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Real Estate Investing School Podcast
188. REAL DEAL: Reviving Texas Through Redevelopment with Katie Neason
00:37:22
Welcome to the Real Estate Investing School Podcast! In this Real Deal episode, Brody interviews Katie Neason about a redevelopment deal she did in downtown Bryan, Texas. The property is an 18-unit boutique apartment building, with two-thirds of the...
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- [00:00]
A
You have a vision, you understand what the city wants, and then you go and present that vision to them. Don't ask them what you can do with the property. Sell them on your vision.
- [00:13]
B
What is up, everybody? Welcome back to the Real Estate Investment School podcast. This is your host, Brody Fawcett, and this is a Real Deal episode. So you guys that don't know what that is. It is an episode where we focus on interviewing one person about one deal they've done with the intent of extracting some good stuff from it that we can go and apply. And it is the best way to learn. The best way to learn real estate is to learn from people who are doing it and who have done it. And the coolest thing about that is the more you can learn about different ways that it's been done in different creative ways that might apply to your situation now or it might apply to your situation in the future. Regardless, the more you know about it, the more effective you can be as a real estate investor. So today is really exciting because I have one of my favorite people, Katie, in the house. What's up, Katie Neeson?
- [01:09]
A
Dude, I'm one of your favorite people. I gotta write that down. That's pretty exciting. You don't know very many good people.
- [01:16]
B
You don't even have to write it down. It is recorded. And as long as you don't take that part out, then. Then we're good. It's. It's timestamped here.
- [01:23]
A
I'm totally adding it to my affirmations in the morning.
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B
Y. You gotta say, I got. You gotta stay on the list because you're already on the list. You just have to stay on the list. That's the key.
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A
That's the key.
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B
No, I love it. I think everybody loves everybody who knows. Katie loves Katie. She's just bubbly, happy, and, yeah, just fun. Fun to be around. We met. It's been like a couple years now since we initially met at some real estate mastermind meetup at some point. And then it just keeps repeating itself because we just keep meeting up again and again.
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A
So it's meant to be stalking you at this point. I just figure out what you sign up for and I'm on the list, baby.
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B
Let's go. Well, what's cool about today is we're going to dive into a deal that you've done, and you've done lots of those deals, but what's unique about you and this deal that we're going to dive into is you focus on this space that a lot of other Investors don't focus on. And I'm just going to call it redevelopment. Is that what you call it? Is that, is that the, is that the niche redevelopment?
- [02:25]
A
Redevelopment. That means this is not virgin land. This is land that has utilities, infrastructure brought to it and previously developed to some capacity.
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B
Wow, is that definition in the dictionary?
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A
Yeah, I put it there. Wikipedia, just yesterday.
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B
Yeah, I can tell because you have that down. So now that we know what redevelopment is, you're going to tell us about a redevelopment deal or project that you did and we're going to dive into it. So as we do, just kind of give us a brief summary and then we'll, we'll dive into the ins and outs of it.
- [02:59]
A
Perfect. I don't have a very good memory, so I'm going to tell you the deal we just wrapped up because I'll remember the most details about it. It is a boutique apartment in our downtown. 18 units. 2/3 of them are just studio lofts and then one third of them is what we call an earth urban two bedroom.
- [03:21]
B
Oh, okay. Urban. Is that just the design of it is that, well, where the urban comes.
- [03:27]
A
From, like a studio loft means there's no bedroom. Like close my door bedroom. It's just all open. Right. So we take a studio loft and then we also add a closure door bedroom. So it's technically could be staged as two bedrooms. And the, the purpose is really for a young professional who, one of them is working from home and they want an office. We don't know if they want their office out in the open or they want their office in the closed door. So we've come up with the urban two bedroom.
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B
Okay, I love it. Awesome. And tell us the location of this.
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A
This is in downtown Bryan, Texas, for all of you non Texans. I mean not everybody can be from Texas, so not everyone knows it, but it's the home of Texas A and M University, which is the largest university in the country. Hour and a half north of Houston, hour and a half East Austin.
- [04:23]
B
Oh yeah. Cool. Love it. I, I've spent lots of time there and they have a crumble cookies there. It's pretty good. And spent lots of time on campus out there. So that's true love, Brian, Texas.
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A
But that's true.
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B
It is true. Yeah. So cool. Awesome. So we know location, we kind of know roughly what it is. And this right now, just to kind of get an idea, you, you're holding it, you're renting it out, you're cash flowing from it. Right. It wasn't like a flip or Anything like that.
- [04:53]
A
Correct. So our goal is to do, build, to sell developments which are single family townhomes, to be able to get money to put into our multifamily or mixed use projects so that we can keep those for the long term for the wealth creation.
- [05:08]
B
Cool. Love it. Yeah, I think that's such a good strategy to point out, like, it's interesting that if you are flipping some houses or you're generating money from this active real estate investing, the end goal is to get into like these long term hold stuff. Right.
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A
To create some more sets, not to buy beautiful sexy cars.
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B
Yes, absolutely. So, okay, so back to this deal because we got to throw some pictures and videos up on here because it, it's awesome. It looks legit. You guys did such a good job with it. Just in general. So the redevelopment on this one, when you, when you bought this property, what did it, what did it look like? And maybe just dive into how you found it in the first place.
- [05:54]
A
Yeah. Okay. So all of our development is in our town. We are the biggest developers in downtown, so we're kind of known for that. And when I say we, it's me and my business partner, who's my mama, it's me and her. And she's been a realtor for like 47 years. So she also has a really strong reputation. So a person had purchased this land that is an entrepreneur in town and they had a dream and actually developed a concept to put a restaurant on it and called to talk to us about it just as like people interested in downtown. And then, I don't know, a couple of years went by and nothing happened. The restaurant hadn't come to fruition. So we just reached out to him and said, hey, how's it coming? What are you thinking? And he said, actually, it turns out I'm a business owner, I'm not a real estate investor and I think I'm going to sell it. And he owned the entire block with three different owner partnerships, but he was the common thread in all of it. So we actually tried to buy the entire block. We ended up with two thirds of the block. And that's. So this apartment is on one of those lots that we bought there.
- [07:00]
B
Cool. Okay, awesome. And how, how initially like for, for you, I guess. Well, there's a few different directions I want to go with this. But why did you want to buy this in the first place? And how did you kind of. How, how did it come about? You're like, hey, I want to buy everything. No, I'm not going to Sell you everything. Okay, can I buy one thing? Or what was the kind of the process of actually.
- [07:23]
A
So our problem is we have a really big vision. And so, you know, like, if we own the whole block, just imagine what all we could do with it. And so the property had an old zoning, and it. I don't even remember what it was, but it. It wasn't going to be zoned for what we wanted it to do, and it didn't fit for where it was, what the zoning was. So we weren't even sure exactly how we would develop it, how parking was going to be viewed, could we get rid of parking requirements? So we were like, you know what, let's just try and buy the whole thing. We'll have more options. This was probably, you know, six months before all the interest rates started soaring. So it was when we thought we'd develop to our grave and nothing could ever go wrong. So we're like, let's just, you know, land bank this stuff. And so we tried. The reason we only ended up with two thirds of it, he had a first rider refusal through a lease on one piece of it, and he's a nice guy and didn't want to hurt feelings, and he wouldn't engage that first right of refusal and to force the lease basically of the land to actually act on it. So we're like, you know what? We'll develop around it. We don't need it. So as far as, like, what we were going to develop there, it's close to a lot of our other developments. We've done a whole lot probably two blocks from there. So it kind of added to that end of the town that was already being developed. And our goal for any revitalizing downtown to survive, they need lots of heads and beds because that's what's happened over the years. The downtown's become blighted. All the homes have either been demoed or aren't livable or aren't what people want today. So our goal is how many heads and beds can we put into downtown so that the retail shops and the restaurants can actually survive? So we knew one component of it would have to be, you know, multifamily to get more people living downtown. So the first part we developed was the apartment building. And then we wanted something cool like we want. Our goal when we build anything is that when 50 years from now, when the next generation of real estate investors come in and they get so lucky to get their hands on our real estate, they're happy because they're like, it's such a cool old building that we're just going to breathe life back into. Not because they're like, finally we get to scrape that piece of junk and build something new. So we really want something that the community loves. So we're like, what can, what does that look like for an apartment? So we had this idea to make it look like all the apartments had front porches, which isn't easy because if you think about how you access an apartment, it's through the front door. So you'd have to walk through other people's front porches. And we couldn't find any examples, but we got with a pretty cool architect up out of state, up north somewhere, and we came up with this concept. And that's kind of the theme around this one is it's bringing front porches to an apartment concept.
- [10:17]
B
Wow, I love that. So just a problem solver getting creative. This is fun though, just because in general I think that it's all these little things that end up adding so much value to the property that allow you to charge more for rent, that allow your property to be, you know, one of those that, that people want. Especially if it, you know, comes to a point where things are saturated. It's. And there's more things available. Like yours is going to be the first to, to kind of go. And it's all the, the little pieces that you put together here. So I think that's awesome. And I, yeah, I just love like the look and how it all, how it all turned out with, and this is without going too deep into like the redevelopment rabbit hole. I think it applies to this deal really well. But you and I have had some good conversations. I think it's so interesting, like your process of, you know, going to the city and getting things approved and like, almost like playing the game in a, in a good way of, you know, getting them on your side and you getting on their side to kind of create this win win scenario. So maybe touch on that as well as like, like zoning, because zoning is a big part of that. You even mentioned it in this one where it had some old zoning on it. So I don't know if you had to get it rezoned. And I know that's something that's scary for a lot of people. And sometimes people buy a property with the expectation of like, oh yeah, I can get this rezone no problem. And they realize they can't. So what's the process? Is there any tricks and tips on what to look for, what not to look for?
- [11:43]
A
There yeah, there's definitely a process and to know whether or not it's going to be possible. And one is every town has a comprehensive plan that they file. Go read it and see what they want for the area you're developing in. If they wanted industrial warehouse where I'm building, they would not rezone it probably for apartments that this is in an area where they want higher density housing. So a rezoning would be an easy assumption, but not one that we just buy the property with without a conversation. So we always meet with the city personally on the first conversation. Whenever we're dreaming up an idea or thinking or get a property under contract and we go to them with a vision, it's not like, hey, can we build an apartment there? It's like, hey, we have this amazing idea. This is why it makes sense. Are you going to support it or not? And then if they say yeah, bring that to us, we'll support it. You should know the city isn't who approves or rezoning. So they can support it or not support it, but they cannot approve it. It has to go to, to planning and zoning and then city council is ultimately the one who approves the rezoning. So make sure that you are asking the right questions and not assuming anything in the process. But if they say yes, we'll support it, we feel good that it'll happen and we have a plan B. If it doesn't get rezoned, we'll go ahead and buy the property. If we're not sure they're going to support it, there isn't a viable plan B that makes us break even or make money. We then we will put it under contract contingent upon it being rezoned. But the most important thing is that you have a vision, you understand what the city wants and then you go and present that vision to them. Don't ask them what you can do with the property, sell them on your vision and you'll have the most success that way.
- [13:39]
B
Yeah, so, so good people need to rewind that and just listen to that part right there. Because that, that is like a concept. If you don't understand or you're not doing that, you need to understand that it's going to help you so, so much in the future with whatever you're doing. You said like vision a lot, right? And this is like, I feel like I'm a, a dreamer, a visionary. Like I, I like close my eyes and get so excited on like what my future looks like and these projects. And like right now you can probably hear it in the background. There's like tractors going around because like a landscaping my backyard, it's like, oh, like I close my eyes at night and I just like picture what it looks like and I get fired up. Right. But I know, like, not everybody works that way, especially when it comes to real estate, because I think it's a lot of the same things, you know, like, oh, you said beds and heads. That's been one of my strategies early on with student housing. You know, the more people I can fit then, the more I can, you know, collect with, with rent. And so how do I strategically design this to fit more people? Right. But any, any advice for someone that's like, okay, what does that even mean? Like, you got to go, go to them with the vision. Like, what vision?
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A
Yeah, so I, I get that this isn't natural for everyone. And so, and that's what's great about real estate. There's lots of areas of real estate you don't need vision. You know, they just want to cash checks for us. We want to love what we do and be creative and build amazing things. And this is our outlet to be able to do it. The idea of going to buy a fourplex and put people in it as long term tenants, like that sounds so miserable. I just go get a 9 to 5 job where I knew where the paycheck was coming from. Like, not excited about that at all. Not that it's wrong, it's just the area we, you know, love. So. So as far as vision, I actually am not. You give me a blank canvas and I, I kind of twitch out a little bit. Almost all of my ideas and vision comes from recreating something else I've seen somewhere else. So I spend lots of time to go into cool little old downtowns and see what they have and bigger downtowns to see what could apply to ours. I spend lots of time reading and looking at cool developments just online. And so mo traveling to places that I love, like Europe, specifically Italy. Like, what makes me love being right here in this spot right now so much and just observing my surroundings and going, how can we recreate this where we live so we don't feel like we have to go across an ocean that every day feels like a vacation in our towns. So a lot of it is just observing how you feel about a setting and then being like, why do I love this? And creating the vision from that. It's not like you have to be, you know, like a Steve Jobs or, you know, Tesla, Elon Musk, where You just envision things that have never been envisioned before. I just recreate or apply what I see and love and how I can fit it into my town.
- [16:46]
B
Yeah. Cool. Yeah, that's. That's a great, great advice there. Pinterest is another thing. Like, I love. I love Pinterest. It sound. It's funny. Like, I use it girly. I know. That's what I'm thinking as I'm saying it. And my wife, like, I use it a hundred times more than she does, but my boards aren't girly, I promise. Like. But, like, it's like. It's like Jeep upgrades and, like, just like, mostly real estate stuff and ideas. And, like, it's. It's crazy what you can find what other people have done in different places that you can kind of take back and. And apply to what you have going on. Right.
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A
Yeah. I'm underutilizing that resource. I'm. I have not really dug into Pinterest now. I feel like I'm gonna have to.
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B
Yeah. You. You will go down the Pinterest rabbit hole.
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A
So I'll be sleeping for the next three nights.
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B
I'll collab with you on some of my boards, and it'll. It'll just get you going crazy. So. Okay. Well. Well, this is so. Yeah. Awesome. Did you call it. I don't even. I've talked about this multiple times. I don't even know the name for it. Do you call it Comprehensive Plan? Is that what you said? The city's comprehensive plan? Cool.
- [17:54]
A
Yes.
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B
Yeah. Yeah. I didn't even know the name for. I just got, like, their future development.
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A
Plan or whatever, but Comprehensive Plan is the general name.
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B
Cool. Awesome. That's. Well, it's probably in the dictionary too, but that. That is. That is gold. Like, I just. I just rezoned two properties that I have, and it was because of that. Right? Like, they're both. They're both in the student housing, I guess, comprehensive plan in that zone, you know, and it shows. They're outlining it, so I'm like, sweet. I have a good chance at getting it rezoned to student housing. And it was like the easiest rezoning there. There was. Right. And you'd almost. Yeah, yeah. Things go through city council to vote, but I was in on a different property getting it rezoned. And actually it. Anyhow, one of the votes didn't pass, but four of them did. And so it was fine. But one thing that this. The city attorney said, he's like, just so you know, we, like, we're open to a lawsuit if we deny this for no reason at all. Like, there has to be a reason that you're against this. Right? You can't just be against it to be against it if it fits within everything that we're trying to do. And so I think that just goes along with playing by the rules. And I loved how you said you're going to them, not just saying, like, hey, can we do this? But you're like, no, we have a vision. We have a plan. We have. I just got here's. You probably do this already. But here's another thing that people are listening fiverr and creating renderings. Like, it's so easy, not expensive. It gets your vision out in turns it in real life. And then when you take that to the city, it looks like you put in so much work. And they're like, okay, this looks cool. You've put in a lot of work. And I. I feel like maybe I'm wrong, but I feel like psychologically it's just like, oh, this person, they're already so far along on this, it looks nice. Let's just help them push it through.
- [19:49]
A
Well, I can tell you at least from our city. Well, two things. One, the number one thing I get feedback on, on social media or whatever from the haters is, oh, yeah, you're able to rezone because of where you're at. I could never do that here. And maybe there's truth in that, because I don't know where they're at. But I can tell you, if I wanted to do my townhome development or my apartment building five blocks over in a different part of town, I also couldn't do it. So not only is it my vision, but I share with them how my vision aligns with their vision. So I view the relationship with the city like a Tom and Jerry relationship. I'm not sure for friends or enemies, but if you're kind of pulling in the same direction, we may punch each other along the way, but ultimately we're all trying to get to the same place. And so even though you're there, your adversary, if you both are really trying to run in the same direction, you usually can come to common ground to try and accomplish what you're trying to get.
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B
Yeah. So good. Yeah, it's so good. Love the analogy. And it's so true. People come to me and they're like, yeah, I bought this house, and I'm planning on rezoning, owning it. And I'm like, where is it? And it's this house. In the middle of a residential neighborhood, and they want to be able to put an apartment. It's like, no, it's not going to happen. I'm sorry.
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A
It just the city for not letting them do it, you know, like.
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B
Yeah. And then. And then they go comment on. On Katie's Instagram, they're like, oh, you're so lucky. Because you. Where you live, they allow this, and they don't allow this where I live.
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A
Yeah. In Texas, they'll let y' all do anything. Yeah, exactly.
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B
A lot of truth to that, actually. Just kidding.
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A
That's why we love Texas.
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B
It is. I actually love Texas. Love, love, love Texas for those. For those reasons. And it's. It's very opposite of where I live.
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A
Now in that regard, that's for sure.
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B
But. But yeah. So that concept and just understanding a little bit and how to go forward with it, and then you taking those principles and then, you know, executing on. Because it changes what you look for as well. And, you know, knowing that and understanding, okay, this is what the comprehensive plan looks like now, I'm going to strategically go look for homes that are maybe for sale in that area that people don't know about. And in your scenario with this. This deal, we're supposed to be talking about one deal. Whoops. But in your scenario with this deal, there was an older home on it, right. And there were utilities to it.
- [22:18]
A
Yeah, it was tough because it had an old, beautiful Victorian home on it, and it was right in the middle, and it had to come down if we were going to redevelop the lot. And the reason that we didn't use the home and why it wasn't previously redeveloped is the city had abandoned the street that this old house faced. So there's no road at the front door anymore. It's just a railroad track. And so it just didn't make sense to redevelop it. So what we did was we went in and we harvested all the good stuff. Stuff, the pine floors, the hardware off, the doors, the big, huge, tall doors. Like, we took all the good stuff out so that we can reuse it, but ultimately we had to tear it down and to be able to use it for something more productive than it was. And so, yeah, there was a house on it, and we redeveloped it. Now, the perfect deal is a house that you can rent. Right. Because while you're going through rezoning and all of that, you just keep renting it. So it breaks even when you buy the land. Because a lot of these deals, you can find Right off the MLS because they look at it as a single family house. I look at it as, hey, I could put six town homes on it. And so it's not like you have to really dig deep and find these super hidden gems from super distressed sellers because you're reimagining what the property was going to be anyway. So you can a lot of times just pay what market value is.
- [23:38]
B
Yeah, yeah. That's such a key point, what you said. Like, I, I see it as this. They see it as that, you know, and I think that that's, that's real estate investing in a nutshell. I see it as this, this hidden potential. You see it as this. And so because you see it as this, you're not asking for the same value that I see it as. And so, so, so good there. How did you finance this one?
- [24:03]
A
Yeah, it's because we were buying two from two different buying entities. We actually had two different structures. One of them, this property, was 170 that the apartment mostly sits on. We had to replat it. So it's not even like it used to be, but most of it was. Is on this property that was 170,000. And I'm pretty sure we paid cash for that. I'm not positive, but I think the other piece was what happens when you're.
- [24:30]
B
Just raking it in and can't even.
- [24:32]
A
Keep up with the money? Can't even keep up with the money. The other one was a seller finance note and we just assumed the note. So we had no money in that one and we just took over payments of that seller finance note.
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B
Wow. Okay, cool. And these were. So just to recap, these were right next to each other and you.
- [24:53]
A
Yeah, they're combined. Yeah, they're contiguous and so touching. That's contiguous is in the dictionary. If you're wondering, Brent.
- [25:03]
B
Can we get the actual definition?
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A
Yeah. And so. Exactly. And so then we re platted it so that the, you know, you can't build over a property line. So it kind of. Once we figured out what the configuration of the building was going to be, instead of just replatting it as one big lot, we went ahead and divided it into, I think, two lots, one with the apartment and one with another that will probably be retail or maybe a restaurant incubator or something on it. And the reason we separated them was so in the future, if we ever decided we wanted to sell, they wouldn't have to be sold together. So we just went ahead. While we were doing all the rezoning, re platting and all of that and did two different lots. And so the apartment sits on its own. And then the new buildings that we construct will have its own lot.
- [25:46]
B
Cool. So Good. Love it. Two separate tax IDs. And then so I bought the, bought the land for 1, 170, let's just.
- [25:55]
A
Say 170 for the apartment.
- [25:58]
B
Okay. And, and then the other one, you just kind of took over the payments. What, and you, you paid cash for it on this. Do you have partners? How'd you structure all of that? Then you got a, you got a loan from the bank, a construction loan. What was the total build price? And then what do they rent for? Like all the nitty gritty.
- [26:15]
A
Let's go into all the details. So yes, the reason I'm like, I think we paid cash for it is because usually when we're developing a property, we'll buy the land just with cash and then we'll figure out what are we going to do with it. We'll get the plans ready, we'll get it rezoned, replatted, whatever we need to, and then we'll go get the loan approved from the bank and then we go and raise the money. And so there's that window that usually who knows what we did, but we probably paid cash. And then for this deal, the construction cost of the building was 1.7, 1.8 million. And we needed to raise 560 ish thousand of that 500. And then we also put 150 in. So it was like 700 and I don't know, 15,000 I think was the total raise. Now the bank did a 75% loan to value, but they also wanted an additional 5% cash collateral. So technically it's a 70% loan to value. But the reason we structure it this way is the cash collateral is only until we hit our one to one debt service coverage. Once we hit that, then they release that cash back to us. And at that time we can either put it in reserves, we can send it back to the investors, or we can use it for construction cost overruns, which happened in this project. And we may actually do that. But the, I like that better than the 70% loan to value because then your money's not tied up forever. You get the 5% back. So that's how we structured it. But the other thing that I want to say that we did different about this deal and maybe it's the would you learn is rates were starting to go up or rumored that they were going to go up and we had another Development in process where the rates were starting to tick up on it because typically the construction note is floating interest rate at let's just say prime. And then once you are finished building it, it will fix and amortize like a normal loan. So two things on that one we asked the bank, will you fix the construction loan? And so I never thought they would say yes, but they did. So now we kind of look brilliant because we had it set at five and a half and it would be seven and a half today if it were floating. So that made us look pretty smart. And we weren't. It was just because we were seeing what was going on. The rumors were there and we just asked right? And so they said yes. And then the second thing that we always, always do is get permanent financing in place before we ever break ground. So all of our deals automatically term, even if it's one townhome that we're going to sell, we still have it automatically term into long term debt. So if something changes in the market, we know we have financing in place. It's usually not the best. It's usually, you know, higher rates, not as good amortization, but you can always refinance later. But you cannot always put a loan in place. And sometimes we think that we can. But if the bank decides, hey, we no longer do apartment loans, we the market's crazy, we're no longer doing, you know, non leased properties like you can get yourself in a fine. So I always use the commercial bank who does the construction and the permanent which does eliminate like hard money lenders because they're not going to do permanent financing for you. But to me it's most important to know what my risk are and to know that they're mitigated. And so that's how we structure all our development deals.
- [29:57]
B
Cool. So they'll actually let you lock that, lock that long term rate in during the construction process.
- [30:03]
A
Rate will set at so ours because we locked it in from the beginning. They just locked it for five years. So even though our construction balance changes used to change every month, the interest rate didn't. That is not normal. Usually it would. And then when it rolls to perm, they've already determined it's going to set at prime, say just the prime, whatever prime is that day, then it'll set for some period of time. So like this loan that we got is a 10 year note but the rate resets at 5 years. So it'll reset at the end of 2027 at whatever 5 year treasury plus 3. I think on this loan is what it is at that time. And it may not be a good rate. Rates may get better. If they do, I'll refinance. But if they don't, I know I have a loan and what it is for the first 10 years of the project.
- [30:51]
B
Yeah, cool. No, that's. That's awesome. Yeah, I didn't, I didn't realize you could. I mean, yeah, it's great to negotiate like, your, your, you know, fixed rate for the construction period, but then also, like locking that in for the long term before you actually finish the project and negotiating that. I think that's. That's cool. I didn't know that. I didn't know you could do that.
- [31:12]
A
We do that before we start the project, not just before we finish, because we want to know that way you can underwrite to the worst case scenario and hope that it's better, but at least you know what the worst case scenario is.
- [31:24]
B
Cool. So I think the last thing just kind of on this. And we've. We've hit on so many different things already. And this is why people just need to be making a list of how you can force deals because you've gone through so many things already of, of how you force this deal, how you got creative, how you made it work, how you made it happen, which is amazing. Anything else you would add to that list of, like, this is what we did to make this, this deal work out.
- [31:53]
A
I mean, I think so. One of the things that didn't go so swimmingly well with this project is you got to know your. Yeah, you got to know your market. So we are in a college town. It is the primary driver here. And it doesn't matter that I'm not leasing to students. Rarely do we have student tenants. I know that in my market, 95% of the leases here renew between June and August. It doesn't matter if my project comes online in December. It doesn't matter if I want three per month. So it's nice and fluid and I'm always having a consistent turnover. I know lease up is in the summer, and our project came online in January, so that means I got to sit there with the finished building. Now it's being leased right now. We've already moved tenants in and it's going through. And we'll, God willing, be totally leased by the summer. But ideally we would have come on in April. Right. And so that we don't have all that carrying costs. But the. It's better to come on early than to come on late because if you come on September 1st, you got to be holding it for a year. Right. And so, but the whole thing is, isn't really about when we came on, it's about knowing your market. Because if you listen to any developers out there and they're doing multifamily, they're going to tell you you want this consistent turn in your tenants. You don't want to have them where they all move out in, you know, the summer. But the reality is that's what our market demands. So when we put a lease in place right now, it probably won't be a one year lease. It will probably be a lease that will renew this summer or it'll be like an 18 month lease so it renews next summer. So, so it's just so critical. Which is why I love investing in my backyard for one. I get to see the improvements I'm making. I get to experience the improvements that I'm making and get the benefit of it. But I know my market better than anyone else could possibly know it. So, you know, to me it's like, know your niche. The only thing that's super scary and risky about development is not knowing what you're doing. Right. Once you know, then you can avoid, you know, the pitfalls, you know what you're doing, you can minimize your risk. And it's like that with any of this stuff. So the main thing is just know, know, know your market and know your product.
- [34:14]
B
Yeah, yeah, no, I think that's, I think that's so good and I think that's smart too. It's like, okay, now we're not going to do 12 month lease because then we're going to be in the same exact problem or situation come next year. And I just had this conversation with, with a new property manager that I have and someone was taking over a lease of somebody else and I'm like, hey, instead of having them take over lease because we, we allow that as long as they have to get approval. Right. But if they get approval and, and I'm like, instead of just having them take over the lease and having it end in two months and then we're back to square one. Like instead let's do a 14 month lease with. Yeah, like with putting in there that, you know, because we raise rent every year. So like rent's going to go up in two months to this and you're committed for the whole next year and then you just don't have to stress about it.
- [35:00]
A
Right, right.
- [35:01]
B
There's little, little things that way. Yep. Cool. Well, with us kind of wrapping up on time. Any other pieces of advice or anything else? Like somebody is saying, hey Katie, I love this idea of redevelopment. I want to get like bigger into it and execute on some stuff. What other advice do you have anything else that comes to mind? You're like, do this, don't do this.
- [35:24]
A
Yeah, well, I mean the hardest thing about the redevelopment space is there just aren't a whole lot of people doing it. So information can be really hard to find. It is a more complex strategy. So my suggestion is if you want to do it like get close to the person who makes the next step feel easy. Get an apprenticeship, get around people doing it and try and seek those people out to learn all about it. It's start meeting with the city, see what their efforts appetite is, you know, like get yourself immersed in it. But it is not probably something that you just want to jump off into and see what happens if you have never invested before. Not that it can't be done, but obviously you want to surround yourself with people that are, that know what they're doing to help navigate that. And so like if you follow me on Instagram at Katie develops, I give away lots of free information there and at least it'll get you thinking about what you need to be thinking about.
- [36:20]
B
Love it. Yes, go, go follow Katie. Surround yourself with people who make the next step. Fill easy. I love that. So good. Well, you told us your Instagram and it's K A T I E. Correct?
- [36:34]
A
Yes. And only one eye. There's an imposter out there who sells cryptocurrency with two eyes. It is not me and it does not have the blue check mark.
- [36:43]
B
So I'm not going to get a refund on that.
- [36:45]
A
No, but he appreciates your donation. I mean it only makes sense.
- [36:53]
B
Yeah, that makes sense. He probably doesn't have a Pinterest account either, so I think we're good there. Well, hey, I'm, I'm so glad that you came on to, to jam on this. Love, love this niche, love all the goods that, that you shared with us today. Obviously you know your stuff and yeah, thank you guys as well for tuning in and listening. Go give Katie some love and we will catch you on the next one.