Episode 3: The “Rules” As A Real Estate Developer
In this episode of My Life As a Landlord, we depart from traditional landlord and tenant questions. We engage in the "rules" of real estate developing. We also answer the question: what is the difference between an investor and a developer? These rules are not only applicable in your real estate development business, but in business in general.
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Full Episode Transcription
You welcome to my life as a Landlord, where we untangle all things housing and educate the curious. If
you're looking for some entertainment with some honest, awkward conversations, you've come to the
right show. I'm your host, Dr. Jennifer Salisbury. This is my life as a landlord. Welcome to it. Hello,
there. Welcome to My life as a landlord. It on this podcast we discuss all kinds of things regarding
housing, whether you're a landlord, a tenant, or you want to get into this industry. Today's episode is the
rules. As a real estate developer, and I know what you might be thinking. Well, Jen, I've seen those TV
shows that make it so simple to go in and you renovate, and they just make it super simple, and they've
got 100 people, and they do it in seven days, and it's lickety split. Okay? Real life check. That is not
reality. It may work for people on the TV show because behind the scenes, they've got all kinds of people
helping them. What you're not seeing is building permits, insurance, all the planning and everything
before they even start the work. And things often go wrong in this industry, in real estate development.
Now, you might be thinking, what's the difference between a real estate developer and real estate
investor? Aren't they the same thing? And here to tell you, no, they could be the same person. And with
Michael and I, we are both real estate investors and real estate developers. So it gets a little cloudy with
an investor. An investor is someone who provides their money. They might provide their time, but
mainly they are investing in a property for return on their money. They are an investor, hence the name
real estate investor. A real estate developer, surprise, surprise, develops a property, you're trying to get it
to its highest and best use. That's an industry term. Highest and best use is if something is designed and
zoned to be a skyscraper and you put a single family home on it, it is not at its highest and best use. As a
real estate developer, we're constantly trying to put things at their highest and best use. And I'll throw a
curveball at you. As a real estate developer, things are constantly changing. The latest change is tiny
homes and RV parks and trying to figure out mobile home parks that are tiny home communities that are
not the additional zoning and housing solutions. So people like me, as a real estate developer, you've got
to figure out what does policy in your area say can be done on a certain piece of property? So, anyway,
that's the difference between an investor and a developer. An investor invests, a developer develops. 1s
And a developer seeks to build, change, renovate, improve. And this is where you don't see the stuff on
the TV shows. You don't see the permits and the insurances and the permissions and the discussions with
the state of you've got to tie into a state highway, which is all special permission that you don't see on all
those fancy dancy TV shows. Since this is my first podcast as a real estate developer, I thought I'd go into
the rules. So let's just jump right into the rules. Rule number one as a real estate developer, what is the
next action item? Constantly I am asking myself, this is what is the next action item? When you are
developing a property in any way, you must continue to keep juggling things, typically at the same time
not trying to drop them. I'm sure that sounds familiar to most of you. When something occurs, you must
know what the next action item is. What is it? Is it you need to talk to your architect? Do you need to call
the county, city, state? Is it you need to email somebody, request a report, request an inspection, write a
check, write an email? What is it? Sometimes I have to go and stage sit ins wherever I'm going because I
can't get a response on the phone or an email or whatever. I will physically go into their office. Now, of
course, this is post COVID. You couldn't do that during COVID But now everything's opened up again. I
can go into their office and sit there and say, what is it going to take to get someone to respond to me?
How do I get on this person's calendar? This is what I need. And that usually works. I'm walking a fine
line when I do that, though, I must tell you. So, rule number one as a developer, what is the next action
item? Okay, rule number two. I hate to tell you, you are going to be unbelievably optimistic on your
budgets. Rule number two know you are over budgeting. Know it. You're over budgeting your time and
you're over budgeting your money. Well, I must tell you, you think it's only going to be six months. It is
not going to be six months. You think it's going to be ten grand? It is not going to be ten grand. I can tell
you that. You must put in a contingency and you've got to put in a reasonable contingency that you
update along the way. So if you're three months in and you're at $5,000 and your budget is $10,000, but
you're not quite even halfway done yet, you're obviously not halfway done in time and you're not halfway
done in money. So you've got to be realistic. You've got to be realistic in all of the extra things that pop
up, extra costs, extra time, things like COVID, things like a ship going sideways in the Suez Canal that
screws up worldwide shipping. And the ripple effects from that one instance were felt worldwide for over
a year. Many of you may not recall, but there were shipping container shortages and chassis shortages all
over the place because you had all these ships that were now out of sequence globally. It was bizarre. So
these are sort of the items that are going to happen that you can't forecast and you can't budget for. So a
plan is merely what you deviate from. Know that when you're budgeting your time and your money and
quite frankly, your patience, you need to make sure that as you're updating along the way, you've got to
have a buffer in there. Please do not put all your $10,000 in savings and that's all the money you have.
You need to make sure you have a backup plan, because I guarantee you, you're going to spend more
than you think in both time and money. Rule three, you've got to keep your cool. You must keep your
cool. 1s Rule one is action item. Rule two is knowing you're going to be overly optimistic on everything.
Rule three is you can't lose your cool. You've got to keep a level head. Many developers get mad. They
get frustrated. They get straight upset with anyone that is holding them up, whether it's a lender, it's the
permitting office, it's an insurer. They've got to have insurance, certain kinds of insurance, or a bonding
agent or customs agent or whatever it may be. But what I do is I flip this. When there is an encounter that
is incredibly frustrating as a developer, which is inevitable, I turn the tables. Instead of getting mad at a
person, I ask them to help me understand the process. US. I ask them to educate me. How does this
work? Even though I know darn right well how it works most of the time. Most of the time I do, but
there's often that sometimes I don't. And they're telling me, hey, it could work this way, it could work
that way, which is good. That's the whole idea of why you're not getting mad at them. So instead of
getting mad, you ask them to educate you on the process. And most of the time, they will walk you
through how to properly do whatever it is that you're frustrated about. Now, does this cost you time and
patience? Sometimes it costs you money. The answer is yes. But as a developer, remember what the
whole idea here is that you want to improve property, improve housing, provide better value to the end
user. And if you are not seeking action items, if you are not being realistic on your time and money
budgets and then you're getting frustrated, that sounds like a recipe for a complete disaster. So you've got
to make sure that you keep your cool. Many permits that I've applied for, both in the US. And Canada
because I have companies on both sides of the border, I still pick up the phone, and like I said, I walk in
and I talk to person, whoever I'm trying to deal with. I pick up the phone and just say, look, here's the
problem. Here's what's going on. And I take notes. I take notes like a fiend. Yeah, you can type them on
your phone, which I've done. You can also write them down. You can take your laptop, whatever it is.
But they will often say keywords and key processes because remember, they're busy too. Take notes.
Take notes. And it's actually helpful because I'll go back and review my notes after I've left or after I've
hung up the phone with them. And inevitably, I will screw something up. I will have been writing so fast
that I can't read my own writing or I don't understand a word, and I have to call them back. And that's a
good thing. That's a good thing. Because I'll say, I'm really sorry, 1s I can't make this word out. Here's the
step. You told me. You told me this step, this step. But I can't make out the third step. Can you please
remind me what's that next step? How do I do that? And they will help them. But last but not least, thank
them. I'm so appreciative of everybody that is a part of the process, even when inside I am so furious and
frustrated at the situation. There is no sense in getting mad at the one person who can help me. There's
no sense in that at all. Anyone who's willing to educate me, I always appreciate it. I take notes, I'm
thankful. Sometimes I'll even send them a little handwritten thank you note. I know that seems archaic
and nowadays, but especially if the person is not expecting it and they've been especially helpful,
especially lovely to deal with. I'll send them just a little note. It'll take me less than 60 seconds. Cost me a
stamp and a little note card. Big deal. And they will be floored when they get that note from me. And
guess what? Then I'm memorable. They remember who Jennifer Salisbury is. Hopefully that's not a bad
thing, especially when they get a handwritten thank you note. But I can say thank you so much for
educating me. I super appreciate it. Look forward to working with you again soon. Aloha, Jen. Because
right now I'm in Hawaii. And so this is the whole idea. Talk about turning the tables from being
completely frustrated and losing my cool to now I've made a raving fan wherever I'm trying to work and
I've got a resource now. I can call them. They know who I am. They know what I'm working on or when
I start my next project. What I'll do is I'll call them and say, look, we've got this five acre in this park,
this, that, and the other we're trying to work on. Where do you think I ought to start? You see any red
flags here? And they can kind of look through. Maybe they'll ask for the address of it and just kind of
prompt them. So as you're going through as a developer again, the whole idea is to improve property,
improve housing for the end user, make it the highest and best use for the end user. Um, seek the
action item. Try to be realistic on your budgets, but also just remain calm in all of this. And all three of
these items are pushing you as a real estate developer, because real estate development is all about
relationships. In fact, business is all about relationships. You start taking these rule and applying them in
your business. What's the action item? Be realistic in your time and money budgets and don't lose your
cool. That's the definition of any business. So maybe that's the rules of any business. But for me, for this
podcast, that's the rules for being a real estate developer. Now, sometimes real estate development takes
superpowers. It can be difficult. And I do know that sometimes my strengths are in some of the
communications I do. My husband doesn't have the same strengths. He's got some challenges, but his
strengths lie elsewhere. He can build a house. I can't. But what I'd like to do is call you to action that if
you are a developer, I challenge to seek the most frustrating point in your current project, whatever you're
working on right now, the most frustrating part, and call whatever office is the most frustrating for you.
So if you're having a problem with your water meter, let's say maybe you're trying to upgrade your water
meter, you're trying to add fix or something, I challenge you to either call or better yet, go into the water
office and have that awkward conversation with them. Explain who you are, explain what you're trying to
do, and ask the question, who do I need to speak with that I can work with on this? Because maybe
nobody's been assigned this question, maybe that nobody's been working on this. But I can assure you,
your presence, you standing there as a developer, especially right now with the housing crisis that we
have going on globally, you standing there is a big statement. You will very likely get action. You will
very likely get someone to respond to you. So if you are a current developer and you have a point of pain,
I challenge you to take action on that point of pain. If you're a new developer, I challenge you to
familiarize yourself as much as possible. And if you can align yourself with someone who is already
doing development in your area and watch them, observe them, learn some of their lessons, if they will
let you. And many of them will make sure that you are familiar with the permitting process. Or if you
want to take a single family home and maybe there's been a zoning change in your area and now you can
make it a duplex, or you can build off the suite in the basement or something. Make yourself familiar.
Walk through the steps. Educate yourself. That is a huge process as a real estate developer is learning the
process, which is constantly, constantly changing. So as you proceed as a real estate developer, following
the rules that I've laid out today will definitely set you up for success. Now, there are more rules and we'll
go into more of those as we progress in this podcast. But for now, here are the rules as a real estate
developer. Welcome to it. Thank you for joining us this week. To view the complete show notes and all
the links mentioned in today's episode, visit our website www.mylifeasalandlord.com. If you're looking
for educational resources for getting into real estate investing, becoming a landlord, or even a better
tenant, then I have a page on my website to get you started looking for a solution to the pickle that you're
in. I have suggestions for that too. You can throw your situation on my Facebook group, My Life Is a
Landlord, and let our community help you with solutions. Also, before you go, make sure you subscribe
to the podcast so you can receive new episodes right when they're released. You can either subscribe
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thank you again for joining me, Dr. Jennifer Salisbury, in this episode of My Life as a Landlord. I'll see you next time.