Today on the show we hear from Scott Choppin, a real estate developer of highly undersupplied multigenerational urban housing for families. He starts off with an explanation of the niche they specialize in, giving us all the reasons why they choose to focus on these urban properties. You will find out how the new development model they use over at his company, Urban Specific, differs from the value-add model, and which type of investor is best.

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Scott shares the criteria a property should meet before they would consider getting involved and explains why workforce housing is a more defensible market than millennial housing. He gets into a discussion about the anticipated recession, why the construction cycle should be paid close attention to, how developers can best prepare for the downturn and what to do when the recession hits while the property is still under construction. Scott further advises about the importance of mentorship for new developers and what other developers can do to improve their businesses. Tune in to hear all about it!

Key Points From This Episode:

  • Being a real estate developer of highly undersupplied multigenerational urban housing.
  • The disparity that exists between income and rent or housing prices in California. 
  • How they are approaching their entry into the Orange County market.
  • Their criteria for buying assets and why they use the new development model.
  • How the market cycle determines the deals that work best and the influence of a recession.
  • The difference between workforce and millennial housing in terms of the tenant base.
  • Preparing for the downturn in the context of the new development model.
  • What happens if a recession hits while a property is under construction?
  • The type of investor that invests in a value-add property versus in a new development one.
  • A recent project that did not go as planned.
  • The importance of watching your construction cycle as you go into a recession.
  • Scott’s best advice for anybody who wants to get into the new development space.
  • The value of mentorship, being willing to work for free and why nothing replaces experiences.
  • Improving their business by creating standard operating procedures and social media content.
  • And much more!
Watch your construction cycle as you get near a recession and plan for contingencies if you get delayed, like a delay to push you into the recession. — @ScottChoppin Click To Tweet

Links Mentioned in Today’s Episode:

Scott Choppin

Scott Choppin on Twitter

Urban Pacific

Six Ways to Build A Career in the Real Estate Development Business (Article)

Gary Vaynerchuk

Monday.com

About Scott Choppin

Scott Choppin the founder of The Urban Pacific Group of Companies. He is a real estate developer of highly undersupplied multi-generational urban housing for families. Scott produces investor opportunities in long term hold new construction investments in high demand urban metros. He has been married for 26 years to Becky, raising 3 kids.

 

 

Full Transcript

[INTRODUCTION]

[00:00:00] ANNOUNCER: Welcome to The Real Estate Syndication Show. Whether you are a seasoned investor or building a new real estate business, this is the show for you. Whitney Sewell talks to top experts in the business. Our goal is to help you master real estate syndication.

And now your host, Whitney Sewell.

[INTERVIEW]

[00:00:24] WS: This is your daily Real Estate Syndication Show. I’m your host, Whitney Sewell. Today, our guest is Scott Choppin. Thanks for being on the show, Scott. 

[00:00:32] SC: Hey, Whitney, great to be here. I appreciate the invite.

[00:00:35] WS: I’m happy to have you on the show. Before I tell you about Scott, I want to remind you to go to the Facebook group of the Real Estate Syndication Show where you’re going to learn from experts just like Scott. You can ask your questions in there. Questions you want me to ask a guest on the show. I encourage you to go there and join. Also, go to Life Bridge Capital where you can sign up on the contact us page, and I will reach out to you personally.

So about Scott Choppin, he’s a real estate developer of highly undersupplied multigenerational urban housing for families. He’s going to tell us in a minute what that is, what that means. Producing investor opportunities and long-term hold, new construction investments in high-demand urban metros, married for 26 years to Becky, raising three kids.

Scott, that’s incredible. That’s an accomplishment in itself and –

[00:01:19] SC: Well, I appreciate that, Whitney. Like we talked about earlier, my family is my greatest accomplishment.

[00:01:23] WS: I was telling Scott that not everybody puts something about their family on their bio, and I appreciate that. That’s awesome.

[00:01:28] SC: Well, thank you.

[00:01:29] WS: Yeah. Thank you again, Scott, for your time. Give us a little more about your background and how you got into this new development asset class, have you always done that, and how you got there a little bit. Then let’s dive into what you do exactly.

[00:01:41] SC: Absolutely, yeah. So I have been in basically real estate development my entire life. My family started developing real estate in Long Beach in Southern California in 1960. They were 50 plus years in the business of real estate development. What I mean when I say that is we are purchasing land assets and building buildings on them to produce income over either a long-term goal or sometimes [inaudible 00:02:08] and sell them at the end of the absorption period that in it development is taking land assets, changing them in the way that’s appropriate to be able to build the asset that you want and to produce value when it’s completed.

[00:02:22] WS: Nice! Okay. So in your bio, we saw that you’re a real estate developer of highly undersupplied multigenerational urban housing. But what does that mean exactly?

[00:02:32] SC: So we have always as a company – So I formed the Pacific group in 2000. So we’re going on our 19th year of operation as a pure play real estate development company. We’ve done different asset types, so new construction condo, market rate apartments. Also, we’ve done numerous affordable housing projects that are lifecycle of our company.

But we’ve always focused on urban infill is the term that we use. What that means is that we’re working within existing metro urban areas. I think I’ve mostly developed not necessarily downtown, but we have done projects in the downtown central business district. But we’re not suburban either or even rural. So we’re in the existing fabric of the city and looking for assets, land opportunities that we can develop to infill an already existing neighborhood.

We’ve always been encouraged by that product type, because it’s close to transit. It’s close to job centers. For our tenant profile and our workforce housing communities, it’s also where their social networks are. So kids go to school. Their families are close by. Their churches are close by.

So we’ve always been encouraged to find the demographic that is seeking to be in that location. In 2000, when we started the company, it was Gen-Xers who wanted to live in cool downtown locations that are urban loft. That was sort of the start of it. Then it’s evolved from there to millennials now are attracted to that product space. But also now, what we’ve focused on is existing family groups that are already here in the urban location and serving them with a new type of housing that facilitates their lifestyle.

So we call it first housing or moderate income housing sometimes. That’s how we describe it, but it’s very undersupplied. We’re in California, which has out of the top 25 most expensive marketplaces in the United States. At least the ones that I saw. Eighteen of the top 25 were in California, and all the top 10 were in California. So rents and housing prices versus incomes in California are diverging, and that is a story across many urban metros. But here, it’s the most distinct undersupplied situation that we observe in the United States, and that’s a market that we want to be in.

That has a social impact story to it as well, which we’re – I’ve always had that. It’s part of my career, but it’s good to be able to do good by doing well, and we see the space [inaudible 00:05:01].

[00:05:01] WS: All right, Scott. So what markets are you in exactly?

[00:05:04] SC: So when we started the program, what we call UTH, which stands for Urban Town House, that’s our specific branding in the workforce housing model. We started in Southern California, and the bulk of the actual projects we have are here. So what that means is think of the Central LA County, Southern LA County, and Northern Central Orange County, so the LA Orange County Metro Marketplace.

But we do have designs to move this UTH workforce housing model into other urban markets. So in California, it would be expansion of the San Diego Bay area. Then we have underwritten projects in locations like Portland, Seattle, and Denver. This is actually a product that’s worked in-demand in those locations. So again, the urban portability story, but also the right mix of land pricing, existing zone sites available, and build cost, which is the formula that we have to keep track as a major variable. If we could track that to make sure we have viable projects. So our long-run picture for this is to expand into all those western urban metro markets.

[00:06:07] WS: So how do you make it to work in Orange County for you all? What are you looking for, and what kind of numbers are you looking for to make something like that work there? I think you mentioned it yourself, the tops of the prices in the low cap rates in a market that you’re in. How do you make that work?

[00:06:20] SC: Well, this is the beauty of the difference between buying existing value-add assets and building new construction. But I won’t go into detail about what value is. I think the audience is probably well aware. But for us as a developer, we can go into highly constrained markets and find land assets that we can then develop our own product. So we’re basically creating new assets out of [inaudible 00:06:46].

Now, we’ve got a whole lot of technical issues to deal with that are different than a value-add type of environment. But like any real estate developer, we’re always searching for new land assets, but we have specific criteria. So one of our criteria is we only buy sites that are zoned, so we don’t want to go through governmental entitlements in any discretionary way, where city counselor [inaudible 00:07:09] can say no.

Our UTH product because it serves working families really only goes in certain locations. But I don’t mean to be saying that it’s exclusive one way or the other. It’s more a function of our tenant base. Working families already exist in the blue-collar neighborhoods is the way we describe it. So there are low income neighborhoods in any city. So whether it’s Orange County or LA County, we’re looking for those neighborhoods where our tenant base already lives, and we’re now just providing them a new housing type that they don’t otherwise have available.

So that’s sort of the two big criteria, location that serves the tenant base and is appropriate for the tenant base, correctly-priced land and [00:07:51]. Those would be the three majors.

[00:07:53] WS: Why the new development model versus value-add?

[00:07:57] SC: Good question. So, one fundamentally, we’ve always been a developer. Although we have a lot of crossover and overlap of value-add investors and we invest in our own projects, we are not purely an investor per se. So we are a developer, which means that we just look at from the standpoint of our job to create new projects and new assets. We certainly own apartments that we’ve developed ourselves, but we’ve never been a pure play value-add [inaudible 00:08:26].

Having said all that, we like the differentiator between value-add and development in this part of the market cycle. So the way I look at it is [inaudible 00:08:36]. I think that’s a very common theme that everybody who is in the value-add space would love to have deals that I always put that criteria. Except that in this part of the market cycle, which would be when the market cycle is climbing, meaning going up and positive growing in order to have peak, then value-add existing assets start to become very expensive, which I think everybody in any major urban metro has this as an issue. Returns are being eroded, because they have to pay high prices.

Well, that’s the opposite model which I call the above replacement cost value or above replacement cost model, which is the development model. So I’ll give you an example. So in a downturn, at the drop, if you could buy a project that was 80,000 a door and it costs 100,000 to replace, below replacement cost, then you would say generally that’s good value, right? I’m using very simple examples here, but you’ll see the point.

In a rising or upward trending market, those values for those assets will start to rise. Then eventually, they’ll flip over. So the value is now above replacement cost. So our motto is build it for 100K a door, and its value when we sell it is 120K. We’re the opposite of below replacement cost, and that will always be true. So when a recession comes, which we’re preparing for, anticipating, then [inaudible 00:10:05]. That is just vigilant preparing, raising capital differently. We’ll know that the development model will basically be less preferred when replacement cost can be or projects can be bought below replacement cost.

So that market cycle does influence what deals work best. So we just look at it from the standpoint that we know when that happens. Now, in a long-run basis, we know that a recession will come, and what we’re anticipating and one of the reasons we like this workforce housing model is because our tenant base is very sticky is the way we describe it. The social networks that I described before are very strong. What that means in a recessionary environment, people will stick around. In other words, their families are local, their kids are in school, their church is close by. So they’re not necessarily going to pick up and move to Austin tomorrow.

My internal joke is when you build millennial housing, and this is nothing wrong with the choice that they make. It’s just they don’t have that stickness. There’s nothing tying them to that market, so they can leave. They got a job in Austin, and they can go, and they’ll leave your apartment if you happen to run into that specific profile.

So we see workforce housing as a defensive model, meaning we have a stable sticky tenant base. We know in recession that values will decline. But if incomes stay stable, rents stay stable, and then life stays stable. Then as long as our capital doesn’t need to get out when the recession is upon us and we can go beyond that since 7 to 10-year hold is what we’re [inaudible 00:11:37] now. Then we think we have a defensive strategy but still able to be real estate developers.

[00:11:43] WS: Now, that’s good. I appreciate you elaborating on that and even the difference in the types of tenants there you were talking about. That’s some pretty good information. But you alluded to like the downturn numerous times, and I like to ask most guests that are in your position.

How are you preparing for another downturn? What does that look like when you’re especially in a development model, because that’s not something unfortunately we get to talk about too often on the show. But I’d love to hear as far as the new development, how are you preparing for downturn? What is that – How does it change what you’re looking at or does it when you’re underwriting, you’re looking at land, and things like that?

[00:12:14] WS: Absolutely. Yeah. That’s a great question. So our preparation is predominantly revising the financial structure of how we raise equity. So typically, when the market is rising and in good shape, and we’re looking for recession maybe two to four years out, we would complete a project, lease it up, and sell it. So build it around itself. That’s merchant build model is what I call that. How we change now is that we’re anticipating the recession somewhere between 18 to 36 months out if you look at the various data points. We don’t know that for sure, but we’re on the longest expansion that we’ve had in recent history. So we just know to be careful and anticipate.

So what the houses do is raise equity that is on a 7 to 10-year hold with the idea that we would ride through the recession with our investors with us and then our engagement together, having a defensible, stable tenant base, right? They are the working families who want to stay close to their job locations and their family that as long as the income stays stable and we don’t have to have a capital event during the recession, meaning investor wants to get out, we got to sell the property, and then we’re out of luck because a sale is forced.

We want to avoid any sort of forced events, because we’re under recession. So as long as we underwrite our permanent debt appropriately, so we would be the defensive there, meaning, assume push in in the underwriting of permanent loan, underwrite our rents [inaudible 00:13:45]. We can see it a little bit more carefully and raise [inaudible 00:13:48] from equity. We can’t, of course, guarantee that that will be perfectly bulletproof in a downturn. But compared to most other new development apartments that I’m speaking about.

Specifically, if you’re in the millennial market and you have major job losses in the local market that would fit, say, the technology sector, you can anticipate that a lot of those folks who were in your profile would leave. They would go home. They’d get roommates. They’d usually have to go and get another job. Nothing wrong that, because they’re all perfectly appropriate for their life stage or part of their life cycle. We just say we prefer to be in a different demographic that’s more defensible. So hopefully, that answered your question.

[00:14:30] WS: Yeah. No, that’s good. It makes me think of a few more questions there. I was thinking about like, if we say we’re expecting a recession. Everybody’s talking about this downturn, right?

[00:14:37] SC: Mm-hmm.

[00:14:38] WS: I was thinking about like the development model of buying land and then there may be maybe two years before this piece of land ever returns any capital, right?

[00:14:46] SC: Absolutely. Yup.

[00:14:48] WS: So how do you prepare for that? Let’s say the downturn happens a year into that model, and we’re halfway through the construction phase.

[00:14:56] SC: Yeah. So in other words –

[00:14:57] WS:  What does that look like?

[00:14:58] SC: The recession hits while you’re under construction.

[00:15:00] WS: Right.

[00:15:01] SC: Okay. So it’s a great question. Extensively, at that point, you raise all your equity and all your debt to complete. So you basically, first and foremost, complete the project. But in the 2008 recession, we get a lot of capital advisory. So we’re advising banks on distressed assets that they had brought in to their REO portfolios, and we saw a lot that were half-complete.

Now, in some cases, the banks actually determine that they would stop funding, which obviously poses a challenge. But if you have their capital structure complete, you finish the deal, then the question becomes how do you lease the units, right? You would look forward to potentially a lower than projected rental rate for particular units. That’s where our tenant profile really comes into play, because we’re not competing with lots of units that were coming in the supply chain while we were also, right?

So when we come into the market with our workforce housing model, invariably there is no other product type like ours, and I’ll tell you why that is. So built a five-bedroom, four-bath, three-story townhouse rental unit. That by itself is a complete differentiator in the type of unit that we have, and we build it and rent it, and then the type of tenant profile.  So what that means is we’re not competing with studios and one-bedrooms, which is the predominant product type for, say, a millennial demographic. Ours is really built and designed to rent and live like a house. Now, they’re attached. So I think Raw Home, three-story, right? You live above yourself, which is preferable.

But we’re basically bringing a unit type that is uncompeted for. Here and there, there’s some projects that imagine not many people would take on a five-bedroom, four-bath unit. We see this as a key differentiator, the what I call [inaudible 00:16:50], what makes our product different both for the investor, for us as the sponsor, and then the tenant, that, at least, in our research, why people worry about these tenants being sticky is that the model, the product type allows us to be in an uncontested marketplace and have a lot less competition while still having relatively high demand.

Now, all those will adjust in the downturn. So we’ve had other defensive strategies. So as an example, one of the things that we see in these family demographics is in some cases, we have Section 8 tenants, and we don’t have any preferential treatment of Section 8 tenants. We would respond to them as they come to lease but see that as a great story and a downturn where we can offer more of those units to Section 8 tenants. At least, in our research, Section 8 is a government-subsidized program where the tenant pays 30% of their income and the [inaudible 00:17:44] pays the difference through Housing Authority local to them [inaudible 00:17:48].

We see that as a good downturn strategy. The incomes and rents are calculated based on some growing average rent and income characteristics from, say, a unit to before overlaid with some local cost. So we’re not going to see. At least, we don’t anticipate a major drop-off in Section 8 rents. So we can anticipate those to be relatively stable. Again, not perfect, not bulletproof, but again defensible.

So everything we think of as can we underwrite a project with defensive capital for the tenant base for the delivery. Arguably in a downturn, Whitney, like if we’re halfway through, we might think that we could potentially negotiate some better subcontract rates on construction. We don’t rely on that, but we could anticipate that that might be a conversation to be had at the time.

So it’s really a function of not saying that we’re perfect and bulletproof, but more that we’ve underwritten conservatively and defensively in a downturn scenario and say, “Look. If all these things change, here is the way we react to it and that we’ve anticipated ahead of time changes, and we’re not stuck when we get there.

That’s, I think, the big issue we saw in the ’08 recession is people didn’t have any other exit strategy. The only exit strategy for a condo project is to build it and sell it. Of course, a lot of condos went to the rental market that the product was [inaudible 00:19:15] and had a lot of competition. So we’re just looking to be defensive at every turn that we can in our underwriting.

[00:19:21] WS: Yeah, of course. But I was thinking too about there’s the types of investors that are going to invest in a new development versus value-add type of property. How would that vary or wouldn’t?

[00:19:32] SC: Yeah. So a great question. I think of it in this way. I think of the difference as for the categories of how these projects work is three buckets, okay? So the first bucket is normal underwriting of rents and offer expected. We all have to look at rents, look at the market, underwrite the tenant base, the capability to compete in the marketplace appropriately, raise rents if we can after value-add, and achieve the rents purely and simply if you have a new unit, right? Operating expense assessments, we have the right property manager that is managing appropriately for us. We use historics for new construction apartments overlaid with advisory for property managements that we work with.

But still, the formula is in the assessments of the market of those costs and incomes are the same. We want to generate NOI, the highest possible NOI. So that’s exactly the same product. It’s a little bit different in how we use [inaudible 00:20:24] different.

The second bucket is what I call the development bucket. That’s where we get into things like assessing land assets, zoning, those design issues that you’re creating projects from basically nothing, right? You have to create that model. You have to create the program. Versus in a value-add space, you basically have projects that are for sale in the marketplace that either fit your criteria or you don’t. But you can’t create a full project of five bedrooms or we can’t buy one that has that. If that was your criteria to purchase, you wouldn’t [inaudible 00:20:57].

But basically, that’s the development model. Then the third part, which is the most important part for all of us is how do you exit. How do we underwrite our exit? What’s our exit cap rate? How will the market respond to the project when we sell it? That’s the same for value-add and new construction, right? The formulas and the way that we go about selling these maximize value is common between these two.

So, when I tell people about this three-bucket system, I point to the second bucket and I’d say, “There’s your big difference.” You’re only a value-add investor, and now you need to get into the development space where you want to. You need to be very watchful for the zoning, land assessment, construction. Like that new construction model, that’s where we see a major difference between those two.

[00:21:48] WS: Nice! So can you tell us maybe something on a recent project that maybe didn’t go as planned and how you turned that around?

[00:21:54] SC: Yeah. In bucket two for the development, this is one of those things where we have a lot more government oversight in our projects. What I mean by that is we have to zone, which we generally don’t. Like a rezone or a [inaudible 00:22:07]. We avoid that. But then we have full-scale set of CBs. We have to go through plan checks. We’re in a value-add project. If you’re changing carpet, cabinets, and those kind of things, and maybe avoiding systems, you don’t really have to deal with the inspectors a little bit but not as much as we do. We’re much more in-depth in that.

So what we find is in that space, we’re afforded on the project schedules regularly by government bureaucracy. Governments don’t care that our projects need to be done in 12 months or 18 months. They’re indifferent to that. So that’s always a challenge. But a recent project we’ve had actually in my hometown in Long Beach, we were going for a final inspection cycle, and we ended up having numerous inspectors that were brand new. They’ve literally been hired by the city in the few weeks or a couple months before, and what happened –

[00:22:59] WS: Perfect timing.

[00:23:00] SC: Yeah. New inspectors are scared of their own shadow. I mean, they’re all good folks, but they’re by the book. I had one inspector who sat down and read the installation manual for our hot water heaters and figured out that we had installed them one inch too close to some other. I think it was our window, and they have to be separated a certain amount. We ended up basically showing them the measurements that we’ve got. But here’s a guy who spent 20 minutes I think sort of looking for something to tag us for. We had [inaudible 00:23:30] more will be our final inspection and last inspection that we’d be able to complete until that project [inaudible 00:23:36]

So that would be a typical one. We saw a lot of deals during the downturn that were projects that were good projects. But for the delay in the completion of your construction cycle, you would’ve avoided or not the recession. So if you finished in a year instead of 18 months or to 24 months, and so a lot of the distress [inaudible 00:23:58] project that we have. This thing that going three years in construction from major midsized project should’ve been done faster.

So on our website, on our blog, I wrote an article about how to prepare for recession as an investor. One of the tenants I put in there watch your construction cycle as you get near a recession and plan for contingencies if you get delayed like a delay to push you into the recession. Then we get into those defensive strategies that we talked about before.

But the first thing to do is not be direct. That’s a common and I think that’s true. Every construction project has done that. There’s nothing special about that. It needs to be managed nonetheless and [inaudible 00:24:39] and having good staff in-house, and maybe picking the right city [inaudible].

[00:24:45] WS: If you could look back, I don’t know, 10, 20 years, however long or maybe there’s somebody listening that’s says, “You know what? I’m really looking to get into new development,” or maybe yourself many years ago. In just a couple or three sentences, what would be your best advice for them?

[00:24:58] SC: Yeah, that’s actually a great question. In fact, I wrote an article called 6 Ways to Build Your Real Estate Development Career. It’s very specific. The one that I would say have weighted most heavily is either joint venture with other developers who are more seasoned and senior than you, say, you’re a beginner developer, and learn from that. Even going to a deal knowing that, “Hey, look. I may not make as much money as I prefer. Everybody’s got to generate income.” So that doesn’t stop.

But you may trade learning to be in a deal maybe to take smaller share but said, “Hey! I want to be shoulder-to-shoulder with you, Mr. Developer, or shadow you,” or you get a mentor. Somebody who’s in the business, or the third option is you hire an advisor. I know people who are in my networks that are retired real estate developers that are available in essence on a consultancy basis.

Fundamentally, it’s get help. I mean, help in the sense that acknowledge that you’re a beginner in the space and that you need to learn first and foremost the very technical characteristics that you deal with in the development space that are much different. So that second bucket idea, zoning and construction, construction management design [inaudible 00:26:07] that kind of thing.

I see too many – I’m on bigger profits a lot, and I see a lot of people who want to get in that space and they just launch and they have nobody around them in their networks who’s more skilled in that space and they’re asking me, “Hey, what do I do? I found a deal and I want to build 30 apartment units. Gosh! Where do I start?” I understand they’re beginners and they’re asking for advice. I always tell them, “Go get a mentor. Got get an advisor. Partner with somebody. Don’t do it yourself. Don’t be a lone ranger.” Some people take the advice. Some don’t.

But this business is so technical and obscure. I mean, just the idea of zoning and understanding zoning. It’s so not normal and uncommon in just everyday life that it takes a lot to learn it and it’s very idiosyncratic, right? This city does this, and another city does this completely the opposite. If you didn’t know that, you might run a foul of some regulation or rule that would hurt your profit.

[00:27:09] WS: Definitely, money well spent. I know the listeners heard that so many times on the show from me and probably well over a hundred different guests that have said get a mentor. I mean, advisors, just like you said. It’s going to be definitely money well spent.

[00:27:21] SC: It’s totally worth it. I mean, I have people who approach me all the time and say, “Hey, I want to be an intern, or I want you to be my mentor.” So a lot of times, what I’ll do is I’ll say, “Come work for free.” Of course, everybody is like, “No way! I don’t want to work for free.” I go, “I will teach you.” In found a guy who works for me now. He’s an assistant project manager that basically did that. I mean, he’s now on a paid position.

But I encourage people, make that trade. Approach somebody, a developer, who may not give you the time of day. But if they say, “Hey, look. I’m going to give you 20 hours a week for free. I would be whatever you want. I’ll go fetch coffee, whatever. I’ll run around.” It will be so worth it the amount of investment you make by not getting paid.”

[00:28:03] WS: I agree. I bet I get three calls a week about this exact same thing, and I’m so glad that you brought that up, because I’ll say, I tell all of them, like especially if they’re not married, no kids. They’re 19, 21, whatever. I say, “You find a mentor and you offer to work for free. You go work somewhere else part-time just to survive.” But after one year of doing that, you are going to be so much further ahead than majority of people that are trying to get started. I mean, it’s just incredible where you would be.

[00:28:30] SC: Like I had a boss I used to work for a division [inaudible 00:28:34] doing apartment development as a corporate offer to them. My boss [inaudible 00:28:39]. He’s a really good guy, I’m friends with him now. We were debating, “Hey, should I go get a master’s degree? Master’s in real estate development, UC had a program like that.” He’s like, “No. Don’t. Spend a year with me. Spend three years with me, and I will teach you more than you will ever be able to learn in a classroom.”

I think real estate deals, real estate syndication and investment all have similar characteristics if you just hard learn it fast from a book. There’s lots of good authors, and I have a full library of all the great syndication books, probably the same as you do, but nothing like going out and doing it and getting the help, mentor [inaudible 00:29:17]. It takes the financial pressure and risk off of you as a beginner. So you can make those mistakes and not have it absolutely shatter your deal.

We’ve talked, somebody went it, made a fundamental error. We never wish it, but their deal died or they didn’t make money or they’re in a loss position. So, have they traded away 50% or 75% of their backend to invite somebody who’s highly skilled, they probably made more money doing that much less the learning that they got along the way. So all beginners could do that, I’d say.

[00:29:54] WS: A couple of questions before we have to go, because we’re pushing the time limit. But, Scott, what’s a way that you’ve recently improved your business that we could all apply to ours?

[00:30:02] SC: A couple quick answers. One is I’m very focused on creating standard operating procedures in the development businesses. Research and due diligence on a site would be an example. I’m writing standard operating procedures, documenting them. I’m requiring my staff to do so so that we can have a standardized system of methodologies and steps to go through on a project. Particularly, I do that because – This is true in many real estate endeavor. There are so many details to track that if you don’t create SOPs, standard operating procedure checklist, you’re going to miss something.

I’m a checklist proponent big time, but checklists don’t scribe how to do something to somebody who doesn’t necessarily know how to do it. I’m talking low and mid-level pass. The really high-level pass sometimes [inaudible 00:30:51] and sometimes they can’t.

The other one I would say which is a big part of our effort right now is basically creating social media content and getting out in the market place with a story of what we’re doing as a developer and people who are raising [inaudible 00:31:07] deals would do the same thing. I think on a go-for basis, all developers, investors, sponsors in the real-estate business need to be in that social media space, because that’s the only way in many cases anybody is going to find you. You have a podcast and we’re doing this right now.

Gary Vaynerchuck, Gavy V, everybody knows. He says, “Every company now is a content company or a media company.” Whether you’re in the real estate business or any product business, you need to be a media company first.” I mean, you got to execute well on your main business. But I thought that was talent. 

[00:31:44] WS: For sure. How do you document all your SOP quickly? Are you using like some type or program or is it all by hand?

[00:31:50] SC: Basically, it’s a combination of – We use a web platform, a project management platform called monday.com. We start the SOPs there. Then they translate into basically a written document. Something that’s as simple as a Word document that has a table of contents with links that hyperlink the sections so you can go on it and say, “Hey, I want to research zoning. How do I do that?” Click the link. Then there’s the steps to go through to complete that process.

[00:32:15] WS: What’s the number one thing that’s contributed to your success?

[00:32:17] SC: Tenacity. Real estate is a tough business. We all go through our times in deals and getting ported and not having to go how you want, taking longer. I think the ability to just sustain. I love real estate and real estate development so much, Whitney, that it carries me through the times where I’m getting beat up in a deal, which happens to everybody. I don’t mean like I feel lost. Just the inspector doesn’t want to pass my inspection or pricing for construction is going up continuously. These are just things that we experience. We don’t control them. It’s the marketplace speaking in its way. So you have to have the tenacity and the love and the passion to be able to sustain those hard times to get back to the good times.

[00:33:01] WS: Nice. Before we have to go, tell the listeners how you like to give back.

[00:33:03] SC: I’m such a real estate development. This is my passion, that where I give back is in that space. So we regularly advise nonprofits that are needing a real estate, say, they need to buy a building or they are looking to build a building. So recently in the last few years, we consulted for a large nonprofit in Long Beach called Art Exchange, and they were looking to buy a headquarters building. So we came in and helped them for a few months to basically just make assessments of the building to underwrite. Basically, being a real estate developer, but for free, pro bono on behalf of a nonprofit or somebody who’s looking to produce a real estate project without the expert fees.

[00:33:45] WS: That’s awesome. That’s a great way to give back and use your skills in a great way. Thanks for sharing that. But before we go, very last thing. Tell the listeners how they can get in touch with you.

[00:33:55] SC: So I would encourage people to go to our website, which is www.urbanpacific.com. That’s U-R-B-A-N Pacific, like the ocean, .com. There’s a signup button to sign up for a weekly newsletter, as well as we have our active investment projects on there. Then, of course, with the contact button at the bottom of the landing page. People can send us emails through that. Our team, our social media team [inaudible 00:34:20].

[END OF INTERVIEW]

[00:34:22] WS: Don’t go yet. Thank you for listening to the today’s episode. I would love it if you would go to iTunes right now and leave a rating and a written review. I want to hear your feedback. It makes a big difference in getting the podcast out there. You can also go the Real Estate Syndication show in Facebook so you can connect with me and we can also receive feedback and your questions there that you want me to answer on the show. Subscribe too so you can get the latest episodes. Lastly, I want to keep you updated, so head over to lifebridgecapital.com and sign up for the newsletter. If you’re interested in partnering with me, sign up on the contact us page so you can talk to me directly.

Have a blessed day, and I will talk to you tomorrow.

[OUTRO]

[00:35:02] ANNOUNCER: Thank you for listening to The Real Estate Syndication Show, brought to you by Lifebridge Capital. Lifebridge Capital works with investors nationwide to invest in real estate while also donating 50% of its profits to assist parents who are committing to adoption. Lifebridge Capital, making a difference one investor and one child at a time. Connect online at www.LifeBridgeCapital.com for free material and videos to further your success.

[END]

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