Podcast Summary: Real Estate Investing School Podcast
Episode 188: REAL DEAL: Reviving Texas Through Redevelopment with Katie Neason
Release Date: August 29, 2024
Host: Brody Fawcett
Guest: Katie Neason
Episode Overview
This Real Deal episode features Katie Neason, a Texas-based developer specializing in redevelopment projects. Host Brody Fawcett guides listeners through one of Katie’s most recent and notable deals—a boutique apartment complex crafted from an old block in downtown Bryan, Texas. The conversation explores the intricacies of urban redevelopment, creative deal-making, city zoning, community vision, and the financial playbook behind Katie’s long-term, wealth-building real estate strategy.
Key Discussion Points & Insights
1. Defining Redevelopment and Katie's Mission
- Redevelopment means working with land or properties that already have infrastructure/utilities, as opposed to “virgin land.”
- Katie: “Redevelopment. That means this is not virgin land. This is land that has utilities, infrastructure brought to it and previously developed to some capacity.” (02:25)
- Katie and her mother are the lead developers in downtown Bryan, Texas, focusing on revitalizing blighted downtowns by increasing “heads in beds” (residents) to support business and community longevity.
2. Breaking Down the Deal: The Boutique Apartment Project
- Property: 18-unit boutique apartment in downtown Bryan, Texas
- 2/3 studio lofts; 1/3 "urban two-bedrooms" (open concept with a closed-door bedroom, designed for young professionals)
- Katie: “The purpose is really for a young professional who, one of them is working from home and they want an office… So we've come up with the urban two bedroom.” (03:27)
- Location: Downtown Bryan, near Texas A&M University
- Strategy: Long-term hold for wealth creation—not a flip. Builds & sells townhomes to fund longer-term multi-family holds.
3. How Katie Found and Structured the Deal
- Acquired 2/3 of an entire city block from an entrepreneur who no longer wanted to pursue their restaurant vision.
- There were three ownership entities; only two could be bought due to first right of refusal on the third.
- Redevelopment was chosen to add residential units downtown, supporting local retail and restaurant health.
4. Design Philosophy & Community Impact
- Focused on building timeless, high-quality structures residents and future investors will value.
- Katie: “Our goal when we build anything is that when 50 years from now...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…scrap that piece of junk and build something new.” (09:18)
- Designed apartments to evoke the social, inviting feel of homes with authentic “front porches,” despite typical apartment layouts lacking this feature.
5. Navigating Zoning and Working with the City
- Vision-First Approach: Don’t ask what you’re “allowed” to do—show the city a compelling vision that aligns with their comprehensive plan.
- Katie: “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.” (13:14)
- Comprehensive Plan: Every city publishes a plan indicating what kind of developments they want in different areas. Projects in alignment with these plans are easier to get approved.
- Approval Process: Obtain city planning staff support first, but know that rezoning is decided by Planning & Zoning Commission and City Council.
6. Practical Strategies for Vision and Inspiration
- Katie stresses that her vision isn’t about inventing entirely new concepts but about learning from great towns, places she travels, and replicating experiences she loves.
- Katie: “Almost all of my ideas and vision comes from recreating something else I've seen somewhere else…a lot of it is just observing how you feel about a setting and then being like, why do I love this?” (15:01)
- Pinterest and travel are great tools for finding design and development inspiration.
- Brody: “Pinterest is another thing…I use it a hundred times more than [my wife] does, but my boards aren't girly, I promise.” (16:46)
7. Creative Acquisition & Financing Structure
- Purchased two contiguous lots: one in cash (approx. $170,000), one via assumption of a seller-finance note (no money down).
- Replatted lots for future flexibility—divided into two, one for the apartment, one potentially for retail/restaurants.
- Katie: “…while we were doing all the rezoning, replatting and all of that…so the apartment sits on its own. And then the new buildings that we construct will have its own lot.” (25:05)
- Construction cost: ~$1.8M; raised ~$715,000 in equity.
- Secured a 75% Loan-to-Value bank loan, with an extra 5% as cash collateral (to be released upon debt service coverage).
- Locked in a fixed interest rate (5.5%) on the construction loan due to strategic anticipation of rising rates.
- Katie: “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.” (28:39)
- Always arrange for permanent financing before breaking ground to mitigate future lending risk.
8. Execution Pitfalls & Lessons Learned
- Lease-Up Timing: The building came online in January, missing prime lease-up season (summer), resulting in increased carrying costs until full occupancy.
- Katie: “I know that in my market, 95% of the leases here renew between June and August…our project came online in January…just know your market.” (31:54)
- Strategy adjustment: Use off-cycle leases (e.g., 18 months) to get back to a summer renewal cycle, maximizing market alignment and minimizing vacancy risk.
9. Advice for Aspiring Redevelopers
- Katie: “If you want to do it, get close to the person who makes the next step feel easy…It is not probably something that you just want to jump off into and see what happens if you have never invested before…But obviously you want to surround yourself with people that know what they're doing to help navigate that.” (35:23)
- Start conversations with the city; immerse yourself in the redevelopment environment before making a big leap.
- Katie offers frequent insights via Instagram (@katiedevelops).
Memorable Quotes & Moments
- Host Brody (on vision): “Vision—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.” (13:39)
- Katie (city relationships analogy): “I view the relationship with the city like a Tom and Jerry relationship. I'm not sure if we're friends or enemies, but if you're kind of pulling in the same direction…usually you can come to common ground.” (19:49)
- Katie (on why she invests locally): “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.” (33:18)
- Brody (about spotting potential): “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…” (23:38)
Notable Timestamps
- 02:25 – Katie defines redevelopment & her unique niche.
- 04:04 – Details of the deal: Location, unit count, product type.
- 05:54 – Origin of the deal: approach to finding and negotiating acquisition.
- 09:18 – Design philosophy: building lasting, beloved spaces.
- 13:14 – Vision and selling it to the city for rezoning success.
- 16:46 – Using Pinterest and travel for creative inspiration.
- 19:49 – City relationship analogy and strategic alignment.
- 24:02 – Financing structure and leveraging seller financing.
- 28:39 – Securing fixed rate construction financing amidst volatile markets.
- 31:54 – Market timing challenges; adapting lease cycles.
- 35:23 – Final advice for aspiring redevelopers.
Final Takeaways
- Vision is King: Approach cities as a partner and align your plans with their future vision for the area.
- Know Your Market Cold: Hyperlocal knowledge gives you a competitive edge (lease cycles, demographics, city planning).
- Creative Deal Structuring Pays: Seller financing, creative acquisition, and early, flexible bank negotiation can provide solid footing, even in uncertain markets.
- Network Relentlessly: Find mentors and partners in redevelopment, and consume content from those actively working in the space.
- Be resourceful: Draw inspiration from everywhere—other cities, abroad, online resources like Pinterest.
Follow Katie for more redevelopment insights:
Instagram: @katiedevelops
This summary covers all content segments with practical advice and notable moments, skipping all non-content, intro, and ad sections.