Profitable Niches – Real Estate Development

In this episode of our Profitable Niches series, we’re starting from the ground up. Inventory of homes is tight in many US markets, and returns are diminishing. Enter real estate development.

Our guest, Jay Hartley, saw an exciting opportunity to expand his business into the real estate development space, and he’s got a wealth of knowledge to share.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your stately host, Robert Helms
  • His developing co-host, Russell Gray
  • Returning guest, Jay Hartley, real estate developer and property manager in Dallas-Fort Worth

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Beginning with the basics

One of the questions we ask in our seminars is which is more risky: buying an existing building and renovating or building from the ground up? The truth is, there isn’t a right answer to that question.

From inheriting problems in an existing property to building too much or building something the market doesn’t want, there’s a lot to consider when deciding whether to build or buy. The key is knowing the market, the demand, and the supply.

One of the most exciting things about real estate development is the number of entry points. Throughout the lifecycle of a property, there is value being added. Taking raw land from a zoned area to a lot with utilities and a finished building are all steps in the process.

For those who find themselves in a market with a lot of demand but a squeeze on supply, real estate development can be a FANTASTIC way to add more houses into the market, whether or not you hold on to that inventory long term.

Shifting your investment mindset

Jay Hartley is known as one of the best property managers in the Dallas-Fort Worth real estate market. He began like many investors with buying and renting fixer uppers.

Eventually, inventory started getting tight, prices escalated, and returns diminished. That’s when Jay took his first steps into development.

“We had to look at the marketplace and see where the opportunity would be to add inventory,” Jay says. “We started looking at acquiring vacant lots that were already in subdivisions and doing what they call infill.”

Infill meant building one or two homes on lots in subdivisions and then either renting or selling those homes to investors as turnkey properties.

It wasn’t long before Jay’s successful turnkey model got plenty of competitors and Jay took it to the next level. He utilized the economies of scale by getting into bigger developments and subdividing tracts of land. That’s also when he started building his network and expanding his education.

“I had some clients in the building business,” Jay says. “I took them to lunch and started picking their brains.”

Jay soon learned it was a smart idea to partner with a few builders early on. But then the key to sustaining his business was to keep his contractors busy with his projects so he didn’t lose them to other projects.

Real estate development doesn’t necessarily mean you’re the one swinging the hammer. In many ways, it’s orchestrating OTHER contractors and moving parts to complete a job. That also means managing labor.

“One of the biggest issues we’re dealing with right now is having labor ready and available,” Jay says. “If we don’t keep them busy, we lose that framer, we lose that concrete guy, we lose that roofer. We try to set them up to go to one job site to the next to keep them busy and on my job.”

As the deals got larger, Jay had to deal with the growth spurt in his business. He was always known as the property management guy, but had to shift his mindset as he shifted into real estate development. One of those moves was toward selling properties rather than buying and holding.

“I’m not afraid to sell them anymore,” Jay says. “I was a collector before, and it was tough for me to wrap my head around selling them.”

But, with some help and guidance, he was able to work through those mental roadblocks and scale up his business!

Get rich in a niche with a network

Rolling with changing markets is what makes an investor successful long term. Even though Jay was doing really well in property management, he saw a need for more inventory in the market. So, he became one of the people to create it! That has also set him up to know about lots of different types of real estate, and it’s another tool in his toolkit.

“It’s not about what I’ve done. It’s about who I’ve met,” Jay says.

Building a network of people with all kinds of unique backgrounds is a way to tap into their experience. Jay says you can take classes and watch videos, but watching flipper shows on television doesn’t mean you know how to flip a house. Partnering with people on a build job, however, is worth its weight in gold.

And that’s the essence of most development. It’s done through syndication and joint ventures. You can partner up with people who have the land, capital, or expertise you need, and you can put together a great deal.

Jay started out financing his own projects, but it wasn’t until he started tapping into syndication that his business really took off. He attended a few of our programs on syndication and sales, and they catapulted him into success.

“I’ve been in real estate all my life,” Jay says. “The training there, I didn’t think I really needed it. It was enlightening … it gave me the tools and the ability and the confidence to talk to clients and investors and pitch!”

Jay’s journey has been propelled by his ability to be ambitious and coachable. The ability to shift and adapt to new markets is how he keeps his skills sharp and his business growing.

If you’d like to learn more about real estate development and property management in the Dallas-Fort Worth market, get on the inside track with Jay. Send an email to dallasdeals (at) realestateguysradio (dot) com, and we’ll connect you with Jay and his expertise!

And, we hope to see you at some upcoming events. Secrets of Successful Syndication and How to Win Funds and Influence People are packed full of information that you won’t want to miss. Register now!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

Expecting the Unexpected – Investing in Uncertain Times

Real estate investing is full of ups … and downs. If you haven’t experienced the downsides, we guarantee you will eventually.

As a real estate investor, you have to be on top of your game. You didn’t get into this business to pull the sheets over your eyes … you’re here to build wealth, and that requires planning and preparation.

You can’t bet on disasters NOT happening … they most likely will. Careless investing is a sure recipe for a crash. Careful investing, on the other hand, will help you survive crashes without losing the wealth you’ve accumulated.

In this episode of The Real Estate Guys™ show, we discuss how YOU can prepare for storms that come out of nowhere. You’ll hear from:

  • Your careful host, Robert Helms
  • His criminally cautious co-host, Russell Gray

Listen



Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

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The nature of real estate

The real estate market is naturally volatile. Economies change, local markets evolve, natural disasters arise … sometimes overnight.

The downsides are ALWAYS looming.

But real estate investors are always looking for the upsides … sometimes so intently that they forget to look at the downsides too.

We caution you to do your due diligence AND have a back-up plan.

Some excellent words of wisdom are to always have a little cash on hand. The downsides are rarely in your control … but you can control your ability to react when they arise.

Four ways to be prepared for a downturn

As real estate investors, we weigh risk and reward every time we look at a deal. But some risks aren’t so obvious.

Being a successful investor means playing defense and offense at the same time.

While you can’t predict the future, you can take practical steps to make sure you’re ready to fend off threats and take advantage of smart deals.

Step No. 1: Get in touch with a demographic that can weather a storm.

Tapping into the right demographic is the key to recession-resistant investing.

It’s a smart idea to look at markets where someone who is a bit under the median income can afford to live.

In tough times, people who are well-off can downgrade to your market. And in good times, people on the lower end of the income scale can move up.

Either way, your area will be in demand.

Many factors can cause a downturn … rising interest rates, slow wage growth, tax increases, or geographic factors to name a few.

Downturns aren’t solely due to nation-wide economic slowdowns. Make sure you pick a demographic that can resist small ebbs and flows in your market.

Step No. 2: Invest in towns that have multiple “stories.”

Every town has something it’s known for.

Even better is a town that’s known for many things … the stories that draw people and growth.

A big industry would be one story. Two big industries? Even better. A major sports team might be another story.

Don’t bet on a single story. Make sure the jobs in your market are tied to multiple industries … that way, when one industry fails unexpectedly, you won’t see a mass exodus or decline.

And be sure an area is appealing for more than one reason.

Step No. 3: Monitor your inputs.

Look at what inputs make the numbers on your financial statement move. These are the inputs to keep track of.

Compile data, set up alerts, and don’t be remiss about digging deeper when an alarm goes off in your head.

All the information you need can be found in one way or another. The internet is a treasure trove of data. Your local Chamber of Commerce is another resource for keeping track of essential information.

Don’t be casual … especially if you’re an experienced investor. Treat every deal like it’s your first.

Monitoring your inputs can help you stay ahead of the curve and react to changes before others even know there’s a threat.

Can you see the advantage?

Step No. 4: Key into experts.

We live in the information age … it’s almost ridiculous how much information is available.

But some of the best information comes from people who have been in your situation and figured out solutions.

Listen to and read information from multiple sources … even if you disagree.

Learn what other people are saying BEFORE you interject your own opinion.

You can’t expect the unexpected if you only listen to people who share your point of view.

Navigating the three rings of risk

We’ve learned a lot over the years.

One piece of advice we think highly of is to always own a property or two with no loan. The return won’t be as high … but you can sleep at night.

In investing, it all comes down to the rings of risk.

Every investor should have three rings of risk in their portfolio.

The center ring is your livelihood. It should be isolated from all the other risks you’re taking.

The second ring is those bread-and-butter properties that bring cash flow and provide long-term equity growth from modest appreciation.

The third ring is where your risky investments happen. You should only expand into this area after you’ve established the first two rings of your investment portfolio.

In the outer ring, you can be more speculative. You may lose quite a bit in this ring … you’re taking on way more risk. But you could also win big.

Another thing to keep in mind is your Plan B.

In any short-term play, make sure you have a Plan B and even a Plan C to take you through the long term.

Sometimes the market changes in the middle of your play. In that scenario, financing structures and a property’s ability to cash flow can be really important.

If you are house rich and cash poor, it may be time to sit down with a financial advisor and considering refinancing so you can leverage the equity you have in your properties.

You may also want to consider selling and buying new properties so you can get some cash on your balance sheet.

When the market turns, you want to be in a position to snatch up a bunch of cheap real estate … and you won’t be able to do so unless you have cash on hand.

Another consideration to take is whether to diversify your liquidity. If the dollar falls, precious metals will retain their value … and the more wealth you have, the more important it is to put your equity in a stable medium.

Your best strategy is a strong network

Knowing how to sell is the essential survival skill in a tough market.

We’re hosting our yearly How to Win Funds and Influence People event this year … a workshop that teaches participants negotiation strategies that result in win-win deals.

We host events like these because networking is SO important. The best way to prepare for the unexpected is to get around smart people and take note of their strategies.

Getting around people who’ve been in your shoes is essential … and most successful real estate investors are more than happy to share what they’ve learned.

We don’t only host events for investors like you … we also attend them! We’ll be at the upcoming New Orleans Investment Conference learning about all things investing with some of our most knowledgeable investor friends.

Join us!

Your net worth is defined by your network. Make those crucial connections, and you have the key to staying strong through ups AND downs.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.