Here come the REOs

A vast majority of execution mistakes in development point back to a lack of or slow decision-making. This ranges from capital formation to paint color selection. Not making decisions quickly is the most damaging thing anyone can do. For anyone grappling with a tough decision, please remember that deciding slowly is also a choice.

the real silver tsunami: SMBs making beaucoup $ off the money-pit mcmansions that empty nester boomers will never ever sell and will keep retrofitting for safety purposes as they get older and less able-bodied

$1.7B in condo sales, pre-construction. Woof. Brickell Key.

I went to any Ivy League School, worked at an investment bank, spent years in private equity, and was the CFO of a business doing $70 million in revenue. None of that has helped me in real estate and if you have ever wanted to get into the space, I encourage you to. Small real estate development is one of the most level playing fields I have ever seen. I've seen guys who likely struggled to graduate high school absolutely crush it. The land seller has never asked for a resume and a GC does not care about your GPA. Here is what actually matters as a small residential developer: 1. Can you find a piece of dirt at the right price? Every deal starts with land. The ones who win are the ones that get in their car and drive their market, build relationships with brokers and sellers, and find off market parcels before they hit the MLS. Only the school of hard knocks teaches you this. 2. Can you underwrite conservatively and be honest with yourself about the numbers? You can still blow up a deal as an MBA grad from a top school if you underwrite best case scenarios. The best developers I've worked with use simple spreadsheets and build contingencies of 10%. 3. Can you manage a general contractor and keep a project on schedule? Construction management is about relationships and communication. The developers who return calls, show up to the job site and hold their GC accountable on timelines and work product are the ones who deliver on time. 4. Can you sell the finished product? Pricing strategy, staging, agent relationships and knowing to cut price instead of holding and bleeding carrying costs. A lot of really smart people have large egos, which kill returns. 5. Can you keep your investors informed and treat their capital with respect? Investor relations in small development means a text with progress photos and an honest and early update if things start to go sideways. 6. Can you do it again and again? One successful project means nothing if you can't systematize the process. Building a real business means you can scale to do more than one house over time. Every skill that matters in this business, you learn on a job site. Pain tolerance, local market knowledge, and the willingness to answer your phone at 6 AM or 10 PM will take you further than anything else.

I have flown coast to coast to evaluate ground up residential project sites and most of my opinion is formed before I even get out of the car. The drive in is the underwriting. Here are five underrated things to think about: 1. Retail quality: is there a Chick-fil-A, Starbucks, or a quality grocery store nearby? These companies spend millions of dollars a year accessing demographic data that a small developer could never afford. If they chose to be near your site, they did the demand study for you. If the closest retail is a Dollar General and a vape shop, run. 2. Rooftops: are there existing neighborhoods within a few minutes of the site. New construction selling into established communities with schools, parks, and retail has a built in buyer pool. 3. Pride of ownership: are the surrounding homes maintained? Mowed lawns, clean driveways, cars in garages instead of yards (looking at you Austin, TX)? Let's make sure exit comps are where we want them to be. 4. Commute: are there employers around that can support paying people the price needed to live in the neighborhood? 5. Infrastructure: are there fresh roads being paved nearby? New utility lines going in? A permitted school or fire station? Local governments do not invest in infrastructure for areas they expect to decline. Always follow the public money. The next time you are driving to a site, pay attention to your surroundings!

I have an LP friend whose primary screening criterion is this: the more conference stage and podcast appearances a GP has, the less likely he is to invest. One of the best LP track records I know, fwiw

People have a megacrush on TC (understandable) and want us to do something on them, but it's also easily the most heavily covered of the great real estate dynasties. There's a terrific book, tons of magazine articles, and everyone has read the memos. We're much more interested in covering the greats who haven't quite got the same attention. Our last special episode (Ep 61) was on JMB, which has spawned an outsized share of today's leading firms. And next week's special episode hits one of the all-time families: Not only for the CRE legacy, but for the scarcely believable origin story. It's time for The Reichmanns. Next week on the pod.

You can sign a piece a paper promising to pay rent or leave, and a total stranger will hand you the keys to a home worth hundreds of thousands or millions of dollars. That is a miracle made possible by the local authorities' promise to enforce the agreement.

Over the past 25 years we've been involved in all kinds of real estate deals - speculative development, covered land investments, credit tenant build-to-suits, path-of-progress core investing, public-private partnerships, "opportunistic" special situations. Some worked great, some ok, some sucked. The one we've done the most and the one I would do exclusively if I had it to do all over again (I have no interest in doing it all over again but would invest in others) is converting big spaces of some sort into multiple smaller spaces of some sort. With retail properties there's a limited pool of demand for really large spaces and there's a wider and deeper pool of demand for smaller spaces. And the smaller the space (to a limit) the higher the market rent, usually. We've converted larger buildings of all sorts - car dealerships, movie theaters, skating rinks, big box stores, and warehouses - into smaller shops. Often the rent on smaller spaces can be 2-4x that of the larger spaces, and these types of deals take maybe a third the time of a ground up deal. The uncertainty is in the lease-up risk and the construction/improvement costs but those can be figured out before closing. And designed properly, they're more resilient because of the added tenant diversity. Neighborhoods and municipalities usually welcome these projects. In many geographies the improvements can be done now for less than $300psf, so in markets where shop rents start to exceed $50psf and buildings can be purchased for less than $200psf, there's hay to be made. And they're of a size that an individual can pull off on their own without a big organization. The only problem with the opportunities is (like any good one) they're rare. "There are only two ways to make money in business: bundling and unbundling." - former Netscape CEO Jim Barksdale photo: before/after example 64 w colorado, Pasadena CA