It's been nine years in the making. I think you know this like real estate isn't a get work rich quick scheme, but it's get wealthy slow. You know, this Pandora's box of like what am I getting myself into versus when it's new construction? So much easier to budget. You get fixed pricing like you know what you're going to pay per square foot framing, foundation, you know, all your trades versus renovating. It's completely, you know, you have

no idea what you're getting yourself into. But yeah, so basically started slowly just adding, you know, adding deals. And like I said, I got to this point like I can't do this anymore. I can't I mean, I would wake up, work from basically like 6:00 a.m. to like 8:00 p.m. I mean, >> yeah. Every day. >> You'd work I'd work by like 600 7 days a week. >> Oh, yeah. I wish I had a mentor. I

didn't. And I I would have, you know, it would accelerate my timeline by like years, >> right? And uh cuz what happened was I thought fixing and flipping was the way, right? >> And so I fixed and flipped for years, right? >> And looking retrospect, like the amount of money I made on these fix and flips was small. >> Hey, I'm knocked on the house. Like don't make me spend $1,000 on insurance. Like okay. >> Yeah.

>> Um and so >> so,000 bucks could have made you some money. >> I would have made great money, man. Yeah. >> If I had covered like even like 100 grand and got burned down. >> Welcome to another episode of Pick Up the Phone Podcast. I am your host, Jose. I'm the founder of gets you.AI. Uh, this is the first emotional intelligent voice AI for real estate investors. It's not artificial intelligence, it's emotional intelligence. Uh, today's

guest is Jeff Sturman. Jeff Sturman has uh built an 8 figureure business. Uh, last year they did 13.6 million in revenue. They uh they developed over a 100 homes. Um they have a 40 million homes in development. >> We we've done a a gross revenue of 40 million in the past like five years or so. >> In the past 5 years and you own over eight figures of rent real estate with over a 100,000 rental income.

So dude, just uh what uh that's quite of an intro there, bro. >> Thank you. Thank you, for having me on the podcast. It's an honor to be here. >> Yeah. >> Um you know, I think I mentioned it's it's been nine years in the making. Um even longer than that. So >> yeah, >> um I think you know this like real estate isn't a get work rich quick scheme, but it's a get wealthy slow. >>

Yeah. >> And that's kind of been the journey. >> Yeah. >> I did my first house in 2012. >> So it's been 14 years. >> Wow. >> Working uh full-time as an engineer in oil and gas. >> Yeah. >> In uh in Missouri City. >> Yeah. Yeah. >> So, I bought like a foreclosed home and uh moved in, fixed it up while I worked full-time and uh >> end up selling it and making basically what I

was making as an engineer. >> I was like, "This is cool. Let's do this some more." >> Yeah, dude. Well, let's get into that, man. I I'd love to hear a little bit about your journey. Um, you know, how you got started. Um, you know, where where you from? Uh, where did where were you born? Where where'd you go to school? Give me give me your background a little bit. >> Yeah. Born in Maryland, not not

Parland. When I say Maryland, people like, "Oh, parland." But no, it's Maryland. It's a different state. >> Different state. >> Um, born in Maryland. >> Born and raised. And then came down to Houston in 200 n 10. >> Okay. >> To do an internship for Slumber Gas. >> Yeah. >> And then I ended up studying abroad in Spain. >> Uh, picked up some Spanish there. >> Nice. and then came back and ended up going getting a

job at >> slumber >> and working there in oil gas uh starting in 2011. >> So >> nice >> worked uh worked there and then you know my my parents are entrepreneurs and I kind of knew I wanted to do that. >> Yeah. >> And uh started tried to do a few businesses they didn't really materialize. >> Yeah. Um, and then I realized that, you know, people in this country have a lot of their their net

worth in their their home. >> And so I'm like, let's I'm going to get a home. And so I bought a foreclosed home. >> Uh, it was a mess. And uh >> bought it with a 203k loan, right? Familiar with those. >> A what loan? >> It's a 203 203k loan. It's a >> It's a loan. They lend you money to purchase and renovate. >> Okay. It It's a kind of like a conventional loan or >>

It was a conventional. FHA, but this was a conventional, >> right? >> So, it was uh it was basically foreclosed on. It was vacant for two years. It had a roof damage. Uh I had a pool that popped out of the ground and so >> Jeez, did you fill it in or what you do? >> No, I had like did uh I had to put rebar staples cuz it cracked, but it popped even. Right. >> And

so end up doing a new concrete decking >> and so you would step up to go to the pool. >> So, have you seen those pools that are like a few like a foot out of the ground? >> Yeah. Yeah. So that's what it looked really nice. >> Yeah. >> Um I did a new new skimmer pump filter. >> Yeah. >> I I I don't like pools though, honestly. Like they're a pain in the butt. >>

Put like 20 grand into that thing. >> Yeah. It's not worth it. >> But uh but yeah, so fixed up the house, worked >> Yeah. >> And then started fixing up other houses that I didn't live in. >> Um and then basically the business grew where I was running about 10 projects >> and working full-time. >> Yeah. >> And so I basically had to make a decision in 2018 >> Yeah. to uh to resign at my

engineering job. >> Got it. Cool. So, um thank you for sharing all that. You shared a lot over several years, right? But I think there's a lot of things to unpack there, right? Um number one, where where'd you go to school at? >> University of Maryland, College Park, just north of Washington DC. >> Yeah. Okay, cool. Nice. >> Terapin. >> Terapin. Nice. Not familiar with the area, but >> No, that's good. >> So, um Cool. So,

mechan mechanical engineering degree. Um, and your parents are entrepreneurs. So, I mean, you knew like, hey, I need to do something in business, right? >> Yeah. >> And so, you obviously real estate is one of the greatest industries out there. So, >> uh, when you when you came down to Houston, Schlumbumberj, what made you what prompted you to say, "Let me buy a house that's foreclosed?" >> Because I wanted to, like I said, grow my net

worth, and I knew buying a turnkey, you know, ready to move in home was not the way I needed to add value, right? So, I watched a little bit too much HGTV. >> Yeah. >> And I saw like, "Oh, that's easy. I can do that." And uh >> it was a little harder. It took like a year to renovate this thing as as I was living in it cuz I did a lot of the work myself.

>> Yeah. >> Um I didn't get on the roof. I don't >> I'm not going to do that. I'm clumsy. Pull off. Uh concrete work didn't do. HC didn't do, but you know, demo um painting, which painting a house is a pain in the ass. >> Oh, yeah. It is. Um, >> yeah. >> And so like light like installing light fixtures, plumbing fixtures. It was a 1989 build, so it had copper wiring, so that was fine.

>> So I left the sheetrock on. Didn't really do any like changing the floor plan. >> Yeah. >> Um, so it was a pretty like >> It was still a lot of work. >> How long did it take you to do that house? >> It was like over a year, but >> we got it like livable, you know, I think in few months, but end up renting out a room to uh this guy who was an

engineer. We had 650 a month in cash. >> Yeah. >> My mortgage was like $126,000 or No, we bought it for$126. Budget like 45K. Spent like 90k. >> Wow. >> It's a little bit over budget. >> Yeah. >> I didn't know what I was doing. And uh >> but the monthly payment was 1300. Yeah. >> And I got a $650 a month in cash >> from this tenant. So basically living in a fourbedroom, two and a

half bath house with a pool on a quarter acre >> for 650 bucks. It was a good way to >> It's not bad. >> Save up, get my cost of living low. >> Yeah, for sure. So, then that was your first uh property. So, you got it fixed up and uh livable uh fairly quickly. Uh how long did it take you to buy your second deal? >> The second deal, I think it was 2014 or so.

>> Um it was a fix and flip out in like Magnolia Park area, 77011. >> Okay. little uh bungalow and uh end up adding an addition. It was a much bigger scope of work. >> Yeah. >> So, adding an addition and then renovating like I did like an ADU. >> Um >> I was also was uh took hard money and uh >> Okay. >> I got plans. >> Yeah. >> But I was stupid. I didn't go

to permitting. So, >> you got red tag. >> We didn't get permits. We didn't get red tagged. What happened was we couldn't get the gas on. >> Ah. >> We tried to get the gas. They're like, "Where's your permit?" You're like, "Uh, what what permit?" >> So, >> what are permits? >> Do things by the book. It's just you're just >> the permitting process in Houston is actually relatively easy and not horribly expensive. >> Mhm. >>

And it just covers your ass. I mean, because of like liability risks >> and then like I said, if you get caught or when you get caught, >> uh, it it's just very expensive to unwind that. So, >> I basically just like threw myself in the mercy of this city. I was like, I don't know what I'm doing. This is my first time. And >> yeah, >> they they were pretty cool about it. They like we

made us cut some strategic holes. Like it was a one story. >> Yeah. >> So they could just get up in the attic and see all the HAC >> and a lot of the plumbing. But >> now we everything is by the book. We do everything by the book. Get all the permits. >> Um get all the plans and uh >> how did you how did you uh find out about hard money? >> That's a good

question. Um I think just online research like Google searching. How do I buy a house? I have no experience. Yeah, >> man. My first Harmony loan was like three points, like 15% interest. It was horrible. >> Jeez. >> I think I end up making like after all that work like 10 or 15 grand on that house. I mean, it was >> our first house. Yeah. >> Yeah. The amount of work we put in. >> Yeah. But

I think that, you know, like in retrospect, Jeeoff, you know, that home was the one that paved the way to where you're at today. >> Oh, yeah. I mean, to me, like you're paying for an education or like even if you don't make money or even lose money, it's it's an education you're learning, right? >> So, I'm glad I did it. >> Yeah. Absolutely. it it kind of sets you up for success for the next uh

projects that you had coming up. So the second step, the second project, how long did you say that it took you to to buy the second one after you bought the first one? >> It was a it was a few years later. >> A few years later like 2014 or so. >> Okay. >> Um so yeah, I I had a break. It's been, you know, a few years, so it's really hard to remember exactly why. >>

Yeah. Yeah. Um, you know, I think that I was focused on my primary residence at the time >> and then I was like, hey, like I want to do this more. Um, it took me some while to to do some research and investigate and, you know, find a good deal. >> Yeah. >> But honestly, in retrospect, you know, people think fixing and flipping is easy. It's actually harder than new construction. >> I agree. >> Um, >>

yeah. >> You know, it's maybe a little bit more accessible if you can find a true like cosmetic flip, but those are really hard to find. anything that you can, you know, just slap some paint on and flooring and actually add value where you're going to get a a reasonable return. Those deals, I feel like, are very far and few, >> very far few in between, for sure. Um, and and I think this is a really

good time to, you know, because you you do mentorship, Jeeoff, I think had you had someone like yourself when you started, it would not have taken you three years >> to buy your second deal, right? If if you had someone like yourself holding your hand and saying like, "Hey, all right, you buy your first deal. You got your you got your lessons in. Okay, this is what you're going to do next. Buy your second one. Not

with a hard money loan of three points and 15% interest, but with this use this guy or use this money, use this resource. Call these people. Uh, and you're going to end up saving a lot of money if you have a mentor, you know." So, >> Oh, yeah. I wish I had a mentor. I didn't. And I I would have, you know, it would accelerate my timeline by like years, >> right? >> And uh because what

happened was I thought fixing and flipping was the way, right? >> And so I fixed and flipped for years, right? >> And looking in retrospect, like the amount of money I made on these fix and flips was small, like >> Yeah. >> maybe 10, 20,000, >> right? >> Like we never made a good, you know, good return on a flip, >> right? >> And we did crazy flips. We would rip the roof off and add a

second story. Wow. >> You know, add garages, like change everything around. I mean, I have photos where basically we saved like 5% of the framing and it would in ret, >> right? >> Um, >> it was like this. I thought I was being clever cuz back in the day, you could actually go into the permitting center with a set of plans, physical set, and sit down with a plan reviewer. Yeah. >> And they would redline them

with you and then they would physically stamp it and you'd walk out the door with plans. So, you can actually >> go in and out in a day. >> Yeah. >> Uh with with uh approved plans, >> right? >> And so, I was like, "Oh, wow. I'm saving so much time." >> Yeah. Yeah, >> but honestly in retrospect isn't worth it to, you know, wait the few extra weeks >> and do the new construction because >>

financing is so much cheaper. >> You have so many more, you know, you have known variables, not unknowns. Fixing and flipping, like you have no idea what's behind the walls, >> right? >> You know, it's just, you know, this Pandora's box of like, what am I getting myself into versus when it's new construction, it's so much easier to budget. you get fixed pricing like you know what you're going to pay per square foot of your framing

your foundation you know all your trades versus renovating it's completely you know you have no idea what you're getting yourself into. >> Yeah. Yeah, dude. And I think I I I'd really love to kind of go through the process of uh the entire building, right? That from sourcing the plot of land to going and getting the permits, financing for >> sure. Uh, I think that'd be really valuable for anyone that's listening to kind of get a

a preview or glimpse into the mentorship that you offer. You know, I think it'll it'll show a lot of the knowledge that you have. Um, so I think we'll we'll get into that here in a second, but first I let's kind of just uh dive into or finish the story of uh how you got to where you're at right now. So uh you did your second deal. What happened then? You know, 3 years, you know, what

what happens next after that? So, I did my second deal and oil and gas is up. They, you know, downturns, right? And so, at a certain point, I was like, I'm going to get laid off. Like, they're firing everybody. Yeah. >> And so, we sold the house in Missouri City. >> Um, and >> cuz I thought I was going to get laid off. I didn't. I was like, okay, let's do this again. Bought another house in

the East End. >> Um, same kind of deal. And basically just started slowly snowballing. Like I said, I got to 2018. I officially formed the company which is known as Vino Homes uh 2017 and uh 2018 middle of 2018 I already had about 10 deals in in the works. Most of them were fix and flips. I did have three new construction homes. >> Started getting into new construction at the time. >> Yeah. >> And I made

the decision to you know leave my uh W2 job. >> Yeah. >> Um and I'm glad I did. >> Yeah. >> Uh but yeah, so basically started slowly just adding, you know, adding deals, right? Um, and like I said, I got to this point like I can't do this anymore. I can't I mean, >> I would wake up, work from basically like 6:00 a.m. to like 8:00 p.m. I mean, >> yeah. Every day. >> You'd work

I'd work about like six, seven days a week. >> How old were you at the time? >> So, I'm 38 right now. This is uh 2018. So, 8 years ago. It's like 30. >> 30. >> Yeah. >> Yeah. When you transition from your mechan mechanical engineering job, slumberj to full-time. >> Yeah. >> Gotcha. And uh so you started adding a lot of projects relatively quickly, right? Um what was the secret to that success? Because you know

at the beginning you you need a lot of capital, right? And you need to save a lot to be able to scale. Did you take on investors right away or how did you do it to be able to take on more projects? >> So um investors, yes. Uh some friends and family. >> Yeah. >> Mainly. And then from the sale, the proceeds of the first home >> uh like walked away like 100 plus,000 in cash. So

it was, >> you know, that was kind of the some of the seed capital. >> Yeah. >> To roll. And then like I said, investors, I did some partnerships. >> Mhm. >> Um it was, you know, a mishmash like a different different uh deals. So >> Right. >> Not everything was done through one entity if that makes sense. >> At the beginning. >> Yeah. >> Okay. Because you had different investors. So maybe different entities with different

people. >> Gotcha. >> Yeah. I mean, you need to figure out the entity structure that's best for you. Um, >> there's always, you know, there's no right answer, but I definitely wouldn't have everything under one umbrella. Just you're you're too exposed to risk, >> right? >> And, you know, you don't want to give up equity in your primary entity. >> So, you want to have like this is my my main entity and then we can have

like kind of satellite entities. >> Yeah. >> Whether they're, you know, owned at all even by the main entity. Sometimes it's better to just have them completely separate. >> Yeah. Absolutely. >> But consult with your attorney. I'm not This is not legal advice. >> This is not legal advice. Go talk to an attorney. Uh this is great uh great insights though, Jeff. Um I think would be really uh important also is how did you learn about

that when you were starting to take on partners and investors? >> You know, it's a trial and error, but also like I said, find subject matter experts. So I said, find an attorney, find a you know, there's different kinds of attorneys, too, right? There's real estate attorneys. You have ones who, you know, I made really good really good terms with uh a attorney at one of my title companies. So, Chicago side of West Loop, >> Jason

Ginsburg. We, you know, I've known him now for probably close to 10 years. >> Wow. >> Um, >> so luckily I can, you know, we're in a good relationship. I can call him up like, "Hey man, I need a favor. >> Take a look at this title commitment." Or like, >> you know, so having people like subject matter experts, you don't need to know everything, right? Right. >> But you need to know people who know things.

So, you know, a really good realtor. So, you know, people think to do what I do, I I should be a realtor. Like, no, it's better to not be a realtor, right? >> You want to have a somebody who's not related to you looking at your deal from a different perspective, >> right? >> Um, so a good realtor, a good attorney, good surveyor, right? Banking partners. >> Um, so like I said, subject matter experts in in

every field. >> Yeah. when and and I know you're you come from a a family of entrepreneurs so I think that uh that gave you a lot of insights in you know learning about business but uh for someone that's listening to this right what kind of value or what kind of resources would you say would be important for someone to go and look at to educate themselves on everything that you just me mentioned you know legal

structures uh finding the right people you know were you reading books how did you educate yourself >> I listen to bigger pockets a lot bigger podcast. So probably listen to hundreds of those episodes. >> Um you know nowadays like you can leverage AI like you can ask AI questions obviously always verify it. Don't just take it at face value. Um but if you have very specific questions you can throw it in AI nowadays. >> Uh but

like I said I listen to podcasts a lot. And then networking. So networking with people who kind of who are where you want to be, right? >> And so like I said the the mentorship program is kind of like that. It's like hey like where do you want to go? Hey, I've I've done that. I've been there. I'll tell you like no, we we haven't done that. So, >> right, >> we're mostly focused on residential. However,

we've done some commercial real estate development and construction. >> So, but the mentorship program that I offer is focused on on residential real estate development and construction. >> Gotcha. >> So, but I think networking, like I said, listening podcasts. >> Yeah. >> I've read books, you know, the whole Rich Dad Poor Dad. >> Yeah. >> Um and those kind of things. >> Yeah. Um I mean my family does uh my dad started a company like 30

maybe almost 40 years ago in medical wholesale. So it's very different than residential right >> real estate development construction but it obviously has that entrepreneur aspect. He started the business out of >> the basement of our old home and like you know >> I remember as a kid like playing G.I. Joe's on top of his like boxes of medical product that was probably like thousands of dollars. Um, >> yeah, >> but watching him grow the business

and just, you know, seeing the hard work >> he put in kind of inspired me. >> Was your mother part of the business also? >> She was. So, my mom was a dentist. Um, I have three brothers and so >> what happened was when she had my uh the littlest brother >> um she had to go ahead and basically resign from from dentistry to take care of him >> and then she started helping out my dad

with his business and she became the the CFO of the business. >> Nice. Yeah. are a couple then, huh? >> Yeah. >> Yeah, that's amazing. >> No, I mean, you know, I work with my wife, so she's uh Antonella Levart designers, so she's uh, you know, architect interior designer. So, it's working with your spouse or your significant other. It's it's a double-edged sword, right? Because, you know, work can follow you home or like, you know, work

it's you need to make sure you have boundaries and you guys are on the same page because, you know, you need to have that respect because it can, like I said, bleed into your personal relationship. So, it's, you know, finding that balance, making sure >> you're not always 100% on work. You also make time to focus on your relationship. >> Yeah. Super important. Super important. >> Jeeoff, let's uh let's dive into uh your the new construction

pro process. Um I think first uh we'll hear about your your first new construction and then we can talk about that. But first, uh let's take a quick commercial break here. If you're a real estate investor in Houston, Texas, you need to listen up. Andrew Fought with Renovo is the number one lender with DSCR 30-year fixed loans. He can do one to four family. Um he can do five units plus he can do commercial, anything you

need. Andrew Fot is your number one source for long-term financing. Right now, his current rates are high fives to low sixes. uh he's got a one to two points in origination and he can fund up to 75% loan to value. So he can refinance you, cash you out right out of that hard money loan that you have, no problems. And he's a direct lender, which means that you don't have to go through any AMC BS, right?

So what that means is they have an in-house appraiser. No need to chase an appraiser to figure out how they do business. Renovo has it all inhouse. They also have a in-house uh servicing company. So, anytime you need uh any help with tax forms, um any help with servicing your loan, Andrew is one phone call or email away to help you out. I'm a testament of this. He has one of my long-term uh notes and it's

always uh smooth as pie to get any sort of documents uh that I need. So Andrew is a relationshipbased lender, meaning that if you're trying to figure out something with your loan, he can help you through it, guide you through it, and set you up for success. So if you're interested in a 30-year fixed rate loan, hit up my boy Andrew F with Renovo. His phone number is 21104252190. If you're a wholesaler in Houston, Texas, Kase

Sullivan is the number one guy to getting your deal sold in as little as three days. So, Kase Sullivan works for the number one buyer in all of Houston. Um, this is called New Western. It's a massive operation. Um, they have 20 to 30 dispo agents working around the clock to sell your deal as soon as you get it. All you need to do is, uh, if you have your deal, call up Kasein. Um, if you

give him just 2 to three days, if you give him property access, he can get you any number on any deal. Um, they have a full closing team, so you don't have to worry about escrow, transaction coordination, any legal. Uh, and that gives you less time selling the property and more time to source your own deals. And that's how you that's how you scale your company. Um, Casey Sullivan closed 72 deals last year. So, you know

that this guy is the real deal and an actual operator. Um, you can reach out to Kasein at 409-5271115. If you're a real estate investor in Texas, Natalie Basak with Black Label Title is the number one title company for real estate investors. Here's why. Natalie can pull free instant property reports for existing clients that show leans, nearby foreclosures, any delinquent taxes. Uh, this is so that investors can do their due diligence before going under contract. Uh,

I'm sure she could even help you out if you need to do some sort of due diligence. If you're going to go buy at the auction, Natalie Basak is the number one person for you. Um, they have they are backed by multiple underwriters. So, they have um, you know, different people that can make sure that your deal gets closed. Uh, and I think what's really cool about them is that they do pass through A to B

closings. This means that you don't need transactional funding. This alone saves you several thousand dollar on every closing that you do. That is a double closing. So that means that you can use the B TOC transaction to be able to fund the A to B. No transactional funding needed. They're familiar with all investor transactions from assignments, double closes, noations, sub twos, wraps, anything that's creative. reach out to Natalie Bes. Her phone number is 9364428486. Natalie Bes

with Black Label title. >> All right, and we're back. So, Jeeoff, uh, let's talk about your first new construction, man. How did that go? >> Overall, like went well. I made a lot of mistakes. >> Yeah. >> So, I took a lot of the money, the proceeds from the sale of the home. Um, and I ended up buying a lot, a 15,000t lot in 77011. Yeah, >> this is back when land was like >> $6 a

square foot. >> Six bucks a square foot. >> Six to nine. It was closer to $9 a square foot. >> What year was this? >> Uh I think 2018. >> 2018. >> Between late 2017. >> Yeah. >> So I bought a 15,000 foot lot and I had no idea what to do with it. I was like, what do I do with this? >> Yeah. >> Um and so I did a lot. >> Why did you buy

it? >> What? Sorry. >> Why did you buy it? Just it >> came because it was I like the area. Magnolia Park is a nice area. >> Yeah. Yeah. um you get, you know, a lot of older single family homes and um I lived not too far away at the time. >> Yeah. >> And uh or I think I was moving in that that direction. No, I know I was living in that area. It's been a

while. >> Yeah. >> But >> um I knew I wanted to go into new construction >> because my background as a an engineer, right? We did manufacturing, >> right? >> Um so I was like in my mind it's going to be much easier to build multiples of the same product, >> right? And so I was debating what what to do with this lot because someone was like, "You need to said if you're going to do new

construction, you make sure you have a great architect." At the time, I didn't, you know, know my wife now. >> Um, and also somebody who really understands planning, right, in the city of Houston. >> So the 15,000 foot lot, someone was like, "We can make this nine town homes with a shared driveway." >> Um, well, I looked at the market and nobody had built a shared driveway community there. So, I was like, I don't want to

do that. I don't want being the trailblazer like you can do when you've really established yourself, but when you're new, you don't want to be the trailblazer in in residential real estate, >> right? >> It's just too risky. There are no comparables. And so, >> right, >> you know, after looking at Long and Hard, I basically decided to build uh six homes. >> So, >> I built in phases of two. So, I built three we call

like front loaders. The lots are 25 by 100. Um, and luckily >> front loaders 25 by what? >> 25 by 100 ft. Got lots. And so it's enough to do a two-car garage in the front. You do like the side entry. Yeah. >> Uh, twotory, threebedroom, 2 and a half bath, >> you know, first floor living, kitchen, dining with a half bath, a nice little 20 by 25 yard or so, >> and then upstairs all your

bedrooms up, >> small little like game room or secondary living room. >> Yeah. >> Um, >> how long did that process take to be able to kind of determine like this is the best use case for this lot? the very first time in a while. It took months to be like thinking through it, trying to figure out what to do. >> Yeah. >> But now, >> and I'm sure you consulted with a lot of people. It

wasn't just kind of like a let me just do this and go, right? >> Oh, yeah. >> Yeah. >> So, like I said, that's why it's really important to have a good realtor, >> right? >> Because the realtor is going to tell you, hey, what is the highest and best use of this lot? Like looking at the market, >> what is selling at the highest dollar per square foot? >> First of all, what's selling, right? because

you don't want to look at, oh, this one thing sold at this high dollar per square foot, but that's the it. And there's dozens of other homes that sold like this. You you want to you really want to look at averages, >> right? >> So, you can't look at the highest point. You don't want to look at the lowest point. You need to look at the average. >> Mhm. >> Um, that's why it's important to do

the comparative market analysis to figure out what is the I said highest and best use and to do with the the land. So, I was like, well, I'm going to build three single family homes. At the time they're around 1,800, 1800 square feet. >> Mh. >> Um, and so I made one of my first mistakes is working with an architect who was out of state. So my buddy who was in real estate, he's like, "Hey, my

cousin's a real estate, sorry, my cousin is an architect in New York." Okay, cool. >> And so he designed some really nice looking homes. However, >> he's used to the permitting process where he was at New York and not Houston, right? And then I went ahead and hired an engineer who was really focused on small like renovation projects, not new construction. >> So I hired basically my subject matter experts >> that are not don't have experience.

>> I hired them for subject matters that were kind of outside of their true expertise. >> Right. >> And so my recommendations always work with architects who are familiar with permitting >> or where you're building. >> Yeah. >> Right. Because it took us a year to get permits. It should not take a year. >> It took you a year. >> A year. >> What was the hold up on that? We kept getting rejected revisions like it

was just very painful painstaking process because also I like trusted my engineer to do the plan running. >> Don't do that. >> Land running. >> Yeah. So basically submitting the plans to the city. Okay. >> I recommend hiring a permit expediter. Somebody who all they do that's the thing is you want to work with somebody who like I said is a subject matter expert. Yeah. In their area. So if you need you know said permits run

get a permit runner. Yeah. So, you know, I remember Sorry. >> No, go ahead. Go ahead. >> On my first house in Missouri City, I remember that my painter was like, "Oh, I can do your backsplash." Like, "Oh, great." Like, "How much is that? 200 bucks. That's so cheap. Okay, here here's the tile. Here's a tile I spent like $600 on." >> And I come back later that day. It was all bad. Like, we had to

rip it out and it was like a Yeah. $600 waste. So, I said, >> you know, make sure you're hiring people who are experts in their field, >> right? Um, and so after my first deal, I I learned that is I need to get an architect who's local, an engineer who specializes in new construction, >> and then somebody who actually can run my permits. Um, because nowadays >> takes us 30 to 45 days to get permits.

>> Wow. Big difference from a year, huh? >> Yeah. And so, you know, it's really just and time is money, right? So, um, luckily while this was going on, I was still at my, you know, full-time job. I end up leaving like right prior to starting. >> Mhm. >> Um, but yeah, I end up building I went to, uh, Prosperity Bank, uh, because they were across the street from where I was at at Slumber in Sugarland.

>> Yeah. >> Um, so basically, I said, "New construction is easier to finance." Um, and I went with it to them. I said, "Hey, I've done these fix and flips. I'm going to do new construction. It's similar. And they looked at me and they said, "Okay, like they basically when a lender, whether it's a bank or hard money, they're going to underwrite the deal, right? You have to show the numbers and the person who's executing the

deal." >> Right. >> Right. So, you need to basically say like, "Look, I am worthy to do this deal and the deal is worthy to do." >> Right. If they if >> both of those don't pass, they won't lend. >> Yeah. >> That makes sense. So, basically, I show them the numbers. say, "Hey, I'm buying the lots at the time for like 25,000 each, right?" It was It was cheap. >> Wow. >> Um I think my

build cost was like 80,000 or so. >> Mhm. >> And we sold for like 269. It was a good I think I cleared like maybe 60 grand a house. >> Nice. >> It was good. >> Yeah, >> that was a good uh >> little return. Yeah, cuz you cuz you do it all You do all six. Well, I guess in phases, right? So, two at a time. So if you build two, sell two, you're making 120

grand at a time. >> Yeah. So, um, yeah, I built three and then we sold those and we built three more. >> Yeah. >> Um, I think looking back on I think we made like 50,000. I I have it in QuickBooks. But, you know, those are amazing numbers for us. Um, >> and we're very happy. And like I said, we kept we kind of developed this plan. Um, it got known as the Buck Plan because that

was like, uh, you can see them. They're off I 10. You drive I 10 outside from downtown. >> Yeah. >> Um, like once you pass Gregs, it's on the right and there two houses are like like uh black paint. Um, and that was kind of like the evolution of this first floor plan. >> So, we kept like evolving and so >> when you get a new construction, like I said, you can go ahead and rinse and

repeat if you find lots that are the same size. And so a typical city lot in this area is 25 by 100. It was great. You can just buy and build the same floor plan, but we always wanted to tweak it and make it look better and better, >> right? >> And so that's what we did. And we end up building like dozens of them. >> And it lets you like really understand your costs, really understand

your processes and get them all down. >> Um, one thing to keep in mind though is that with finishes, right, they change like finishes and and they actually change relatively quickly. Mhm. >> I mean, cuz I don't know if you remember back in the day like when like shiplap was like a thing, but >> now like no one put shiplap in their >> And so like, you know, as far as building the same floor plan, if

it works, it works, >> right? >> Uh stick to it. However, you just need to be aware of like what is in style, right? >> Right. >> Um especially now nowadays in this market. >> Mhm. >> Man, what was like postco >> Mhm. >> Even during CO like we sold eight houses before shovel hit dirt. >> Wow. >> Like which was a blessing and a curse, man. >> Why? because because lumber spiked and so we got

eight contracts locked in and then lumber shot up >> like 400%. >> And so which translated to like a 20 to $30,000 increase or so per home? >> Per home. >> And uh >> and that your profit, you mean? Yeah. >> Yeah. This ate up all our profit. And so >> we actually we honored our contracts like some builders backed out. They're like, "Hey, like this right you need to you need to pay more." >> Yeah.

>> And uh which you know it's a legally binding contract. So, we we sucked our contracts. Um, we did have two buyers uh like back out because I think their rate they weren't able to lock in their rate. It went up to where they couldn't afford it. So, they end up backing out and we end up we end up increasing the price like 20 grand >> and getting under contract like within days. >> Wow. >> So,

>> but nowadays, man, like design like having a really good architect and then a really good interior designer is a mustave to sell. >> Yeah. >> Unless you're going that like super budget. If you're like in or around the loop and you're able to somehow sell stuff for under 300. >> Yeah. >> And then, you know, >> doesn't matter. >> It doesn't matter. >> Yeah. What's your average sales price right now for the homes that you

build? >> So, we just listed four houses for 489,000. We got them all under contract. So, that's where we're moving right now. So, we were really focused in the first-time home buyer market in the 300s >> and the like 400s, but we're getting out of that market. So, we're just selling inventory. >> What's the reason you're getting out of that market? >> They're not selling. >> Not selling. So it's because the buyer like it's this economy

we're in. >> Yeah. >> So have you heard of the K recovery? >> No. >> So basically kind of postcoid what's happened is that the rich have gotten richer >> and the poor have gotten poorer and basically the middle class is like going away. So what I'm seeing right now is that with with interest rates like they were up in the sevens, right? Like they got they got bad. >> Yeah. >> But they've come down a

little bit now. They're hovering in like the low sixes. I think now with this this war in Iran they're probably in the mid sixes. >> Yeah. I don't know if you follow rates much. >> Not to the degree that you're probably at right now. So, >> yeah. So, and you know, everything's getting more expensive. Gasoline obviously right now, but even before that, food, right? >> Yeah. >> This cost of living's going up. And so, and people's

wages aren't going up, they just can't afford. >> And so, that's what we're having is that people who normally afford those homes, they can't anymore. >> And so, you know, we're really moving up. And it's only that, it's the fact that we really want to go ahead and and highlight our, you know, quality construction, quality design, and the quality of the finishes. And unfortunately, in the $300,000 price point, you can't use, you know, really nice accent

walls or these kind of really nice features you would see in a more expensive product. There's just no budget for it, right, when you when you're building like you need to be really bare bones, >> right? >> And so we're building two houses now in the Woodland Heights. They're going to sell for one at 2.1 million and one at 2.5. >> Nice. So, we're going in that price point now, which is going to be, you know,

500 to about 2.5 million is going to be our focus right now >> because the rich got richer. >> Like I said, there there's they sell quicker. Um >> they sell quicker. >> Oh, yeah. Um and then at the same time, we're going to go ahead and leverage our, you know, our expertise, right? The quality construction, the quality design, you know, quality finishes. >> Yeah. So, it makes sense like you right now the the state of

the market is that first-time home buyers um because of everything and the economy that we're in uh are not strong anymore, right? So, the higher priced now uh have the capital to be able to buy the nice homes and then you're also in turn able to make a better product, >> right? And and also I'm assuming a better profit margin. >> Yes. Yeah. >> Profit's better in the higher price point. Yeah. >> Um and the other

thing is, you know, with this inflation is that you're getting asset, you know, assets values are inflating. Well, who has assets? >> The wealthy. >> Yeah. So, unfortunately, the people who, you know, working-class people who are maybe renting, >> they're not benefiting from asset inflation because they're not participating in the stock market, they don't have property. And so, it's it's the unfortunate truth, but >> we just have to I have to go ahead and do what's

best for for my company. And like I said, regarding, >> you know, where we can make the best profit, >> of course, >> um, you know, and that's me talking from my point of view. I mean, there's definitely business cases, you know, I see people building out in the because we're focused on the loop in the in the inner loop, right? >> In and around the inner loop, >> right? >> That's what I'm seeing. I mean,

I think they're builders who are building, you know, much further out, you know, building in the lower price points and they're still selling because some people go out there for the schools, right? Better schools out there sometimes. >> Yeah. Um, and your money goes further, right? Because the dirt is cheaper. >> Yeah. >> So, there's, you know, business cases. I'm not going to say there's no business case for somebody building in the 300s, of course. >>

But for us, it just isn't a good fit anymore, >> right? No, that makes sense. And I think it it makes complete sense. I think you're doing the right thing. Um, it's headed in that direction. You you have to adjust uh to be able to, you know, move on to this next market that we're going to be in. You know, 2026, I think, uh, after the midterms, who knows what's going to happen. And 2027 is going

to be an interesting year for sure. >> For sure. >> Um let's go now into the uh the the entire new construction process, man. Like uh >> from the moment that you know, you're an engineer too. Um I'm an engineer. I studied electrical engineering. So like I think we have the same kind of processor oriented mindset. And so uh first step whenever you get a deal, you know, first thing you do is source a deal, right?

So uh for everyone that's watching this, I think it'll be extremely valuable for them to understand the entire new construction process, right? Um, and then I think it'll also give people a little sneak peek into the sort of mentorship and the level and attention of detail that you could potentially offer maybe someone that is looking for, uh, mentorship and, uh, and wants to do new construction. I think it'll be able to give them like a good

idea of what you could offer. So, um, let's start at the beginning, man. How do you source deals? >> So, sourcing deals, right? We MLS, honestly, like you can get deals on MLS. >> Yeah. >> Um, wholesalers, word of mouth. So, we just bought five lots to build 10 duplexes. So, I didn't So, we're we're having three product lines now. So, >> kind of the mid-tier buyer, which I said like 500s and up >> and then

like luxury, I don't know where you define luxury, maybe like a million plus. >> Mhm. >> Um, and then we're doing like you mentioned like the build to rent. So, we're building 10 duplexes on five lots. I got it because this couple would walk their dog and they and I said, "Hi." I said, "Hey, how you guys doing?" And like, "Oh, we love what you're doing in the neighborhood." because it was just a big vacant lot

with a nasty house that was boarded up. So yeah, >> he's saying these we built 18 homes and you know, brand new. I think they look beautiful and they agreed >> and we talked and like oh like do you want to look at our property? I'm like yeah of course let's go. And so I looked at theirs like we want to sell like okay and then we basically talked and talked about like doing a JV and

they thought about it and said hey that's not for us we prefer just you to buy us out. Okay. And so we talked and agreed on a price and uh >> yeah bought took down five lots. Each lot's about 7500 square feet. >> So good good chunk of land. >> Um and we'll be building 10 duplexes on it. >> 10. >> Mhm. >> So five What was the total square footage of the lots? >> So 7500

ft each, >> right? >> Um 75 uh half of 75,000. So the 37,500. So just shy of an acre. >> Gotcha. Um, and so yeah, we're we're getting in permitting now. >> Um, and so we're also building uh MURS, so multi-unit residential, which is a little bit different than just a standard duplex. >> Um, so >> but regarding sourcing deals, sorry, going back to your question, MLS, word of mouth wholesalers is kind of three main sources.

What what about you? I mean, you're wholesaling >> uh master. I mean, so when it comes to like sourcing deals, right, there's all sorts of uh there's all sorts of marketing campaigns, right? I think the the ones that have stayed true for the longest periods of times have been things like coal calling. I think it has the lowest barrier of entry for anyone that's watching this, right? You can go and pull a list from the county

straight from PropStream and start dialing, right? So, the barrier of entry to get into for sourcing deals and anyone that's watching this, if you're looking to sell a deal to Uh to Jeff, this is literally the exact things you have to do. You go to PropStream, you pull up a foreclosure list or probate, divorce, uh tax link, code violations, whatever, right? Make sure it's distressed. Um you want to get it in the zip codes that Jeff

is buying in or you can just pull up vacant land. Uh and then you uh get the list, you skip trace it. You can skip trace even in PropStream. Um then you want to get a dollar. Definitely get a dollar. Mojo dollar, uh, ready mode, call tools, batch dollar, whatever, doesn't matter. Get a dollar, get a script, start calling, negotiate, make offers. That's it. You know, it's, uh, it's not a hard process. It's it's it's difficult

in the in the sense that it's a lot of rejection and it's a lot of sales and it's takes a lot of grit, but you can source deals that way. There's also, you know, direct mail, um, PPC, Facebook ads, uh, ringless voicemails, voice broadcasting. Now we have AI tools, you know, like >> Yeah. Yeah. Yeah. So, this this AI is going to be >> pretty incredible um in what we're going to be doing, but uh unfortunately

we can't do outbound cold outbound reach with AI. It's very illegal. So, uh we we need to have prior consent to be able to reach people. >> Okay. um you know but uh there's ways to get uh consent and once you get people uh the AI really excels at doing a follow-up process you know if you have a legitimate marketing source and you get uh compliance to be able to reach out to them with AI and

uh typically you know consent can look in in in the form of a little check box on a opt-in form you know and that's enough compliance and as long as you log it properly you can reach out to them and uh do the follow-up sequences with AI. And I think that's where I think that's the the the goal and the use case for our voice a AI is bridging that gap in between when someone gets a

lead and a contract is signed is that tedious follow-up process. That's it's so easy when you're having like a thousand leads that you have to manage to be able to call a thousand people and remember the conversation with each one. >> Yeah. >> Right. It's it's mentally in it's you're not capable of doing it. So voice AI will be able to go in and remembers the last three conversations that it has. It remembers when it needs

to call them and it calls them on that date. >> Wow. >> No ifs, or buts. >> It's amazing. >> Yeah. So I mean even I forget to copy what Even if I have a reminder and a calendar, I I sort of forget. So AI is not going to drop the ball there. Um, it doesn't have to overcome that barrier of like because I I've actually cold called. Yeah. I hate it. Sorry. I hate cold calling.

>> Yeah, it's tough. >> Um, yeah. I used to like drive for dollars. I just drive around and like take pictures of lots and like look try to like look people up. >> And uh, yeah, not a fan. So, hats off to you and way to go. Creating the AI is going to make it so much easier. >> But, we just let the wholesalers do that work for us and then come to us with the deals.

>> And you're happy to pay. What's the most What's the biggest wholesale fee you've paid? >> I think I paid like 40 grand. 40 grand >> on one deal. >> Amazing. Yeah. >> Yeah. And it was it still worked out for you, right? >> Yeah. >> Um, you know, more like more than line is usually like 10 to 15, but >> for sure. >> No, I mean, no, I definitely see the value that wholesalers add. They

go ahead and, you know, get get the Well, they're supposed to get get it, you know, you know, ready ready to go, right? Um, you know, we've had some wholesale deals where like title couldn't like actually be delivered clean, so we had to go ahead and, you know, bust out. But we've had good experience with wholesalers. >> Um, >> where are you buying? So, anyone that's watching, >> right now we're focused on Independence Heights in kind

of Heights, Woodland Heights, non-historic. >> Okay. >> Um, so we're building, like I said, two houses. Uh, they're going to be in the market. One's already coming soon, but they'll be finished in a few weeks. Um, just bought two more lots. So 7709 on the west side of of 45. >> Um and then we're also in 77 uh 018 77022. That's the Independence Heights area, >> but you want to be south of uh like 36th. So

south of the tracks. >> Um ideally west of airline. >> Um >> cuz there's like Okay, zip codes are big. Like some zip codes like 09 for example, >> it's huge, >> right? It's going to It's night and day. Like, so if you're west of 45, like you can sell a house for $2 million. >> You're east of 45, you're going to sell a house for like $400,000. >> Huge difference. >> Um on a 5,000 lot.

>> I know cuz I've done it. Um and so like I said, uh we're also doing 7707. Um and then I'd love to build in like, you know, Montros. It's hard to find lots there. >> Yeah. >> Like there's some areas where just finding lots is is tough. So, which is where wholesalers would come in like >> Yeah, absolutely. >> So, I'd love to get into like 019 um and uh like that Montress area to do

some nice like high-end spec. >> Yeah. >> But like I said, finding lots can be can be challenging. Absolutely. >> Why you got if you're wholesale, you got deals in that area, please let me know. >> Absolutely. Yeah. Cool. Um let's continue with the new construction process. Um before we uh but before we continue, let's uh take another quick commercial break here. Guys, if you're doing business in Houston and you don't have a great title company,

I highly recommend you guys to use Natalie Mario with Black Label Title. They were awarded the best title company in 2026 by Houston Latino Magazine. Um, but I think what's truly impactful of working with Natalie is that her title company can do pass through funding for A to B closings. If you're an investor, this is very important to you because it means that you don't you don't need to have your own funds to be able to

finance an A to B closing on a double close. You can use the funds from the C to B to fund A to B transaction. If you don't understand what that means, reach out to Natalie. She can explain it all to you. More importantly, you can make a very big assignment fee without your buyer or your seller finding out what that fee is. So, it's a great opportunity to get with a investor-friendly title company. They also

do blind huts, assignments, novations, subject to wraps. Um, and so they close in all Texas counties, right? So, they they can do e- signing. You know that you don't even have to have a closing in the title company, right? They do CE classes. Um, listen guys, if you're wholesaling or you're investing in Texas, you need to call Natalie Marrio with Black Label Title. And um the link for Natalie is going to be in the show notes.

So the number for Natalie Murio is 9364428486. Make sure you mention Joseas with Pickup the Phone Podcast. If you're a real estate investor anywhere in the United States you need to listen up, get hardmoney.com is a free platform for real estate investors. You can find local hard money, connect with the lender directly, request term sheets, and chat all in one single place. What I really like about the website is that they have free tools. They have

built-in AI comping. They can they have flip property calculators. They have cash to close calculators. Everything's 100% free. You don't even need to sign up to be able to use their calculators, which I find extremely useful whenever I'm running numbers on a property. Um, so it's going to be free all the time, no cost ever. So if you're investing and you need a lender connections or you need deal analysis tools, it's a it's a no-brainer, right?

It's a no-brainer to sign up. So the way to sign up is you go to get hardmoney.com and the link is going to be in the show notes. If you're a nationwide real estate investor, you need to go check out gehardmoney.com. Gethhardmoney.com is the number one place to find local hardmoney lenders. You can connect with them directly. You can request term sheets. You can chat all in one single place. The coolest thing that I think about

get hardmoney.com is that you have free tools built in. Um, AI comping, you have a flip profit uh, calculator, cash to close calculator. Um, what's really cool about it also is that it's 100% free. You don't have to go and buy anything. You can sign up. You can use all the tools that they have. Um, they have tools added there all the time. No cost ever. So, if you're investing and you need lender connections, this site

works nationwide. Uh, if you need deal analysis, this thing is a no-brainer. There's no cost to sign up. It's just free value, free connections to any real estate lender out there. So, get go sign up get hard money.com. Cool. And we are back. So, uh, Jeff, let's, um, I know we're, uh, limited here on time, so let's let's kind of wrap up, uh, as much as possible. The new construction process, uh, sourcing deals. Uh, what's the

next step after you source a deal? >> So, after you identify the deal, obviously have to get under contract. And so, having a realtor, >> you can write up a good contract for you. I mean, I've gotten to the point where I can write up my own contracts, but I'd rather have a realtor do it because they won't make as I can make mistakes. I mean, anybody can make mistakes, but realtors, like I said, are the

subject matter experts. So, they should go ahead and be able to write up a good contract for you. >> Yeah. >> Um, and then you need to find how are you financing the deal? So, are you going to go ahead and buy it cash? Are you going to go ahead and use, you know, private money or hard money? Are you going to use a bank? Right. You take debt. >> Um, and how like your capital stack

just to acquire the land. And so, typically, it's a combination of debt and equity, right? >> It's very rare to get 100% debt, right? >> Uh, I've done it, but it's not very common. >> Yeah. Um, >> the only reason you've done it is because you have a great track record, >> relationships, >> and relationships. >> So, typically, like when you're just acquiring raw land, >> they're going to want more equity. So, you know, you get

hard money lenders like, oh, we'll lend 90% loan to cost, right? Land, it's typically like 75 is like kind of the max >> with hard money. >> Yeah. And a lot of hard money lenders actually won't touch just raw land acquisition. >> Yeah. >> There is a loophole. The loophole, it's not really a loophole, it's just like a caveat. they will go ahead and finance land if you already have plans. So, if you already know exactly

what you're going to build on it, they'll basically do an appraisal of the value of the future state, right, with a finished home on it. They'll lend on that. So, they'll lend on basically they'll do what like LTC, loan to cost and loan to value based off the appraised value of what you're going to be building. >> And this is with a hard money lender. >> Yeah, hard money or private money. And banks will do that

too. >> Banks. Okay. But typically with these high-end luxury homes, like we're not copying and pasting. So, we're going to have to build something unique. >> So, we typically just take down the land first. >> Um, so like I said, we work with different banks. Um, I mentioned Prosperity Bank, Stellar Bank, Central Bank, uh, Texas Golf Bank. >> Um, you know, there's a lot of local banks out there. >> So, small commercial banks is >> Yeah.

Don't go to Don't go to Chase. Don't go to Bank of America, right? >> Don't go to Wells Fargo. Mhm. >> They'll lend they'll do give you a mortgage to buy a house, but they're not going to go ahead and lend you money to buy raw land to to develop. Like you need to go in and I recommend like going in and like shaking someone's hand, like meet somebody. >> Yeah. >> And even if you don't

have the track record, go shake your hand, shake someone's hand to introduce yourself, open up a little account and say, "Hey man, like you know, here here's what I want to do." Um, banks, it's the hardest to work with. They have the most stringent requirements. They're typically going to require like two years tax returns, right? like you need to show financials. Um, and they're they're going to ask you for a lot of documents. Yeah. >> But

it's worth having the option to work with banks because it's the cheapest money. Like you can pay like 7% versus like I said, I mean my first pay 15%. >> Right now, hard money, I mean, you can get it >> if you have a good track record like 10% or under, >> right? >> Uh, but you have to have that good track record. Um, so >> and with a with a small commercial bank, you said it'll

be around 7%. >> It depends. is based off of Wall Street Journal prime plus uh a margin. And so prime rate right now is 6.75. >> Hopefully it comes down some more. >> Um so they'll mark it up like a half a percent, some do a quarter, >> some will do prime if like you're really really lucky. Um but typically a quarter to >> a point uh depending on the spread, depending on the bank. >> Yeah.

>> Um some banks are bigger than others. >> And then what kind of uh LTC do they do? Okay. So, loan to cost with these banks on the vertical construction be 75 80%. >> Okay. So, you still have to bring 20 25% down. >> Yeah. So, hard money guys will go up to 90 typically, >> right? >> Um and so, like I said, when you're buying raw land, if you have the plans, you can go right

to that that private money or hard money lender. >> Um and then if you don't, like I said, you want to do the land acquisition. >> Yeah. Um, you know, it's you kind of need to make sure you put your feelers out there because finding people who just blend lend on raw land is is hard. >> Um, but there are people out there, like I said, it's um, we just closed a deal, the five duplex deal

with Texas Golf Bank. They lent us um, you know, 70 75% of our purchase price. >> Yeah. So, it's um like I said, I think if you're first time going to them, like if you're want to work with a bank, maybe you say, "Hey, look, I'm your first time. I'll do like you 50, you know, but like I said, if you're taking down half a million dollar lot, that's $250,000." So, you always want to make sure,

like I said, you have a combination. I always do debt and equity. So, >> I typically do what's called an SPE, a special purpose entity. >> Um, like I said, this is not legal advice. >> Yeah, I'm telling you what I do. >> Yeah. And uh it's a limited partnership typically me acting as a general partner and I raise capital from like friends and family who act as the limited partners. And so >> they're they're limited

as far as liability. >> So they're only exposed to liability of the amount they're investing >> versus the general partner has unlimited liability. >> Um and then they also really like based off your operating agreement typically you can't do anything. So, if you're going to go ahead and do anything besides like a solo member LLC, you be very careful about your operating agreement. Like, don't use Legal Zoom. Like, talk to a lawyer. Even AI, like I

don't I would still not really have AI write your operating agreement because, you know, >> you know, you can go ahead and and uh make mistakes and uh so make sure you have an attorney who specializes in >> in uh the entity that you want to make. Um >> because everything is fine until it isn't, right? If there's problems, you don't have anything in your oper agreement that specifies how to solve that problem, it can easily

lead to a lawsuit, which can be very expensive, very timely. >> What is the the biggest the biggest liability when it comes to building homes? What is uh what would you say is the biggest exposure? >> Um that's a good question because honestly, um you know, we have to carry general liability insurance of million, $2 million coverage. >> Every project we do has that builder's risk insurance, right? Right. So, honestly, as far as liability, like you

know, if you're doing it right, you should be covered. Um, so one I have a story. Uh, someone burned down one of my homes. >> Wow. >> Luckily, it was a home I was planning on demolishing. >> Yeah. >> So, >> it worked out. >> You got insurance proceeds from it? >> No. >> Cuz I didn't insure it. That was my problem. And so, >> I was >> really shortsighted in the fact that I was like,

well, why do I get insurance on a home that I'm going to knock down? >> Makes no sense. >> And so, I didn't get insurance. Yeah. >> And the lender was okay with it. >> Yeah. >> And then what happened was I got a letter from the uh City of Houston Department of Neighborhood saying, "Hey, your home was in violation. We had to do an emergency demolition on it. Uh pay us $16,000." I'm like, "Wait, what?"

And so I had no idea what happened. All I know I drove by the lot, the house was no longer there. So I was like, "Okay, well something happened >> and the city demolished it." And so I I end up like requesting a hearing. >> And so I go to this hearing in front of this like big panel. >> Yeah. And uh I actually end up zooming like attending me a zoom and they're like why aren't

you here? I'm like was I supposed to be here? Like yeah like I've never done this before. I don't know what I'm doing. >> And so they like showed like they actually had like it was like a a jury like trial basically. And so they presented evidence. Somebody broke into the home. >> Uhhuh. >> And basically set it on fire. I think it was like I think someone who was doing drugs broke in and actually lit

a fire. >> Right. >> Um >> and I was like look guys like I'm so sorry. I didn't know, you know, like, you know, we take full responsibility. However, $16,000 is very expensive. Like, if I mean, I would have gotten it demolished for like six. Yeah. >> Like, can we do eight? And they're like, you know, we appreciate what you do for the community building homes, but pay us $16,000. So, like, we're putting a lean on

the property for that amount. I'm like, okay. And end up paying 16,000. So, even if you're knocked on the house, get insurance. >> Get insurance. >> So, always get insurance. It's just >> And typically the lender does require it. Like I I had a good relationship with the lender. like, "Hey, I'm knocked in the house." Like, "Don't make me spend the $1,000 on insurance." Like, okay. >> Yeah. >> Um, and so >> so,000 bucks could have

made you some money. >> I would have made great money, man. Yeah. >> If I had covered for like even like 100 grand and got burned down, I've had 100. >> Yeah. >> Get insurance. Yeah. It's a very small price to pay. Cool. So, um, Jeff, just so we can continue, we got we sourced a deal now. We got the contract. We got the financing in place. What's next after that? >> So, just real quick on

the financing. So like I said with the limited partnerships are like I said either if you're still a member you're going to provide 100% of equity. Yeah. >> For the limited partnerships I'm forming I'm typically providing like 20%. So which is great. So if you need you're doing a million dollar deal right >> well you can take leverage up to say 80%. We need 200,000. >> Mhm. >> Okay. So you need to raise 200,000. And so

say you're going to put 20%. What you need put you need to put $40,000 to do a million dollar deal. Like it's pretty incredible what's it's basically called like you know your capital stack. >> Yeah. Wait can you repeat that again? Okay. Um, so if you're going to do a million- dollar deal, so the land acquisition plus your construction is a million dollars. Okay. >> And so you basically go out, you get 80% from a bank

or a hard money lender, >> which can go up to 90%. >> So you need 200,000. And so you can go raise 160 from limited partners, friends, and family. You put 40. So you're basically have your 20% owner of the partnership, which is typically a requirement. Like you can't usually have a partnership where you like have 1% equity. They're not going to lend to you, >> right? you need to show you have enough skin in the

game. And so you say, "Hey, I'm 20% owner of this partnership, right? We're going to go ahead and get this property." And so for $40,000 out of your pocket, you can go into a million dollar deal. >> Wow. >> So it's like I said, it's important that you >> huge leverage. >> Yeah. >> Um but I think it's leveraging in a smart way because I said you're you're still bringing I mean look, you still you do

want more than just 20%. Like 20% is typically your equity requirement. So you want to have cash reserves, you want to have carrying costs set aside. So with the students I go through proformas and make sure we understand okay here's your hard cost here's your soft costs you know here your carrying cost closing costs and make sure you take in consideration all those costs because a lot of people look at okay what's my acquisition what's my

build cost what's my sales price >> okay there's a lot more than just that >> yeah there's a lot of holding costs taxes uh utilities >> I think we paid like 150 fees and and taxes in January so >> what what about um what about uh so you also like on on a million dollar deal what would you say is the amount of reserves that you need to have on top of the 40k. >> Well, the

40k is what's coming out of your pocket. So, typically >> reserve wise, I mean, man, at least 10% >> and I mean reserves. I mean, it like >> you need to look at the deal, right? It just depends. If it's something you've done multiple times, then you should have really high confidence level in what you're going to spend. >> If it's a deal you've never done before, you want to have higher reserves. And if it's like

a market that you don't know, you want to have higher reserves. >> Yeah. Yeah. >> So depending on the marketing conditions and that kind of thing, um you obviously don't want to have an extra half a million dollar sitting in the bank doing nothing, right? >> So in the partnership agreement, you need to make sure you have a clause about capital calls. They're not fun. You don't want to do capital calls, but if you need to

do them, you need to do them. So capital calls basically saying, "Hey guys, like we need more money, so everyone everyone needs a pony up." >> Yeah. according to your percent ownership. So, it's just something that you need to go ahead and make sure >> you're aware of and everybody's aware of so it doesn't catch somebody by surprise and say, "Hey, >> I don't have it." >> Yeah. >> So, >> and then the the partnership agreement

should also specify what happens if somebody doesn't have it. So, >> um, but going on next the next question >> and that's and and I just want to point out right here um like everything that you're sharing is is uh very specific information, very detailed information that I feel like is extremely valuable to someone that is looking to do a new construction and new development because the problem is that whenever you're doing anything, you don't know

what you don't know. >> Yeah. >> Everything you just mentioned is things that are things you probably found out by doing it. >> Yes. you know, so I think that it's extremely valuable and I think it goes to show the level of expertise that you have in this uh in this business. So uh yeah, I mean if if I wanted to do new construction, I would definitely come to you for sure. >> Thank you. Thank you.

And um so we we develop most of our own deals like in in related entities, but we are building for other people now. So we mentioned we offer the mentorship to help people learn how to build and we also build for others on a case- by case basis. >> Yeah. Um, but basically one thing we didn't talk about is due diligence. Due diligence is so important. >> So making sure like, okay, I got the property in

contract. I have the financing. We missing the most important part is the due diligence because the due diligence can kill you. >> And so making sure your lot has utilities available to it cuz that >> cost me 60 grand. >> Uh, when we built our office building, um, it was a bar. >> Mhm. And I was like, I didn't do my due diligence on utilities because it was a bar. They're going to have water. They're going

to have sewer. They're going to have light. Uh, come to find out the toilets were plumbed into the storm water system. >> What? >> Yeah. And so, basically, when I you have to go to the city, it was called that you request a wastewater capacity reservation report. It says, "Hey, connect to this water line. Connect to the sewer line." And they said, "Hey, you don't have sewer." I was like, I went to say like, "No, we

have sewer. This is a bar." And so we literally had to go to the plumbers, go out and pour like water with tint in it down where the toilets were. Yeah. >> And it came out in the storm water line. Like, oh [ __ ] And so we had to cut the street up, close it down. Like 60 grand, like I quote from 60 to like $150,000. >> Holy cow. >> And so having to extend the

city utilities is extremely expensive and can kill deals, right? >> So you need to make sure you understand, do you have water? Do you have sewer? Light is easy. Um, it's usually it's going to be free. Centerpoint has the responsibility to get light to your property. >> Yeah. >> But one thing that can be killer on deals is not planning. I've seen people where they built a house and said, "Hey, we're ready for power." And like,

"Hey, we can't get you power. We're going to put a new pool in." Like, "Okay, great. How long is it going to take?" 16 weeks. Like, but I'm done. I need it now. Like, we'll get to you in 16 weeks. So, you're just sitting there for 4 months or so waiting for Centerpoint to come out and put a new pole down to hook your house up. >> If you have to move centerpoint infrastructure, they'll do it

at a cost. And so, I've had to move centerpoint poles before. It's like five or six grand. >> Yeah. >> Um, I like to go underground to the pool. Some people go overhead. It just depends on the site and the project. I said due diligence. So, it's not only utilities, but it's also understanding the setbacks. Mhm. >> So standard city setback is 10 foot building line, 19T garage building line. However, if you're on a major thoroughare,

that can go to 25, 50 ft. And so you have a lot where you're like, I lost like half of the buildable area. Yeah. >> Because it's a major thoroughare. And so >> and all of these things are are caught during the due diligence period. >> You need to catch them during dig. Whenever whenever you get it under contract, let's say like you have a deal like uh do do you pour now water down the toilet

with ink in it to check? >> No, no, you don't have to do that. Um if you go to Geoh Hub, it's uh Houston, put type in Google, it'll pull up and it's a it's a great resource. It tells you where the water lines are, where the sewer lines are. Yeah. >> Where the storm system is. >> The other really important thing is man, this is where the historic districts are. I thought historic district only existed

inside the 610 loop. There are historic districts outside the 610 loop. >> Is there? >> There are. I found out because I bought a deal through a wholesaler. >> Yeah. >> And it was it's historic. I didn't know cuz I didn't check. >> So you couldn't build what you wanted to build on it. >> We're trying to Man, it's it's it's a mess. Um but just check for historic just to cover your ass. >> Yeah. >>

So check get a survey that is going to be >> it's not just getting a survey. You need to provide the title commitment to the surveyor. if you don't, they won't take stuff from the deed restrictions. They'll just take what's the conditions on the ground and what records they find. >> Um, also, >> I had a deal where we had massive like overhead lines. They were like 100 feet off the ground and we had the survey

and the title commitment and they didn't mention any aerial easement. >> Mhm. >> I was like, "Okay, cool. Well, they're so high up. I guess that doesn't matter." Um, we went to permitting. They're like, "No, there's an aerial easement." We're like, "What do you mean?" It didn't come up in the survey or the telement. like, well, we have it recorded. And so, basically, we had to completely scrap our plans and redo it. So, if you see

overhead lines, >> yeah, >> I bet there's an aerial easement on your property, right? >> Which will prevent where you can build, right? >> And so, the other thing is there ements sometimes you can't see cuz if we're in Houston, there's oil and gas. Sometimes they're like >> pipeline >> pipeline ements. >> So, you know, you need to make sure and get, you know, obviously get title insurance, right? Um, review your title commitment. Like, make sure

you have it reviewed by an attorney because >> just because you have a title commitment doesn't mean anything. Sometimes they take exceptions to everything. Like, why are you taking exceptions to that? Cuz they basically are saying, "We're not insuring that." >> Yeah. >> So, you make sure you review, you know, everything on your title commitment, making sure you understand what they're not insuring. >> And if you're not okay with it, object to it. Say, "Hey, I'm

not buying this property unless this is, you know, this this aspect of this property is insured >> because that can blow up in your face." and you say, you go back, hey, like this is happening. They're like, well, we took exception to it. We're not you're out of luck. >> Yeah. >> Um, and then utility availability, if you have any encroachments, so you get a survey done, you have a fence encroachment, >> get it get it

cured before you close on the property, right? >> Otherwise, you're going to be fighting with the neighbor, right? So, you tell the seller like, "Hey, you have a fence encroachment. You need to talk to your neighbor, notify them, like get that fixed >> because I've had fence encroachments like wind up in a lawsuit." So, you know, it's you're like, "Oh, it's just a little fence." >> Yeah. >> But it can be a pain in the butt,

man. So, any kind of encroachments, like I said, any easements, setbacks, deed restrictions. They're deed restrictions, hey, like you only build up to this height. >> Yeah. >> Or you have to like use brick on the exterior. Like, there's some weird deed restrictions. Um, and sometimes they're written like 1927, like you can't even read them. >> Yeah. >> So, you need to really understand, make sure you get someone to review it and you can do what

you want to do. uh minimum lot size. So you you sometimes >> what is that? >> And it's it can be block by block. >> Yeah. >> And so you go like I'm buying a 5,000 foot lot or I want to cut it in half, >> right? >> You can't. Why not? It's a minimum lot size like and so >> and honestly sometimes it's good because it maintains consistent, you know, look on the block like as

uh you sometimes you drive down a block and there's all single family homes. They're all like 50 foot frontage. Other times you drive down a block and there's like a 50 foot frontage, 25 foot. their share drive. Well, you can tell they didn't have a minimum lot size because they it's all like hodge podge, right? Um >> so, like I said, if you're if you're planning on subdividing, you need to make sure there's no restrictions that

can prevent you from subdividing, >> right? >> Um the other thing is understanding chapter 42, the liable places code that passed >> because that has restrictions as well. So, that's now a new ordinance. It says that the minimum frontage is 33 feet. So, when we used to be able to cut a 50 foot lot in half, you can't do that anymore. Um, well, there are exceptions. You have to do like a Y share drive, which is

not attractive. Um, or they say, you know, you can't do it at all. If you're within 1300 ft of a school, they say no, you can't you can't replat that. >> Wow. >> Um, you can do like a share drive like three, you know, have you seen those where they have like it's a three-ack. >> Yeah. >> So, that's that's allowed, but sometimes depending on your market, you don't want to do that. >> Yeah. Um, >>

it seems like there's so many rules to >> there's a lot of like, you know, landmines you can step on, but >> there's a lot of nuances, right? >> Yeah. I mean, I've I've stepped on a few and so >> sometimes, you know, >> and it's learning by experience. Um, >> right, >> we had a situation where like the city wanted us to extend the water line and like uh we had water going by our property

which we cut into five lots and they're like, "Yeah, but the water line only goes this one lot. You need to extend it." Right? like why can't we just do an easement and like all the meters like no and they want to charge us like we talked to our plumbers like hundred plus thousand on house we're building to sell for 200 like 50,000 >> and so we would have like like there's no way so sometimes if

you get told no >> sometimes you can push back some people think like a no is a no >> like sometimes a no is like you got to like the city >> you can talk with them they'll work with you like hey man like I'm trying to add value you're trying to add tax dollars I mean you're like hey I'm building these these things is going to add, you know, revenue to the city. Yeah. >> So,

you know, going down to the city and talking with them can help. So, if you if you just going to know, don't take that as 100% know, like, hey, like, okay, let me see what I can do. So, sometimes having, like I said, a good plan, a permanent expedator who knows people who can talk to people, >> right? >> Um, or like I said, going down to the city, scheduling appointments with a planner of the day.

Yeah. >> Um, it's not an easy process and there's no guarantee you're going to get that no turned to a yes, right? But some people is going to know and they're like, "Well, I can't do that." >> Yeah. >> Um there's there's some flexibility, >> right? >> I feel like we've just now scraped even just the surface level of how nuanced and how detailed new construction, new development can be, you know, and and I feel like

there's so many unknown variables if you don't have experience. I think you're talking about now, you know, we spoke at the beginning about unknown variables in fix and flip versus in new developments. And I think >> there are unknown variables if you don't have experience. You know, I think once you gain experience and you hire a mentor, you could have all of these known variables now. Um, but I feel like this is going to be Jeff,

we're going to have to get you on this podcast again, man. >> No, come come back. This is amazing. I really enjoyed it. >> Yeah. I think I think uh it would be extremely valuable to maybe have a a follow-up podcast for everyone that's watching to be uh you know I can see also you're very passionate about it and I think uh you love talking about it and I think we can kind of break down the

entire process from beginning to end and just talked about all of the nuances and offer a whole lot of resources and a whole lot of information a whole lot of value to anyone that's watching out there and I think you know even with just watching this they can go and kind of have a good understanding and then whenever someone's actually ready to move forward based on everything you've told me, I would not do a new construction

now without hiring a mentor. >> Yeah. >> Yeah. Yeah. Uh it seems like there's a lot of landmines there. >> No, there is. And I I did forget one I want to mention is Flood cuz we're in Houston. You need to know if you're in the flood zone. >> But no, I mean, like I said, I'm I'm uh I have like one or two spots left for the the one-on-one mentorship. We also do a master class

for people who want to start but aren't aren't actively building because the mentorship is basically adding fuel to the fire that you already have going, right? You already have a business, you're already actively, you know, in real estate developing or building, right? >> Um the master class is like, I've never done a deal. I want to go ahead and we walk through a deal. It's a four-monthlong class. We meet once a week for four months. So,

it's it's you follow the construction of a home. you talk about looking at it from a developer perspective, looking at from a, you know, the builder perspective and looking at as the entrepreneur, business owner perspective. >> Amazing. So, >> but yeah, let me know. We can uh come back and conversation. >> No. Yeah. Uh we'll definitely have to put it on the book very very soon because I there's so many questions that I uh that I

need to ask still and I think that a lot of people would benefit from hearing u but you know, unfortunately I think we're running out of time right now. But uh we've we've spoke a lot uh about everything new construction, new developments. How can people find out uh even if they have a deal they want to show you or if they want to know about your mentorship program? Uh how can people reach out to you for

anyone that's watching? >> Yeah, I mean you can hit us up on DM at Bisino Homes. Um we can you know I'm not good at I have a professional uh social media manager who manages and responds. >> Yeah. >> I mean you can try mine which is uh Jeff the Builder. Um I don't check my messages that often. >> Yeah. >> Um >> or you can you can email me. It's uh jeff. German at visit homes.com.

>> Yeah. Cool, man. Well, thank you so much for coming out here, man. I really enjoyed this podcast and uh I'm looking forward to the next one, man. >> Yeah, me too. Thank you. Thank you so much for having me. >> Absolutely. Thank you. All right.