
A
Yep, exactly. And I. I love that you. You brought up tennis and sports. I actually reposted a story last night just because they were saying how athletes make such better friends and business partners. Because you see the best and the worst of people. You see it when someone wins, and you see it when someone loses and how they react. You also see it in how they show up every day to practice and their work ethic. And they're just like, you're in the trenches with them. And so I think it creates amazing leaders. I think it creates amazing teammates. And when you have that level of trust and you understand who a person is, you're. You have a really good idea when things hit the fan, because a development project will blow up on you two, three, four times in the process, and you will be like, oh, crap. And you need someone beside you who's like, yeah, oh, crap. Let's put our heads down. Let's figure this out, and let's just keep moving forward. And you don't want them to fold or crumble and go, oh, what do we do? You want that teammate beside you to help carry you through, because you can't always be the person lifting them up, too.
- [28:02]
B
There's nothing I could add to that. That's. That's well said. Yeah. I'll just leave it at that. That was perfect. I think. Yeah. Like, business is a contact sport, a full contact sport that runs around the clock. And to build on, like what you said about deals blowing up, like the first page of a real estate textbook that I read said there's going to be five points throughout your development, five days throughout the process of your development that you're going to wake up and the whole fate of the project is going to be determined by the end of that day. That's certainly been true for our projects, and I'm sure it will continue to be. But that's part of the reason why I like the job. It adds a level of excitement and danger that. That wakes you up. For sure.
- [28:42]
A
It does. And it's like you get to put your best problem solving hat on. And we talk about it with all the guests. It's like you get to be a professional problem solver. And so when those obstacles and those hurdles come up, it's not, oh, why did this happen to me? It's, I knew this was going to happen. I put myself in this position because I know I've got the right people around me and the right skills to go solve this problem. So first it will sucker punch you and you go, oh, crap. Because I'm sure at Norm, I'm not sure I know for sure. It comes also when there are other things in life happening too, and you're just like, this is not good timing. Well, it is never good timing. And life never gets easier. You just get better at dealing with the hard stuff. And it is solving those problems. I'll tell you what, those. Those days where everything's going wrong suck a lot. But when you figure it out and you get that victory, there is no feeling better than when you came out on top and you go, yes, we found a way to keep making it happen and go forward.
- [29:34]
B
Yeah, it's. Yeah, the highest of highs and lowest of lows.
- [29:37]
A
Yes.
- [29:37]
B
But it really is like a game, and that's what makes this whole thing fun, is playing the real estate development game is. It's just that. And I think if that's like, some experience that you want to have in life, like, to be able to, like, like, like pump your fist, like when you get that entitlement or like, you close on that loan or you like close on the land and you get
- [29:58]
A
that short term rental permit that you knew you could get, but just in case you still had to get the yeses on that vote.
- [30:04]
B
Yeah, it's just, it's such a joy. So that's. Yeah, thanks for bringing that up.
- [30:09]
A
I love it. I, I agree. The whole reason you like development is exactly why I, I love it. I love the entitlement puzzle. I love the. All right, we get to, we get to solve these problems or figure something out that nobody has before. Like, those are the cool things. So you guys ended up building the first short term rental and the whole process, from that start to finish, from when you got the dirt to when you were able to get that final CO and then get your first renters in how many months or just over a year was that?
- [30:36]
B
We started ground up. I think we closed on the loan in February, so we bought the land in January, closed on the loan in February, started going vertical in March, and then tariffs happened and it delayed our windows.
- [30:49]
A
I forgot about that.
- [30:50]
B
Oh, yeah, yeah. And, and so like, that was a change order that we didn't expect. Like, we ended up having more change orders later on in the process. But that, yeah, that was like our first project delay. You're like, we're, you get into the deal and you're like, all right, it's gonna get built in seven months and everything's gonna go perfect. And how often does that happen in, in real estate development? Yeah. Never.
- [31:11]
A
Absolutely never.
- [31:13]
B
I, I asked or the builder said, yeah, like, we'll get to break ground in March and we're projecting, projecting to like finish here. But, but things always go wrong in development. And like, for me in my life, I was able to really calculate through decision making and, and like, kind of like push the outcomes that I wanted. Like, very clearly development is not like that. And so because of my history, I thought, like, delays. That's not going to happen on my projects. No. Why would things go wrong?
- [31:43]
A
I'm gonna plan ahead. I'm gonna have all these contingencies, I'm gonna have the backup plan like there. It'll go wrong, but we'll make up time, we'll get there.
- [31:50]
B
There's some things that you just can't control. And so, yeah, we, we went through that. And so that was our first project and, and we, we got delayed about three months because of, you know, the different like tariffs and schedule delays that just happened. But we got our certificate of occupancy in December, so about like a nine month construction process which hey, can't complain.
- [32:11]
A
Yeah, yeah, that's still good, all things considered and everything that you guys had gone through. But and I, I will say so when those things happened, did you learn things that you could carry into the next build? Because you have three more lots to build on, right? So.
- [32:23]
B
Oh my gosh.
- [32:24]
A
So how, like, what efficiencies and what lessons learned with you will you and the contractor have already? That's going to save you so much
- [32:31]
B
beyond the things that we can't control. The. The biggest thing that I'm going to take away from this first project is thinking through specific design elements and being crystal clear in the scope. When you're sending out like the invitation to bid, it's like the most obvious thing. Like, give clear instructions, get great results. But when you're young and you just want to take the project off the ground, you may not think through all the things that are missing or are unclear. And the builder just is also kind of incentivized to just like, hey, let's like close on this, like contract and let's start and I can just give you change orders at the end. What they're not telling you is that like, like I'm not preparing for those change orders, but they are.
- [33:08]
A
And even if they're not, like, it's, there's so many times like it's, you just don't know what you don't know. They don't know what you don't know. They have certain assumptions. You have certain assumptions. And just an easy example, I had some friends building new construction duplexes in, in Naples, Florida. They had it all buttoned up. They had all the, the electrical and this and that. When it came down to it, they said, oh well, for these luxury builds, we never include the electrical fixtures, AKA the things that, you know, get powered to the power in the ceiling and give you light in a room. We're totally missing. Okay, well, if it's a 5,000 square foot home, that's an extra $20,000 of fixtures that was completely missed from the budget. Contractor knows they never provide it. Developer and builder says has never built a house before and doesn't understand that that's even a question they should ask. And that's a $20,000 hit to their budget. Now they knew going into the next duplex next door when they were going to include that into their numbers. But it's, it's to going things like that to where I don't necessarily think that contractors are being misleading and there are plenty of bad ones who Are. But there's sometimes it's just that gap in assumptions and I. Over the years. It's also why we have very long due diligence reports or why some bid sheets are so detailed and extensive. Because you figure out what was missed in one and you're like, no, no, no, I want you to think about that. So for us to put this in, like, did you include all the drywall screws? Did you like all the tiny little things that can truly add up as line items that you go, oh, or ordering stuff ahead of time. Like, we had a big issue with getting transformers and switchgear on projects when. When that stuff was happening. And like, it would be a year to get switchgear that normally took us six weeks. That's a huge impact on a schedule. So we're actually negotiating deals with utility providers to say, hey, I need you to order this. Allow us to order these ahead of time. And I know you don't order transformers until we pay the contract and we're here, but your transformer is a year out and I can't power my project without it. So, like, there's all sorts of things that you learn later.
- [35:03]
B
100%. 100%. That's actually where I think is like a great application of AI because you can have AI read all those documents and identify those scope gaps before they become change orders. And that's actually what my friend is doing in AI startup for specifically that identifies scope gaps to identify change orders before they happen. I'm working with him and we're about a week into it, and we're looking for people to use it and apply their data for it. So. So that may be like an interesting product that can be shared amongst many people in your community.
- [35:33]
A
Hopefully, yeah, for sure. The number of people that have been on that could. Could use that. And I know it's. It's already been nice for me even to plug it in and be like, what questions weren't even asked. And sometimes I check my brain. At first I'm like, I send it to AI first and then I have it come back and I'm like, okay, well actually. And then I use my experience. But it's those. Those scope gaps are so huge. And because even the contractors too, just go back to them, their estimator is different than the person in the field. And so they're making certain assumptions. So even the person building it might go, oh, well, I know you need to do this, this and this to make this work. But the estimator bid exactly what the Project is. So the person building it might not even be the same person seeing that scope gap too. So love the fact that AI is, is growing to where it is because it's. Our industry in general is pretty archaic and I think it's very ripe for disruption. So I'm, I'm personally very excited to
- [36:22]
B
see where we take this, especially like with change orders being like, and like miscommunication I think is like the biggest part in and where AI can pick up on those misalignments very quickly. So I'm excited for that too.
- [36:38]
A
Yeah, I love that. So as in general, how do you approach it when you get that roadblock or that obstacle and you go, okay, I know I need to push through, or it's just that really long grinding part of a project. How do you personally stay motivated to keep pushing through to go, okay, this, this is worth it. This is what I signed up for. This is not the fist pump, yay, we achieved something day. This is the I'm getting sucker punch day.
- [37:00]
B
I think back to two things. One is like my personal experience, and two, my personal experience in the Army. And two is a book that the army told me to read. And so the book is called Harvard Business Reviews. Ten must read articles on mental toughness. And so there's 10 separate articles, but the one that stands out in particular is the appropriate way to respond to crisis. And in summary, it tells you to be a firefighter. And so when a crisis happens, you have two choices. You can either do the number one thing, like the first thing, just taking the first step towards the fire and then taking the next, and then taking the next, but identifying that first step and just focusing on that, I think, I think about that and not shying away from those problems, just making small progress. And then the second part is my freshman year in the corps of cadets. The whole philosophy was let's break you down and then build you back up. And when you get sucker punched, it does feel like those times when you're like a bald cadet being yelled at by caffeinated juniors who remember how terrible their freshman year was and just want to instill that pain in you. And so being able to carry that experience with me forward has given me a little bit more resilience because of it. But I think that's really all it is because each situation is different. The thing that's common amongst all of them is how they get solved. And it's just one step at a time.
- [38:18]
A
So true, so true. So as we're looking forward, you've got, currently you've got your, your four parcels that you can build out into the vacation rental community. What, what is the next five to ten years like? If you're, you're dreaming your vision, you're like, hey, here's, here's where we want to take this. If, you know, if, if money and time were no object, here's where we want to go. What does that five to ten years look like?
- [38:40]
B
I want to build towers. That's always been my goal, especially since leaving that office in Austin. The buildings are like so beautiful and they are so similar to what we're doing right now. We're working with one contractor, one designer, one contact or multiple contacts of the county. But you're interacting with one county and then one lender and then one equity investor. You're playing with the same team, just at a different scale. And that's why I have the confidence to be able to set that goal for myself because I'm getting all those reps in right now. The thing that's different is how much money I have to, to like put on the line to, to play the game. And so like the pre development budgets that we were like investing with down in Austin were about like two and a half million for like those towers across like legal design. And so yeah, everything before a shovel
- [39:28]
A
gets in the ground, spending two and a half million and the deal could still not work. Like that is why the developer then gets paid tens or hundreds of millions of dollars on the back end. Because they're willing to risk significant dollars ahead of time.
- [39:41]
B
Yeah. And that's why I want to get to the point where I can like risk those pre development do myself without having to like lose somebody else's money. So that's, that's really like the, the ultimate goal. But I, I love the idea of like building a tower. But we're, we're starting with short term rentals.
- [39:57]
A
Yep. But just like you said, I mean this is, this is the way to get the reps in. It's the exact same process. It's you, you get more time and more money. The bigger the projects were and it just and truly the bigger the projects are, the more risk everyone knows involved. But people also want to be part of that because those are iconic projects. Those are, those are things that you go, I built that. And people are like, whoa, you built that and you're still hurting cats. You're still solving problems. You just get to do it on a bigger scale. And as long as you've got the level head on your shoulders. I mean, you'll figure it out. That's fully achievable. There's no reason you can't go do that.
- [40:31]
B
I love. I love that word iconic, because that. Not just building a tower, but building an iconic tower. I want. I think we're making, like, the project that we're doing in Virginia iconic, and I want every other project that I touched to be iconic. And the marketing piece is, like, such a huge part of that, which is why Raj and I are like, like peas and carrots. Like, we really got something good going on. And so I'm excited for what the future holds.
- [40:54]
A
Yeah, you guys have an awesome dynamic and are truly, like, that's. That's a great partnership that I can see from the outside. So what. What advice would you leave someone who's listening, who's maybe on the fence or maybe maybe started their first project, and it's kind of hitting those first roadblocks? What advice would you give someone?
- [41:11]
B
Oh, I feel like the first thing that came to mind isn't the most encouraging, but I don't know if development is for everyone.
- [41:19]
A
Correct.
- [41:19]
B
It definitely seems glamorous. And even after my first project coming, like, the first week after it was, like, done, the thoughts that I had circling through my mind were like, man, I don't know if I could go through that roller coaster again.
- [41:32]
A
And this, guys, this is coming from someone who said he is so passionate about real estate and development and understands the hurdles. Yes, we all question life and our sanity and, like, our. You really willing to do this again?
- [41:45]
B
And because of that, I think that could serve as encouragement to other people because you're going to have those feelings. But there's a couple truths that are inherent to your being that won't change. And with time, those feelings will subside and your core tenets are going to be what prevails, and those are going to be the reasons why you continue. So for me, be encouraged that projects don't always go well. Like our. In Austin, three out of the five deals that we would do pre development on would survive. Meaning, like 40% of them die, and that's two and a half million dollars of pre dev. That kind of just gets punted away. And that's. That's. That's the game.
- [42:30]
A
Yeah, you gotta have the stomach for it. And it's really fun when you.
- [42:33]
B
It's.
- [42:34]
A
It can be a really fun game, but, yes, it is not for everyone, so. Well, Renza, this was awesome. I love having you on. I love following what you guys are doing because it's just you, you are inspiring so many more people to get in the game. And we're changing what a developer looks like and we're helping locals understand that, hey, you can do it too. And, and you don't have to go build that massive apartment complex or, or skyscraper. You could start small and you could start with something that, you know, you're, you guys created a space where people can have a vacation and they're going to have memories that last them a lifetime. Like you're building spaces that change people's lives. That's the cool part. That's, that's amazing. So where can other people connect with you and follow along as you guys go?
- [43:13]
B
They can follow myself and Rajanyo Renzo on Instagram and then Cheetah Rajan on Instagram. And then our Property is called royaloakretreat. So you can find us@royalokeretreat.com or royalakeretreat on Instagram.
- [43:30]
A
I love it. Well, thank you so much for coming on. We really appreciate it and love sharing your story. And for those of you listening, if you could leave us a five star review on Apple, Spotify or YouTube, it really helps grow our audience and our impact that we can all have in other communities to help improve them, make them better. So this has been the local real estate developer podcast and we'll see you next time.