← The Small Nation Podcast
The Small Nation Podcast
102 | Small Town Development | The Small Nation Podcast Ft. Katie Neason
00:53:13
Loading summary
Transcript97 lines
- [00:00]
A
I so admire what you've done and I feel like your fingerprint is all over the town. I have gotten so many ideas, so many things that I want to take back to my community. But what I love the most about your town is you guys totally punch above your weight.
- [00:23]
B
The Small Nation podcast is brought to you by CoverLink Insurance, where people are more important than policies. Unpack lessons from entrepreneurs, break down development strategies and dive deep into small town success. This is the Small Nation Podcast.
- [00:35]
C
Hi, guys, this is Jason Duff. I am here today with Katie Neeson. We are at the Small Nation podcast and we're excited to be in the studio today for episode 102. And today is kind of a special day because I've got Katie and her son who traveled all the way from Texas to Bellefontaine, Ohio today. So welcome.
- [00:53]
A
Thank you. It's our treat.
- [00:54]
C
Yeah, well, I just say I've heard everything is bigger in Texas. Is that true?
- [01:01]
A
Probably. I mean, we've been brainwashed to believe that it is true. So I have to tell you.
- [01:04]
C
Yes, well, I'm hoping because the advice that I know in the time I've spent with Katie this morning, she is a small town developer doing incredible things in this town, Brian, Texas, and we're going to hear about Brian. But what I love about Katie and her story is that when she first began, she's blatantly honest about this, that she had no clue what she was doing. And sometimes in our origin stories of entrepreneurs, you hear people that, you know, grew up with these mentors around them, maybe had a family business background, had all of this knowledge and sometimes you just have to start at square one and figure it out as you go. So, you know, she mentioned she had no clue what she was doing and she was looking for a how to guide on how to develop properties, you know, multifamily, really activate her town. And searching out there, there wasn't a lot of people. Right. So she had to pave her way on her own. And where she's at today is after 15 years of investing, eight years of development, and over a $15 million portfolio that is now cash flowing. And let's put a double click on that. That is a rare thing sometimes in small town development. You can have a big portfolio and put a lot of money out there buying and renovating, but you may not have any tenants. So it took a lot of work to get there. And, and today we're going to unpack some of that lessons, those journeys and those experiences of Katie Neeson and Brand Texas. So, Katie, how did it all begin? Kind of walk us back and tell us a little bit about your background and maybe that first project that got you into doing what you're doing.
- [02:40]
A
Yeah, you know, the background probably started when I was a kid because both of my parents are entrepreneurs. My mom was a real estate agent. My dad actually did steel construction. And we went through the savings and loan crisis in the 80s, and it was tough. And the one thing I learned is I want to be an entrepreneur, and I do not want to do real estate. And so went to college, graduated from college, and went and got a job as a banker, which turns out I love, because I was always the weird kid. I mean, I'm still. I'm the weird adult now, but I was always the weird kid. I wanted to talk about money. I was totally intrigued by it. I assume I'm intrigued by it because of the financial crisis that we went through, but it turns out you're not allowed to talk about money.
- [03:24]
C
Money to some people is like a dirty word, right?
- [03:26]
A
It's offensive. And when. I mean, my husband's a working cowboy, and I remember I'm trying to just fit in with his friends and our first, you know, get together. I was like, how many acres do you have? And he was like, you can't ask that. You might as well ask how much money he has in his bank account. I'm like, oh, well, I hope that was the next question. And so when I became a banker, it was amazing because I got to sit down with owners of companies and ask them how they made money. And I really got to see how some businesses make money and some don't. And they may be in the same industry, they may be in the same town. So it was really intriguing. And so that I got to learn about financial analysis as a banker, and then I read a book that changed my life, and it was Rich Dad,
- [04:06]
C
Poor Dad, Robert Kiyosaki.
- [04:07]
A
Yes. And the reason it changed my life is, one, it put words around thoughts that I had, but I didn't know how to verbalize them. But two, it made me realize what happened to us in the 80s wasn't real estate. It was just that my parents came from very humble beginnings, and they outpaced their financial education. They made a ton of money, but they spent it all because we just aren't taught about money growing up. And so that's when I was like, I love real estate. This is what I want to do. So I quit my job as a banker, but I. I'm a Banker. They beat all creativity out of me, right? Like I am risk adverse. I'm scared of everything. And so I said, I want to be an entrepreneur. I don't know what that looks like. I want to do real estate, but I'm scared. So instead I took another job. But I took a job for education only, not for money. So I went to work for a startup company of two guys who took care of people with Alzheimer's and dementia. But they were serial entrepreneurs, they were super wise businessmen. And I was like, I don't know what I'm going to learn, I don't know what I'm going to do, but I'm going to learn a lot from them. And then seven years into that, the company sold. And that is how I started my real estate full time career. Because I was able to take my exit bonus because once it sold, they didn't need me anymore. And so I was able to take that and I said, you know what, this is almost one year worth of income. At the end of the year, if I'm out of money, I'll just go get a job. And if not I'll just keep going. And I still may have to go get a job. But so far it's just worked out so what we started doing even while I had that W2 job, after reading Robert Kiyosaki, we're like, let's go buy some low income housing. Do Section 8 vouchers. Convince my business partner, who is also my mom, put together this whole business plan to come on this journey with me. We bought two or three fourplexes out of bankruptcy, fixed them up, got them rented and hated it.
- [06:02]
C
So with the Section 8, for people that are listening, that are learning about real estate, the benefit of that as the landlord is that you probably are going to have a pool of people that need housing. That with those vouchers or that commitment, you know that your rent's going to show up. Is that kind of what drew you to feel like that would be a safer, less speculative investment than doing something else?
- [06:24]
A
So like the government was going to pay me. I was like, we're going to help low income people, right? So there was some mission behind it, but we hated it. I think the voucher program is amazing in really high income cities. I mean you can have full time job, be working and still not be able to pay rent. But there are other parts in the country, which is the part of country we're in where it's more of a gaming of the system. So we became immediately cynical it just wasn't fun. And so we pivoted. What we loved was fixing them up. So we just sold them. We pivoted it and we started flipping houses. And we did that for 10 years and we loved it. I mean, it was part of our
- [07:01]
C
identity in the flipping side is that you try to buy low and you would make improvements. Maybe it was ways that there were certain walls that were in the way that wasn't, you know, making the place feel inviting. And maybe the kitchens were outdated or the bathrooms were outdated. So you would improve those properties with the idea that would be worth more and you would flip it and make a profit.
- [07:24]
A
Exactly. And so it was amazing because we loved the renovation. But as a safety girl, being a banker, we had to have a plan B. And plan B was it had to work as a long term rental. So if something happened in the market from the time you bought till the time you sold and you weren't able to sell it, it couldn't take you down. And so that meant we had to buy really cheap houses. We couldn't do high end flips because the rent would never cash flow if we couldn't sell it. Well, that kept driving us closer and closer to downtown because that's where the really old blighted houses were.
- [07:56]
C
But.
- [07:56]
A
But they were full of that amazing character. The wood trim, the hardwood floors. And we started fixing them up and people loved them like they were selling so fast. It stroked our ego. We loved it. But like you just said, you sell it and then you make the income. All we had done was created a job for ourselves. And I convinced my mom we're gonna be real estate investors. I wasn't a real estate investor. I was a person with a job in real estate. Now it was one we love, but we know real estate's a cycle back from the 80s. We know that real estate is a cycle. And at some point flipping won't work. So then what? And so we said, okay. We didn't like the first assets we bought. We do love the flipping. What do we want to own to build wealth in. In real estate? And there was a revival just starting to happen in our downtown. All of our flips were in downtown. We started off seeing in downtown and in Texas, it's always hot, you know, like winter is 100, you know, like it's just always hot.
- [08:50]
C
Temperature wise.
- [08:51]
B
Temperature wise.
- [08:52]
C
And also, I know you're in the news a lot for your sports teams. We can talk about that. Some big, you know, college and pro. And then secondly, you have some of the. What has been traditionally, in the last 10 years, the hottest real estate markets in the country?
- [09:05]
A
Yes.
- [09:06]
C
There are pros and cons, pros and cons, because. And we'll talk about that. It heats up, but it can also cool down really fast, just as much as heats up. But. So tell us more about Bryan, Texas. Can you give us a little bit about what the community is like?
- [09:18]
A
Yeah. So Bryan College Station is the msa. You leave one city, enter the other. You have no idea. College Station is the home of Texas A and M University.
- [09:27]
C
We've probably heard of that before.
- [09:29]
A
Probably up here by the.
- [09:32]
C
There's. There's some Ohio State bands that just probably dropped off right now on the podcast.
- [09:37]
A
It's nothing like a village.
- [09:40]
C
That's great.
- [09:41]
A
And so the nice thing about that in our market is the university is the gorilla, but it also makes our market stable. Now, the bad thing is when the market's really hot, we're not really hot. But when the market dips, that's when people go and extend their education when they've been laid off, or they're like, I'll invest in myself. So it also helps on the downturn. So we are not one of those hot markets in Texas, like in Austin, where you get really high highs and really low lows. So that's nice for the most over the long term. That's really nice. When you have investors and you're so proud that your market's just ticking up at 3% and the rest of the country is at 15%, it's hard to make them realize, no, this is good, because when it goes down, we're still good. And so our M, about 250,000, plus we have another 100,000 in students. So it's totally driven by the university.
- [10:30]
C
And after you decided that we really don't want to be in a job for real estate, I want to be a real estate investor. What did that look like?
- [10:39]
A
Yeah. So we said, what assets do we want to own? Here's the reality. When people have the idea of an equipment job and going to real estate, what they miss is you still have to have income. You. You can't use your income to build wealth and live off of it. It has to be one or the other. So we said, you know what? Let's do development. But we still need income. And we wanted amazing towns. So we go to Italy every three years. That's our inspiration. It's like, why do we build crappy cities? Everyone from America goes to Europe, loves the cities, comes back Home and then we build crappy cities, like why are we doing that? And so we saw downtown, like this is the potential to have such a better place. Why don't we do that? Well, those communities, they need retail, they need office, they need homeowners, they need renters. So what we said is, hey, let's build townhomes. Anything we can deed single family, let's sell them. That's basically an extension of flipping, right? It's just ground up instead. And it lets us get that income and pops of cash that we can then put into as equity into our build to rent that we want to keep long term. So that's what we do to keep our income going. And then we have homeowners in our neighborhood and then we might buy the lot across the street and we might build a boutique apartment or a mixed use building. So our asset class is downtown. It's a 15 by 5 block area. It's not apartments, it's not mixed use, it's not adaptive reuse, it is downtown. So when we get a lot, we just say 20 years from now, what would be the best use of this land to benefit downtown? And, and that's how we decide what to build there.
- [12:19]
C
Well, the key takeaways from some of the things that you've just shared is flipping does not equal long term wealth. Flipping might get you that short term boost and build, you know, some capital that you can reinvest in something. The other thing is that as you became a developer, you started to think about what systems do I need, you know, to support the geographic area so that I can scale this. So having one property improved, that's going to benefit another property that I own and another property that I own. And then I think you thinking about opportunity as a perspective to build a business and identifying that in a town that isn't maybe the largest and the sexiest in terms of like Austin, Texas, but that is actually your strength because you're not riding the big highs and the lows. Being in that secondary market, things are a little more stable and probably a lot less competitive. Meaning you can be the developer and the big fish in a smaller market.
- [13:20]
A
Yes, absolutely. Being in a small town is not a consolation prize, it is the competitive advantage. And not only are we a secondary market, technically we're considered a tertiary market. And so we're not going to compete against big institutional money. They're not going to be in downtown, so that's beautiful. And we're working with the city that wants what we're giving them now does that mean it's easy? No, that's right. But it means it's possible. And so I have developed for past jobs in Houston, I tried to in Austin, in San Antonio, in the bigger cities. And it is, it's, it's just like beating your head up against the wall. Like it is hard enough to build in a city when you're both pulling in the same direction. My opinion is life is too short to do something that they don't want. So I want to do what I want though. I don't want a job. So I have a lot of friends who are real estate investors and they're like, I don't care about real estate. It's just a means to an end. And I'm like, that's a job. So I want to do something I love. Otherwise I'm going to let somebody else write my paycheck. Why would I go through the pain of being an entrepreneur and not do something that I love? And so building a town and a community and having a huge impact on it, that's something that we love. And to be able to create income and build long term wealth in the process, like that's living a dream every day. And that's the kind of life that we wanted to develop.
- [14:50]
C
I think that's a great way to kind of put a button on those particular pieces. Here's another theme that I was interested in hearing your opinion on is how do you. It seems like to me as you've built your this portfolio and you've moved on to having multiple projects and now also working on some commercial storefronts and wanting to work to recruit new businesses to Bryan, Texas. How do you see opportunities that oftentimes other people miss?
- [15:18]
A
Yeah, this is so good. Part of it is just exposure. I would have never even gone down this path had we not taken those trips to Italy. And, and for the first. So we go over three years, so we've been, I don't know, eight, 10 times. The first couple of times I didn't even really recognize it. I knew I liked it, but I didn't think of it from a real estate perspective. And then it kind of dawned on me what makes it so great. So if you're not exposed to it, you. It's really hard to dream it. So part of that is just get out there and get exposure. And then here, that's why I'm here. I am doing a little tour. I'm here. I'm going to go to Marion, Ohio and then I'm going to go To Chambersburg, Pennsylvania. These are all small scale developers that I totally admire. And seeing it, there's no substitute for seeing it in person, man. The ideas and the just the energy that you get. And maybe it's ripoff and replicate, but a lot of times it doesn't really apply exactly in your town, but something clicks for you that you'd been thinking about and you couldn't put all the pieces together. So now I see opportunity. Not because I'm creative, because I'm not. I'm a spreadsheet girl. I'm not creative. I see opportunity because it's a reflection of something I've already seen somewhere else. So if you're the type of person who says, I'm not creative, I don't have the vision, that just means you haven't seen enough things. You don't need vision. You just need to be able to see something and then apply it to your landscape.
- [16:41]
C
I love that. You know, you mentioned earlier that you described yourself as weird. I will tell you, spreadsheets can be a gift, particularly where you and I probably are very different. I struggle with accounting so much and I took an accounting course in college. But when I first started the business, like I could understand the marketing, I could understand the idea of like working and making a real estate project better, but I really struggled with numbers. And so I had to come to realization that that was not my unique ability and I needed to find someone that really was good at numbers. So this is a shout out to our staff accountant, Cam, because if we did, you know, everyone in the studio is like shaking their heads. Cam runs the numbers and makes sure the bills get paid, the payroll gets done. And he also holds me accountable when we set budgets. And the budget word sometimes is not a fun word, but we need those people in our life. But you described yourself as weird. And I want to relate this to real estate, you know, as identifying opportunities. What are the small or odd properties that you may be that everyday people kind of pass by but could become the best, best opportunities to invest in?
- [17:52]
A
Yeah, I think the opportunity is just seeing it for something that it isn't. So a lot of the properties, unfortunately we don't have these beautiful buildings that you guys have. We're. Our town is bigger and I can assure you we have less amazing historic buildings. I don't know why that is, but that means a lot of the stuff that we have to create becomes ground up construction because we just don't have the beautiful building stock. Well, most people will see a boarded up house or maybe a rundown house. And their mind is, can I fix that house up or tear it down and build another house? But I can say, what can I do to make downtown better? Can I turn that into 10 townhomes? Can we make that a mixed use development? So it's not even so much that the property is odd. It's just realizing most of our real estate since World War II hasn't been built efficiently. So if we're starting all over, what should have this been? And usually it just means something more dense, something that's walkable and creating something that people love. For some reason, we create towns that we want to escape from so that we can go to towns that we love. So the question is, when I see a property, what can I put here that people would love to stay here and experience it and not try and escape from it?
- [19:09]
C
Can you share a deal that other people may have passed by that you have now worked on and it's been successful?
- [19:17]
A
I feel like every day we do, some would pass by. That's why we got it. I mean, our very first development ever was an old building. It was the last boarded up building on the most redeveloped block of Main Street. And so this was really the moment that made us think, could we buy that building? And I don't even know why. We've walked by it many times. We walked by it, it's boarded up and we're like, could we buy that? The minute I said that out loud to my mom and business partner, I immediately thought, I bet there's a reason that it hasn't been developed, right? Somebody knows something that we don't know. This building has been boarded up in for my whole lifetime. It had dirt floors with a cistern. It did have a roof, but that was because it had collapsed, which is why it was dirt floors, because I'm sure it was wood floors back when it was originally done. Had a roof leak, it all rotted out. So the only thing left was a dirt floor, which is actually good. I didn't have to bust up concrete, but the city somewhere along the way made em put a new roof on it. So it had a roof and the exterior walls. And we said, you know what, let's just see. So I googled the guy's name and his email address was right there on the World Wide Web. And so I emailed him and he emailed me back and a few months later we owned the building. I cannot tell you how many people after we bought that building and got it fixed up, which we still own it today. Told me, oh, I was going to do that. I saw that building, I had this dream for that building, but nobody was willing to act. The story is you don't have to be smart, you don't have to be more clever, you don't have to be more creative. You just have to take action and you will outperform at least 80% of the rest of the people.
- [20:53]
C
The key takeaway I am learning from you on that would be that sometimes the best deals people drive by every day because they think they're complicated or they're just ignored. And so having that understanding of the value and the vision and then the key piece of that is how do we execute on it. And sometimes the execution, it's not that complex. It's emailing the person and saying, hey, hey, do you want to sell your building?
- [21:21]
A
Yes. We also, we often think that hard things should be done by other people. Like, I'm just not the person for that. And the reality is everything is just a five minute task. Everything can be broken down to what is just the next thing that I need to do. And, but people get so overwhelmed. And the biggest one that I hear about is money. Like, why don't you invest? Oh, I don't have the money. I'm like, do you have a deal? Have you underwritten it? You don't even need to worry about money. Money is like five steps down the road. But we get. So like, if we're going to drive, you know, to Houston, I need to be able to have a clear path all the way. You're never going to be able to see all the way to Houston. You need to get in your car, start it and start driving. It's the same thing with real estate. Quit trying to solve problems at the end of the road when you haven't even gotten your car and started it yet.
- [22:07]
C
There's the banker brain working. And it's so true because I think there's a lot of fear that's associated with money. Or like you talked about in the beginning of the episode, money is not a topic that a lot of families or people feel comfortable talking about. And that kind of leads me to this next area about the framework of how you're thinking about developing and also how you develop systems to help other small incremental developers be able to do their first deal. Walk me through a little bit. Like, what is the framework you use to evaluate a deal?
- [22:45]
A
Yeah, so the first thing is your market. You need to know your market the way you de risk development because the reality is if you look at all real estate investing on a spectrum, development is the riskier end of the spectrum. There's no way around that. The way that you de risk development is you become the expert in your market. I know my 15 by 5 block area better than anybody else in the world. If you want to just go down in flames, look at the spreadsheet and see what Citi says is the number one development city and go and try and develop something there. That is when development is risky. So first off, I want to know my market better than anybody else. I want to make sure it is a good market to invest in and it makes sense just like any other real estate investment. Ideally it's landlord friendly. The city actually wants to do what I want to do, that the population can support whatever it is that I'm going to build. And if I don't know which you usually don't know when you start redeveloping because there's no comps, there's no people who can prove it. My theory, just like when we flipped houses, it had to break even as a rental on development. Our deal is we will not do a deal so big that if it goes wrong, it can take us down. So we just start small. Even to this day. We're able to do bigger projects now because we've built up a bigger base. So a bigger project, you know, we can withstand a bigger project, but we still will not do one if that single project could take us down. And so like when I encourage other people in your town to get into development that are interested in it almost. We have a housing shortage across the whole country.
- [24:20]
C
That's right.
- [24:20]
A
And we have a missing middle housing crisis because we haven't been able to build them since World War II. So like your niche can be, I call it the gateway drug into development. Do a small townhome development because you can make it small enough, three to six townhomes, it's single family. So it's easy for you to understand, it's easy for your city to understand, and it's easy for the bank to understand and it's easy for your investor to understand. But it's complex enough that you will go through every phase of development. You'll have to understand zoning, you'll have to understand how to get through the process, how to get it replatted. You'll go through the actual construction, managing the contractor and then selling it or renting it if you decide to keep it. But it will take you through the whole process. But It's a small enough project that it likely won't take you down, but you will learn pretty much every lesson in development by going all the way through the process.
- [25:12]
C
That's great. You know, I love that you focus on residential. And we talk to a lot of different real estate investors. And what I love about residential is that there is so much pent up demand and just not enough supply. So that's a problem too though in the nation, you know, we. The cost of actually developing and building properties continues to go up and up. The burdens of maintaining properties with real estate taxes, property and casualty insurance, finding trades that can repair and maintain properties, that's challenging. But the thing I think that we realize, and I love this from an economic development perspective, is a home is where a job lives. And for states or communities that want to see more jobs, or maybe they're very strong in recruiting large factories or large businesses that are major employers. But if you're not keeping up on your housing and working with a coalition of other housing builders and developers, you can get your economic development mix out of whack. And I think people like you, you know, and this is why I'm so thankful that you're on the show today and helping other people that are listening be able to do the same things in their town and community. Because we need more housing. And so like that idea of scaling. So in terms of a framework, after you get that first deal, you know, how should someone scale from one to multiple properties? What's kind of the system and process for you to do that? Because you mentioned you don't want to take a deal on that may be more risk than your portfolio is to put you out of whack with that.
- [26:50]
A
Yeah. So first I want to address the residential versus commercial. The truth is, my passion is commercial or mixed use. Like that's really what I love. But the one thing that we discovered when we started redeveloping downtown is if you look at a normal development pattern, commercial always follows rooftops. So if you look at the sprawl edge of town development, all the neighborhoods go in. Once they hit a critical mass, all the strip centers start popping up. When you redevelop a downtown, all of the housing has been demoed or blighted or is not up to the standards of what people are looking for today. But all the commercial buildings are generally existing. So they pump it on its head and the commercial takes the lead in the revitalization. The problem is the house. The rooftops aren't there to support it. So we want the commercial vibrancy, but the reality is until we can get enough rooftop density, those retailers will struggle to survive. So we do a lot of residential, but the end is so that we can have more vibrant commercial in. So as far as like how to scale it, that's I like the start small and then it also lets you start small with an investor. Right. It's a beginning and an end project if you do it build to sell. Because in having investors is like getting married. And if you do a build to sell, at least the project ends. But if you go in with an investor that you've never worked with before and you have a long term project that they're going to be in forever and you get sideways like it's terrible. So that leg.
- [28:17]
C
And it can happen.
- [28:18]
A
Oh, it happens a lot.
- [28:19]
C
It's probably. There's a good chance that it will happen.
- [28:22]
A
It will happen.
- [28:23]
C
Yeah.
- [28:23]
A
And you know what, it all goes back. A lot of it goes back to the whole financial. We don't like to talk about money and so we don't know people's philosophy around money. And most of the problems that happen are because something has gone wrong. And when you're problem solving, that's when you realize you are not in alignment about what bunny is, how many works, what risk is. And so because we don't teach it and there's not common language around it, we find ourselves often in a situation with a partner who had we known this about ourselves, we would have never partnered to start with. But as far as scaling, so I say start small. Did you like the experience? Was it good? And then just keep stacking on top of it. The reason we love the build to sell is because then we get that pop of income and then we can go and put that either into an adaptive reuse or, or into a multi tenant that we can keep. Because ultimately what we're trying to do here is grow our wealth and create a legacy. My goal is for like the next generation of real estate investors. They would die to get their hands on my building. Just like you. You're like, oh my gosh, we got this amazing old building and we got to rehab it. We want to build those things. So from 50 or 100 years from now, people are craving to get what we have to renovate, not to scrape by the way. And so it helps us put in perspective what we're trying to build. Something that's going to last forever, that is definitely, you know, like our goal is we want to build something that other people are going to treasure, you know, years from now, just like we do from the investors, we get our hands on their properties.
- [30:00]
B
Most of us don't think about insurance until we have to. But protecting your home, family and everything you've worked for, it matters. CoverLink makes it easy by comparing options, guiding you every step of the way. Visit coverlink.com today.
- [30:12]
C
So you're building the systems to develop something that's sustainable, that you can grow. And it's not just about the random wins. It's building something that is legacy building and something that you're thinking about your development. Not just 10, 15, 20 years. You want to see this legacy in these properties be around 50 to 100 years from now.
- [30:33]
A
And it's not, I mean, it's definitely legacy for our family, but it's legacy for our community. When you think about a cool town, what makes it cool was what made it unique, right? You don't go to a town that looks just like another town and have any memory of it. But when you go into a town and you're like, either it was cool buildings, it was amazing tenants, it had this feel, this vibe. Whatever it is, every town needs to have its own personality. And that's why I'm so adamant about American individuals owning America's real estate and not spreadsheets. Because not that spreadsheets are bad, but spreadsheets will always produce the same answer. And right now we have financial systems that support the spreadsheet and that is go in and build a 400 unit apartment complex. They're always going to look the same. Build a five over one building. There's a financial mechanism in place to do that. And the spreadsheet shows that that cash flows. So what happens is all of that institutional money comes in, they throw that up, it all gets sucked out and they go and they go on to the next city and then you drive from one city to the next and they all look exactly the same because it's the same building the same money and the financial system, building those towns over and over again. I do not want to live in a world like that. I don't want it to be owned by them. And I don't want my city to look like everyone else's city. So the only way we make them unique is to build them by unique individuals. And that's why I'm so passionate about if you're sitting next to your potential tenant at lunch, you will build and rent differently than if you're never going to meet them. So building your community because you will be better for it and so will your community.
- [32:12]
C
Small town superheroes over spreadsheets is what I heard there. Really, really wise words. I know I'm in good company because every formula that I try to do in a spreadsheet has all of those error things. So I will never probably be able to master this spreadsheet, which is a good thing. I'll take the small town hero, which kind of is a good segue into this small town development. You mentioned this term Turing market. You know, these opportunities outside of the major cities, secondary markets right now. Why do you think the small, the smaller markets and the small towns are advantageous?
- [32:52]
A
Well, one, it's easier to build in them because we're providing something that the city wants, but they don't have the big guys coming in offering to do it. So luckily, luckily for the cities, even if they don't realize that. And so that's definitely advantageous that it's possible. And two, because you can find the uniqueness and create an identity for your town and that will make it more resilient long term. And then three, like I said, when you're building in a place that you know and love for people who are going to love will just, it will just result in good things.
- [33:29]
C
What do you think investors misunderstand about smaller markets?
- [33:36]
A
Well, if you look at the spreadsheet or the market research, it'll tell you it's higher risk. Because if you build a house, let's say you build four houses and you have 4 million people, the odds of you getting those sold or better than if you build four houses and you have 10,000 people, like that's just simple math. What it doesn't take into account is one, your local knowledge of that market, and two, that you're building, what's missing? And three, you're building something that people are going to love. So if you just listen to what a textbook would teach you, it would say what you're doing is higher risk. And so I think that's why people gravitate to the million plus market, million in population plus in markets, and they go to the big towns because in their mind it's more resilient. But the reality is real estate is hyperlocal. So I can invest in, you know, Houston, that's 6.4 million in the MSA. And I can still get my rear handed to me because I'm in a neighborhood that isn't resilient and reflective of 6.4 million. And so really big cities are just comprised of tiny little Markets, too, but everyone thinks of it as a big market. But when you go in and evaluate Houston or a suburb or where you're going to invest, you're basically doing the same thing you would do if you were investing in your small town. But for whatever reasons, the pundits and the big guys, they don't discern it that way.
- [35:00]
C
What makes a town investable?
- [35:03]
A
I mean, I. Population growth is really good. That's helpful if you're building new product. Ideally you have new people coming in to absorb it, so the absorption rate is stronger. Otherwise you probably can still sell yours. But if it's a net growth in buildings but not in population, it's coming from somewhere. So you're making something vacant in order to fill what you're doing so you can still be successful. It just makes it harder on the city as a whole when there's not population growing. Number two, a city that encourages businesses. And this is so important to me, and it's so frustrating to me as well. I believe a successful city has a local company that sells regionally or nationally. So I don't know how many people have been to Bentonville, Arkansas. Probably a lot of you.
- [35:58]
C
Yes, we've talked about it on the show.
- [36:00]
A
Isn't it beautiful?
- [36:01]
C
I think everyone needs to take the pilgrimage. My partner, when I said we're going to Little Rock for a little getaway vacation and we rented a car and drove three hours south, I don't think that's what was on the list, like a vacation destination. I was a kid in a candy store. So tell us what your experience.
- [36:20]
A
So this is my experience. It's what? The mountain biking capital of the world. And they don't have mountains. Do you know why? It's amazing. Because of you. You went and bought at Walmart. Walmart is local to Bentonville. They sell it all over the nation. Guess what? That money doesn't stay in your market. Don't believe the lies people are telling you. That money gets drawn back to Bentonville. Now they have disposable income to make their city amazing. What cities do is they give all these tax incentives and all this money to these big national companies to come in, extract the community money and send it back to the hometown of that market. If you can find a city who says, why don't we invest in our own people? A lot of those businesses will fail. It only takes a handful of. We have a little town that's probably 10,000 next outside of us, and it's Brenham and it's a town that punches way above its weight. And the reason it does is it's the home of Blue Bell Ice Cream, one company that sells nationally. And that town is way punching above its weight. It should not have the amenities it does. It should not be as beautiful as it is. But why is it. Because that money comes back to their community. So if you can find, if your community has that, or you can encourage your city to promote that instead of tax abatements for a target that's going to suck your money out to some other town, obviously that's a golden one. So you want a business friendly environment, population growth, and ideally, even though this isn't my market, something that isn't dependent on a single industry. And so, you know, you guys are right here in the. What's fondly referred to as the Rust belt because that was the path of it, right? All the automat, the manufacturing, the steel plants, the automakers. But once that shifted, it left you exposed. And it's the same in my market. I mean, it's driven by the university. If there's a shift in the view of education, it will definitely leave us exposed. So ideally you have a market that has a lot of different job opportunities.
- [38:14]
C
Well, I think, you know, you are singing and preaching the choir to what we believe at Small Nation is that the secondary and tertiary markets really are great places to invest. There's the less competition, which you mentioned, the focus on community and local and then that faster path to becoming the influencer, the change agent, the person that is sometimes the lightning rod both for good and bad. But the plan about more good is that that lasting impact that that leaves for the community and the money that you keep in the community really builds a sustainable economy and a place that people want to live. So that was really, really great. And I say the last thing that we kind of end up on would be working with cities. So that public private partnership, you know, the idea of collaboration over conflict. How do you approach working with municipalities?
- [39:11]
A
I use my sarcastic humor. That's really good. So it's funny because I tell my city and I say this a lot, we're like a Tom and Jerry relationship. We spend a lot of time together and there's a debate, are we enemies or are we friends? We're not sure. We need each other to be successful, but we don't really trust each other. We're a little skeptical of how it's going to work out. And that's okay. Their motivation is different than mine. And my motivation at times is not necessarily in alignment with theirs, and that creates a good balance. But if you can respect what the city does, and if the city can respect what you do, it can be a good relationship. But it goes back to read the comprehensive plan and know what the city is trying to do and then don't change what you're doing to fit the city, but find alignment with what you want to do, where the city wants it done. And then it really can be a fun relationship, it can be productive. They will help you when you need help. It doesn't mean it's easy. It doesn't mean they're going to give you what you want. It doesn't mean they don't still have a lot of dumb rules. But I tell them that these are dumb rules. This doesn't make sense. I buy them Tom and Jerry shirts, so we all have matching shirts. And so I just try and have fun with it and not hide that I'm super frustrated with certain things. But I also try and tell them, although it's harder for me when I appreciate the effort that they do put in to help us get things done. Sometimes we get so focused on just the things we're frustrated with. But the reality is our city has been a big engine in getting our projects done. They've done 380 agreements with us, which is where they help reimburse us for some costs. You know, they have the grant facade grant program where we've been able to get money from them and so they've given us land and right of way, so we've been able to increase density. So you really do work with us. Hopefully they don't listen to this because I don't want to hear three positive things in a row from me. But it's just keeping it in place perspective and just realizing you're, you're not always going to align with what they're trying to accomplish. And at the end of the day that probably is a good thing so it doesn't get out of kilter one way or the other.
- [41:22]
C
What mistakes do investors make with cities?
- [41:26]
A
Well, I've made them all for sure. One is not reading the comprehensive plan and not understanding what the city's vision is. And then two is, and this is, I'm so guilty of this because I like to say, hey, here's the deal, guys. When you deny my project or wait two weeks to review it, I know your paycheck's still coming, but mine's not
- [41:47]
C
right, or my loan payments are due
- [41:48]
A
and my loan payments due, I have to pay it if I Don't get this project done. I can't survive. Which is all true, but leading with that is probably not the best approach to take with the city. And so, and then I also think it's kind of a good cop, bad cop if you have a partnership to have one that kind of pushes them really hard and the other who kind of compliments them. But at the end of the day, you need to know who your development officer is. You need to know what your city's vision is. And then when you go and meet with them, you should cast your vision ideally with visuals. Even if you don't have a property underway, even if you don't know if the building's going to look like. Show other buildings, show vision of what you're trying to do. Do not go and ask the city what they want built there. They are people who are administrative trying to make sure the process is met. When you go to them and ask them to cast a vision for you, it's not. You're going to get frustrated with them and it honestly it's not their job. Go with the vision, push really hard and make them tell you no. And your whole team, your, your engineer, civil engineer, he was built to live in black and white boxes. He is going to tell you the city's not going to prove that you can't do that. You have to find that civil engineer where you can say, hey, I got an idea. Let's let the city tell us no instead of you telling us no. Always push, always ask for more and then negotiate from there.
- [43:16]
C
On our walking tour today, we were sharing some stories about lessons and mistakes that we've had with signage and zoning codes. And one of my mentors and I've shared this with our guest on the show, is that no, it's just a delayed version of yes. You just have to keep asking the question other ways. And so I do think you really your idea of casting out the vision, asking for the moon and knowing that there's going to be some fallback things in the negotiation. But around those lines you get everything together, you put all your money on the line. You've worked tens or hundreds or thousands of hours on something. How do you handle resistance
- [43:57]
A
with meds? No, I'm just thinking
- [44:01]
C
I drink a little bit of wine. Like I drink a lot of wine,
- [44:04]
A
a lot of self medication for me. I am a very emotional being. So I need a business partner. I need to be able to blow up. I'm not level headed. But part of that is also what I think is My genius. Right. Like I'm going to push hard and I'm allowed to do that because I have these highs and lows and I'm not trying to be evil, even kill all the time. But as far as resistance, I definitely. I'm a person of faith and I believe that you should be patient with results but impatient with action. So I'm going to push really hard. But if the answer ends up being no, I accept that as that's the way it was supposed to be. Now that's different than I am waiting for the opportunity to come to me. I'm going to push really hard. But if the answer is we have to redirect, we have to do something different, I find a lot of peace in if I've done all that I can to push it forward and there's still resistance and the answer is no, that just means I need to redirect to a different place.
- [45:06]
C
I like it. There are some days where you die of a thousand paper cuts, but you've got to get right back up the very next day.
- [45:14]
A
Just gotta keep going.
- [45:14]
C
It's just part of the journey. So, you know, some of the themes from that is that we look at our municipalities and our cities as partners. I love your examples of Tom and Jerry because there is sometimes some give and take. And I think that's just an understood part because of, like you were saying, the brain types that they have, they maybe don't have the same risk profile or the concerns around what's the next paycheck going to be of approving your project two weeks from now or now. And so that urgency is really important to have those, that dialog between those things. Relationships matter. So as you are and establish the trust of your community partners. Doing one project, two projects, then I think you earn street cred to be able for them to approve things maybe a little more easily and better. Would you agree on that?
- [46:07]
A
Yeah. I'll give you a really quick example of this. So we don't have cottage cluster ordinances in our town. They're not allowed. But we found a property. Townhomes aren't going to work. I really wanted to do a cottage cluster. And we have a comprehensive plan that talks about cottage clusters, but there's no zoning to allow for it. So this is on a street where we've done eight projects on two blocks. So we've done a lot of development. This is the last development on that project. We've done mixed use townhomes. We've never had anyone speak out against us. We Go to city council, actually planning and zoning. We go to planning, zoning. And everyone comes to talking and says, you know who's talking? Yes, the people's townhomes we built and sold to them.
- [46:45]
C
How ironic.
- [46:46]
A
And their response was, we're going to lower the value of their property. So we actually, it was a tie at pnz, which means it failed. I actually didn't know this. And so I assume other people don't either. You don't need PNZ approval to go to City council. You want PNZ's approval to go to city council, but you don't need it. So the city staff actually said, we suggest push forward. You already own the land, you've already done the work. So we go to city council, same thing. They all come out, they're speaking against it and it did not look good. This is, I was definitely like, this is never going to pass. And then at some point, one of the city council members said, what would it take for us to actually approve this deal? So they started talking amongst themselves. They looked at it at a different way. And then the complaints that came up were typical parking, trash, not enough room for the trash can. You know, all the things. And the mayor said, you know what? They have done many projects in downtown, they've always done what they told us they were going to do. We have a comprehensive plan that says we should provide for a cottage cluster. If we don't let them build it, who is going to build it?
- [47:51]
C
Right.
- [47:52]
A
We should test the market with these people who've done what they said they're going to do. And so Basically, it was 100% our reputation that carried us through. And then it approved unanimously. And so that's a great example of the city sees a whole lot of investors who come in, pitch this great vision, and then value engineer it to look nothing like that. And so the city ends up with something they did not think they were going to get. So always do what you say you're going to do, and when you can't, don't surprise the city with it. Go and tell them, we can't do this, Brick. We can't do this Stone. It's not going to have this, whatever it is, so that there's an understanding and they don't come out and just feel like you pulled the wool over their eyes.
- [48:33]
C
That's a great story and a great example where that communication wins approvals. Your, your history, your, the trust that you establish and the way that you go about asking for those approvals, even when there's opposition in the end that you were approved. So I love that. And, and today, you know, kind of wrapping this up today, you know, you've unpacked a lot of stuff, a lot of really good themes and nuggets and some practical advice on projects that you've done. But today you teach, coach and mentor other small town developers and tell us a little bit more about that business and what you're excited about and what you're working on right now.
- [49:12]
A
Yeah, so I do that. It grew out of people reaching out to me on Instagram saying, hey, I have this property in this town, I'd love to do what you're doing. Can I do it? And I get that question because when I started I couldn't find anybody doing what I was doing. I didn't understand the words. You can't Google it because it is niche and there's not universal words used. You don't even know what to Google. Google. And I couldn't find anyone. But the reality is that's like a two week project, right? I got to find their city code, I got to look up the ordinances, I got to figure out the zoning and I couldn't get back to them and that felt terrible because I once was them. So eventually I said, you know, there are people wanting to do what I want, which is take back their town. So how can I do that in a way and still be a developer, which is my passion, but provide them the guidance they need. So it's just small group coaching. I don't do any one on one small group coaching. And I am not going to tell you if you can do that project. I am going to teach you how to find out if you can do that project and help you through the hurdles and the obstacles. The city told me this, my civil engineer told me this. Is this the right answer? How can I respond? So really it's just a community of people that are going to help you problem solving it, through it with the structure that tells you how to go through a development from start to finish so that you will do what it takes to take back your town and we can own have an America that's owned by many, many people. That's my goal with the coaching program. As far as what I'm going to do, I don't know, I'm just, I'm like Pinky in the brain. Every day I just wake up and think, how am I going to take over the world?
- [50:39]
C
I love it. And you know, you, you're embodying that. You are doing that you're helping so many developers. You have this. You have several channels on social media. One of being really, for Brian, Texas, that life in downtown. Tell us why social media and getting the word out for your projects has been, like, really a positive experience for you.
- [50:59]
A
Yeah, it's been amazing. For one, I get to meet awesome people like you. I mean, we connected. Yeah, we connected on social media. Two of the three people I'm going to see was because of social media, and the third one was because of a mastermind. It's all about getting yourself in circles, and social media is such a great way to do that also. I feel like that's what we need to enhance our cities, to get the word out about our cities. So the life in downtown website is basically us playing a role that really our should, our city should. But you, if you want to know everything that's happening in downtown, if you want to, you know, rent there, if you want to stay there, if you want to visit there, if you want to know what's going on, go to the website that we actually host. And at the end of the day, it benefits us, right? If you're an entrepreneur, you're looking for space, you're going to come to me. And so it helps feed our whole ecosystem, but it also lets us kind of be in control of the narrative of how we share the city. Because sometimes I think our cities are really bad at sharing the traits, the qualities and the great things. Like, we just are in the forest so long that we forget that there's actually a big forest. And so, you know, you get to control the narrative. And so that's really kind of the goal of our life in downtown.
- [52:09]
C
Katie, how do people find it? Find you?
- [52:11]
A
I am on Instagram at Katydevelops. I would love to have you there. If you're a troll telling me how everything I say is a lie. Come on. I welcome you there. I got a lot of you. But if you are like, how, you know, you want to see projects, vision, inspiration there, but you can definitely connect with me on Instagram @Katydevelops.
- [52:27]
C
One quick closing question. If you could give one piece of advice to someone who wants to transform their community, what would it be?
- [52:34]
A
Take action. Transformation doesn't happen without action.
- [52:38]
C
That's it. And for today's show, it is really about thinking of your small town, taking action and finding other people that are like you, that are doing what you do. And there's two ways that I've mentioned that you can do this. You can either read and learn from the lessons of others or listen to the lessons of others, or you got to go out and do it on
- [52:59]
A
your own, and it's better to do it on your own.
- [53:02]
C
Amen, sister. Thank you.
- [53:06]
B
Thanks for listening to this episode of the Small Nation podcast. Be sure to follow the show for future episodes on your favorite podcasting platform.