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Marc Savatsky, Ray Hurteau, and Dan Rubin open up and discuss their own deals, budgets, and mistakes every Tuesday.
Not guru content. The stuff that decides whether a project makes money: what a triple decker really costs to build now, the retroactive Newton tax bill that landed on unsuspecting condo buyers, the helical pile surprise that cut a deal's IRR from 70% to 40%, the eleven-week-old demo company doing $6K a week against a $20K burn. They read their own numbers on air, including the ugly ones.
A typical week is some mix of: a breakdown of one of their active projects (an 1874 adaptive reuse in Amesbury, a Dorchester three-family held fourteen years, a waste and demo business), a guest who does one thing extremely well which include zoning attorneys, architects, labor lawyers, energy consultants and brokers. Ray's Multifamily Minute on the news that actually moves the needle, and a round of Overrated / Underrated / Appropriately Rated.
Heavy on Greater Boston and New England, because real estate is hyperlocal and pretending otherwise is how people lose money. Useful anywhere the same problems show up: permitting, capital stacks, subs, tenants, and the gap between what the spreadsheet says and what the building does.
For investors, developers, GCs, agents, and anyone still holding a W-2 while they figure out deal one.
Co-hosted by Ray Hurteau, Dan Rubin (Instagram: @rhinvestgroup), and Marc Savatsky (Instagram: @choose_boston)
Follow the Real Estate Addicts Podcast on YouTube: @RealEstateAddicts
00:07
Yeah, so I feel like COVID broke people. Like we just, relationships with buyers and with the butters and with, you know, in general, I feel like just shifted after COVID. Like people have a completely different outlook. think the depression is up, businesses tough, jobs are tough, you know, families' relationships are strained. And like everyone's looking for a chance to get in a fight or get in a lawsuit. But that was pretty true before COVID. No, I feel...
00:35
People are so on edge. People are so sue happy now. It's I feel like and so willing to it just at least what I'm seeing. And this must explain why the DSA slash, you know, other alliances is rising in popularity because that's it. Just take take what's there and hope for the best. Is that where we're going? Oh, I think it's I think it all stems back to people's financial, how comfortable people are financially.
01:01
So when you take someone and you strain them with inflation to 10 % over a few years, and then someone who had a good job, who has had a relaxed lifestyle and could pay their bills and live their life. then all of a sudden, they're having to go paycheck to paycheck looking at their expenses because things are 30, 40 % more expensive and their amount of money they're making is only up.
01:27
3%, 5 % per year. Do you watch Financial Audit with Caleb Hammer? Do you know who he is? No. You should check him out because I think it's that mindset. Hammer? Caleb Hammer. Is he an adult film star? Nope, but plenty of his guests have solicited. He's not the kind of guy you'd expect them to solicit to, but that's neither here nor there. My point is that- That's a great name. He heard of him. His whole thing is like, he just brought people on to try and help them with their finances, but he just finds-
01:55
that everyone there is like a professional victim and like, why aren't you going out of your way to help yourself? I mean, you could go move back home with your family. You could try to live within your means. You could try to build a nest egg. And I know that this won't resonate with everybody, but I mean, what happened to the personal responsibility of things? And you know, you don't have to live in like a brand new building. You can live in an older building. don't have to live. Everybody seems to think that you are entitled to live wherever you want and do whatever you want and have whatever you want, but not pay for it.
02:24
the way that it made me think. the main thing is that up until this point, typically what people had seen was that as you climb the ladder in life, things become at a certain point and then you have the next tier and the next tier. And then all of a sudden people had these massive resets and no one was expecting that. And it hasn't been something that generations had seen. And so all of a sudden someone who's, they're expecting to have their nice car and living in this nice house. now all of sudden it's like, well, now I all of a sudden have to like.
02:53
Yeah, they feel like the ground fell out below. Yeah, the financial crisis was the last time. And I mean, we were back from that and then COVID happened. we just, are we just in year four of the recovery from COVID? Is that it? Or year six, I No, I just think there's like a general lack of human decency. And there's always been a general lack of human decency. And I had a business law professor in college and he used to this refrain. He'd deal, it was a big lecture hall. What are we gonna do? And the whole class would say, And he'd say, who are we gonna sue?
03:22
And the would go, everybody. And it was funny, but it was kind of like, yeah, is a gusty merry go. But like, just had the most ridiculous altercation this past week. We have an office and we have an easement to get to our two parking spots behind the building. And I tried to bring my vendor, Acre Siding, to the back to our parking spot with an eight by 10 trailer on it so we could do a lunch and learn. my neighbor who shares the easement, like, called my landlord, absolutely furious.
03:50
But has your number do this? Yeah doesn't know it was you know and then like you think that the land I'm like I said to landlord like listen I have a lot of rental properties like I sometimes neighbors call me and I I'm an I call my tenants and I'm like you got to stop this this is insane like he's absolutely right, but sometimes I take their I have their back because the butter is absolutely crazy and you're actually my clients and I have an obligation to you you pay your rent every month and what you're doing is not crazy like
04:19
You're having a barbecue on July 4th. It's seven o'clock. Like cool. And I made that analogy. I mean, absolutely not furious. Yikes. I met your landlord. Interesting guy. Interesting. But again, the neighbor who told me he's going to it's just like a lack of human decency. Yeah. It's like, what's, what's scary? What is it to you? I also think, I think that like everything, like the political climate and
04:46
All of that, it's like everything is playing into, like it's everybody against each other, right? Like everyone wants some sort of like rise out of somebody else or they want to get into some sort of battle with somebody. It's like, why is that? Like, it's just, I don't know. think people are just, people are just upset at life. They stop. And when you're upset at life, you lash out. And it can be over a trailer or it can be over a roof deck.
05:16
Or it can be over a development site. Or someone cutting down a tree in your backyard. These are all the things, it's just the little things. Or not having a sidewalk. Yeah. I generally think that people who are super miserable and just awful to deal with are typically lashing out because they're unsuccessful in their own life. And they're unhappy and they're just going to bring you down. They're not thinking rash. Yeah.
05:45
did we get here? We talked about COVID and everybody's misery. this is your fourth time on the Fourth episode. I reached out yesterday and wanted to be in and rushed over here. I'm the best at inviting people to do things like a half an hour. I was like, Mark, what are we talking about? He's like, I have no idea. Come on down. Well, we were talking. So Ricky did a behind the build.
06:11
at the union and I was chatting with Josh Brandt after the podcast and Josh gave you a really nice compliment. I want to share it. said, Ricky is somebody who can speak to kindergartners and in their own language. And then at the same time, go to a master's program and teach stand in front of that classroom and be able to like clearly articulate.
06:33
you know, high rise development and putting together an elaborate capital stack. And it's like, you have like six different languages that you can speak depending on who you're in front of and you do so very, uh, cohesively. it's, a, it's a compliment and I don't know too many people who can really do that. So, no, I appreciate that. think it's been a real journey with that because it's, it's honestly just where it started, right? It started out with the smaller projects and living those conversations. And then as things have grown now.
07:03
I think my call earlier today was like with an institutional firm that has like a hundred billion in assets. And I'm having to have a dialogue with that guy about a project and, we're still also doing single families where I'm talking to a neighbor. Yeah. So it's a little bit of everything. And I think it's just, it's training, right? It's getting used to it and then being able to have those conversations. So what are like better? Yeah. mean, in today's environment, the large scale multifamily is just, it's almost impossible. And it's just like, you take five, you take two steps forward, five steps back.
07:33
So it's like, you're trying to get a deal to, you know, and it's, it's mostly to get anything to pencil, get anyone interested from financing standpoints, getting equity groups interested in Massachusetts. You know, you can continuously see these articles that depopulation in Massachusetts, lack of business coming to Massachusetts, rent control, which the problem with the rent control, yeah, it's off the ballot. But now the conversations with these large global firms is that's great. It will be back in 28.
08:01
And the fact that the state is willing to even consider it and go in that direction now gives them fear. And these are long-term holds. Right. So they're not looking at it like, yeah, in two years, we're going have to face this and our building might be included. it didn't really, you know, talking to a bunch of brokers, like, oh, we saw the money flowing back in and they're like, no. It was a technicality. Right. So bought more time and for both sides. And I think it will come back in a more reasonable fashion, but it's.
08:29
not gonna fix the problem. And until the state figures out a way to fix its problems, then it's just gonna keep getting worse and worse. Are you starting to look at out of state projects? I mean, we're just looking at projects where the numbers make sense, right? And I think, we've started doing some of these single family projects. If you look at what's happening right now, single families are flat slash up over the past few years. So those have held strong even through this environment. So a lot of demand.
08:58
Yeah, still a lot of demand, the transactions are at record lows. think it's not that people aren't buying the houses, the transactions are low because everyone has really good mortgages at low rates and then builders aren't really building enough. Right? So you're not seeing a lot of transactions out there. Especially in the more like affluent communities. Yeah. And also you can't build. Most of these towns now have one or two year demo delays if you want to demolish a house. So what that means is you bring in a guy like me.
09:25
And I want to buy a house and it's like, okay, this house could be a great site to build. Okay. The owner wants to sell now. All right. Well, let me layer in two years of sitting on it, not just on the cost for the debt. We use equity investors, right? So the equity investors are going to expect a, a carry cost on their capital. Maybe they would do less if it's just scale and it's waiting, but still 12 to 18 % returns over those two years of sitting. You plug that into a model.
09:53
It deletes the profits. So you start layering all these different things into these towns. It makes even a project that could have been a great project if you could have demoed it right away to not feasible. almost wonder why they even have demo delay of such a significant time, right? Because the whole point of it is to try to see if there's any alternative outcome, right? A lot of these towns- And it usually never is. I mean, it's like listening to a butter to offer their challenges. The reason it's there is just...
10:20
to scare you off. I don't believe there's any rational. I can't walk out and be like, really understand that demo delay concept. It's just, say whatever you will. Well, it's like one time we got historical for a place in Boston here and they said it's not significant. Then there was a whole uproar over our submittal and then it came back that it was significant in some. It's political. It was 100 % politics. So I mean, how do you take the politics out of it? Like, is that what we need to get to? Because that kind of seems it.
10:48
I think it just, yeah, it needs to go to, what is the real driver here? Do people want new housing? Do people want more housing? Or do they want to make the, the politicians want to make the people happy. And if they'll be more happy with more housing, which is the direction it should go, you'll see changes. I just saw an article today, like Miami and also like Dallas and Austin, it's been like 15 to 20 % decreases in rent. Which now that scares me, because we don't want that.
11:16
but a little bit of easing will flatten rents. mean, rents have actually softened for sure over the last 20, well, that's a different reason. That's a political reason. But bringing it back to like the demo delay. So we have a site in Newton and I got this house, it was being shopped around. came to me and I was worried about the year demo delay because you couldn't sit on it for a year. And I went to the seller and I explained to them the situation and they said, okay, well, we'll give you enough time.
11:45
to at least go and try to get your demo approved. And so I said, great. And they were like, we want $5,000 hard deposit. And I said, okay, like, let me think about this. All right, five grand. Okay, five grand, architectures and some basic stuff. Then I'll be able to go maybe $10,000 at risk. And to get my demo, went through the process, got in front of the board. A bunch of neighbors came out against the project. This is a, we gotta remember, this is a falling apart hut.
12:12
Like this is, it doesn't even have plans on record. It was a long time ago. was no, it's just a, it's falling apart. And then luckily for me, a woman who's probably, probably in her like late seventies, early eighties, direct the butter across the street. Uh, she gets on the call and just interrupts everybody. And she clearly had it like was known in the community. And she goes, I need this house. I've been looking at this house for 45 years. It's dangerous. It has rats. It's horrible for my neighborhood. My cul de sac, it needs to come down.
12:42
I don't know what everyone's talking about here. This house needs to be demolished. like, she was the strongest voice because she was the most direct abutter of She's she's 45 years. She's speaking the truth. She's been looking at this house for 45 years. Not the people who live two streets away, who had some story that was built by laborers who lived in the house on the main road and all this, all these stories. was like direct to the point. The vote still went three, two. It almost didn't get through.
13:08
And then actually I was with you at your event. I was, I actually was that once she finished talking, the board was still anti approving it. I ended up hanging up the phone cause I was so frustrated. And I went and was talking to Mark and then my phone starts ringing and it's like, did you see that? And I was like, no, what happened? And they're like, it got three to two approved. That's hilarious. Yeah. And so then that was, so we have that, we're doing the foundation right now. Where in Newton is it? It's in West Newton on a cul-de-sac double lot.
13:35
So most lots in that area are like seven or 8,000 square feet. This is 14,000 square feet on a quiet street. Comps in the area, know, sell for like new construction, this size house, you know, between like 3 million and 3.3. And then, you so our hope is to get three, two to three, five. Our lots double the size on a cul-de-sac. hopeful that. Great market. If it comes in in the low threes, we make a good return. If it comes in the mid threes, we make a great return.
14:04
How do you find construction costs and schedule doing single family versus multifamily? I was going to ask the question. I think the biggest frustration, like why we've just pulled away from all these, like the permitting, like we were the number one permitting firm in the city for a long time. We had more projects than anyone else in the zoning process. And it just became so long, right? And it's just the, it's the brutal of the time drag on these investments that by the time you finish,
14:33
and you start to try to figure out what the deal is gonna look like, it's impossible. And also it's it's such, it's such like a mind numbing process, right? For you to be involved in a six unit building for like three plus years is craziness. Yeah, I I one that's in, that I'm doing with Benji and Arts Urban that I've been working on since January of 2020. Yeah. Is when I started the permitting for that 48 unit building.
15:02
And it probably won't come out of the ground until 28. Yeah. I will say this too, like with condominiums, it's much like, it's more akin to short-term trading that it is like a buy and hold investment where you can sustain like ups and downs. It's like, this is my thesis. It's based on the world today and I need to execute and then get off the field. And when you have these long gaps and all this ambi uncertainty, uh, really, makes it really difficult to underwrite. Yeah. Look at this one. I paid $500,000 for the dirt.
15:32
Is that the one Benji? 49 units in Dorchester. Yeah, you think that's a whole lot. There's no way you would have thought that that project wouldn't work as a market rate rental building. Right. And it is a low six return on cost and you're not going to get anyone interested to build a six to five return on cost right now. I feel like I was the one who thought of making that affordable and told you to talk to Benji. Probably. I think that was a phone call. But eight years though. I'll take a little community. Eight years before we break ground.
15:59
So I mean, it's relatively speaking. took him 10 years. Relatively speaking. I don't know, but whatever you make, break it by 10 years. Oh, I will. You'll see it. You'll see it on my Instagram. You'll see it added to the deal. Yeah, I was going to say, let's talk about that because yeah, I was going to bring that up. You've been posting all your deals historically, like from the very beginnings. And some of them were pretty good. And then you had one that was, you had to take the L. Two losses. So there'll be some more coming up.
16:28
Yeah, I think yeah, no, I mean, it's been interesting. I started using Claude and so I was kind of playing around with it and then I was like, you know what, like I have all this old, all the old files and all the performance stuff, but it's now organized. It's not organized in a fashion. Like, so I was like, let me just go back through, start pulling up HUDs and then just while I'm laying there on my phone, I'm just plugging in information from the HUDs and then, you know, putting in the different information and having it run IRRs and like, and then the cool part about it is like,
16:56
then it brings back memories of like lessons learned. And like, you know, there was one that I put on there where it had, that was my first time working with helical, helical drilling. And that was the first time I faced really bad soil. Yeah. And we wouldn't. you had dips. We had to do dips down 130 feet and it was like 56 of them for four units. what are, what's our, what are dips? Ductile iron pipe. So instead of being an end bearing, deep foundational, it relies on friction.
17:25
So 130 feet, it's what it sounds like. It's a ductile iron pipe. And you just drive 130 feet and you don't ever get to anything really good sporting it. You're just relying on all that the fact that there's so much. It's expensive. We had to touch bedrock. we went all the way. had to to bedrock. Why did they have you do that versus like piles or... Because you're just getting into absolute garbage. You can't get to a good straddle.
17:53
It was all just junk. so like looking at that in the model was, know, I'd always knew it. You knew it impacted the returns, I didn't rerun the model if it hadn't happened. And then all of a sudden I was like, you know what? Let me pull up the helical quote. All right, how much did I spend for all these piles? Okay, put that out. And then I remember we had to redesign the foundation because you can't just put those into a slab on grade foundation. have to build a double deep foundation. Well, you need a structural slab. Yeah. Because there's nothing to support the slab. You do have all these little
18:23
points here and there that can support. So we had to do this, like, it's crazy. You dig down, you do a foundation, you fill that in, you do another slab on top, and then you put the piles into the bottom one. And so I put those numbers in, and then I plugged in, and it also cost me six months of time. And so then I plugged it in and it cut the IRR by like 35%. It would have been like a 70, and it went down to a 40. So still a good deal, a good IRR, but significant impact. Yeah. Right.
18:52
Not that I don't believe the geotech guys, like, how's the rest of the buildings in that area staying up? Right? Like, is it that dire of a situation or are we trying to build for 200 year homes? I do wonder. you looking at next door was a triple decker, next door was a triple decker, had been built a hundred years ago or sitting on standard foundations, not a single issue, not tipping over. And you wonder, but yeah, like that's just one example of- And there's some of these structurally, think about that all the time too.
19:20
you're next to 150 year old house and you're looking at this Simpson hold down package. That's what's using lights. Like fly into the air on this arcade. What are we doing here? I think the counter argument to be fair is that what we're seeing are the houses that have survived 150 years. Most of them have washed out to sea. So those were probably the well-built ones on good soil and a lot of them are sinking and you put a marble down and it just...
19:45
runs and so. yeah. So then that was, you know, that's one example, but was just going through every single deal, starting the beginning, plugging them in. Um, and then, you know, putting in the losses too, right. The ones where, know, luckily we had zoning contingencies where we were protected from the same point, but it is a loss, right? I we lost like 60, 70,000 across those two projects. And that's all architectural attorneys, know, surveys, that type of stuff.
20:12
some deposits and it got lost. I take two rounds that same way. Yeah. Where like one seller, I was asking for more time. It's absolutely adamant. Like, no, this is it. And I was like, well, this is a kamikaze mission, but I'll show up Tuesday afternoon, ZBA. Yeah. And it was interesting because there's actually like some really interesting questions from the board that seemed like, oh, they're considering this. So I'm still sitting here. And then it was just like rejected, rejected, rejected. Yeah. Do you have anything left in Boston?
20:42
Uh, so active constructions, we just finally finished up our 15 units in Dorchester. Oh, nice. Yeah. I know we were, we were actually talking, talking five closed, just accepted an offer, uh, yesterday, another one, got another buyer is making an offer. So that would be two more. So it'd be like half, half sold soon, hopefully in the next couple of weeks. What did the banks look for on the buyer's side? Cause usually they're like, we want two thirds sold or half under agreement or something like that. How does that work on a larger?
21:11
project where you know the timeline is longer. Yeah, same thing. I mean, a lot of the lenders are looking for 50%. And then what you need to do though is you need to work with a preferred lender who doesn't have that. And so you make it very clear to the preferred lender, like you cannot be the preferred lender if you have a requirement of how many units are sold. Yeah. And then if a buyer makes an offer early on, you need to make sure like, can't accept your offer if you're not using my preferred lender, because if this thing isn't 50 % sold out, we need to close. And you won't be able to move in.
21:40
You won't be able to close and I won't be able to sell. so you can refi after you can refile after, you could get multiple pre-approvals. Right. But we need to have my preferred lender in place to close. That's smart. Yeah, you have to. Um, you know, think having the preferred lender, especially when you're building new construction is like, it's vital because you need that lender, the communication to be there. That needs to be like rowing alongside you, especially when there's delays and things that happen.
22:08
Yeah. Yeah. Plus who else is going to buy the sandwiches for your open house? Exactly. Do you enjoy the single family stuff? It's fun. It's different. We've done so many of these condo projects now that they're so repetitive and it's like, yeah, they're just, it became so rinse and repeat. Same finishes, same process. a little bit. It's bored. Yeah. Yeah. think I really, these projects that have been dragging on for years and years.
22:36
That part's just become a lot. I mean, started permitting stuff in, was it 2012 when I started? So it's been 14 years of entitlements and years of my life permitting these things. And then now I'm just like, I don't know if I have the patience for a small one to sit around and work for years. I was just in a community meeting and they were convinced. This was me and like 10 neighbors.
23:03
Uh, that me and my two partners were just front men for this larger, uh, veiled entity. is that what you posted? Yeah. It was just like, you're like trying to front for black rock or something. Yeah. Is this a Q and O? He wishes. Yeah. Yeah. Yeah. Oh, So how did that play out? They, they just flipped out. Yeah. It was bizarre. They like looked up my, um,
23:33
partner's office, like where the LLC is filed. And his uncle is also a developer and they share office space, but his uncle has nothing to do with this project. And like his name, they're like, but what about Arthur? No, no, no. And he's been, he's not involved his, his corporate. I'm like, Whoa. Take those like a Keanu Reeves, like the red pill, the blue, like what, what is this? think I'm a conspiracy theorist?
23:58
But yeah, so going through those has been cool. think, the single family stuff is- Well, that would be a lot more creative because the budgets are, especially in the higher price points, your budgets are higher. It's like, I don't know. Yeah, I think a lot of the stuff, and we're looking at projects right now, our key is we need to be in that price point of two and a half plus sellout. Because as we all know, the cost to build a house, it's-
24:23
The final finishes are one thing, but there's so much that goes into it. Like the foundation, the site work, like that's going to be, whether you're building in a $1.2 million price point or a two and a half million dollar price points, really it's the same. Right. And so it needs to be for us to get into a project that two and a half plus sell out. Um, and then we're looking to make those work. You need to be getting the land for, you know, one point one, one point two or less.
24:50
Right. And so like the projects we have right now, we paid 1 million for one property, paid 670 for another lot, 680 for another lot. And then we just bought one, put one under agreement in Weston for 1, 150 on a two and a half acre lot. Which that was talking to you guys before about my gut reaction. And this is to anyone out there who like comes across an opportunity and people will call me about stuff. And a lot of you guys have probably already passed on them and you and I all, we have all seen them. then.
25:17
Some random person like, Rick, I got this. I'm like, that's been looked at by everyone for five years. And here's the reason why you shouldn't buy it. And we've all done the due diligence on it. my gut reaction is somebody who doesn't do projects in Weston is why is this getting to me? Like I posted on social media, I was looking for leads and one came in. And when I first look at it, I'm like, this is a great opportunity. So my first thing is why am I getting screwed here? And so then the next step was figuring out, well,
25:46
I have two weeks before PNS and I was very transparent with the bot, with the seller. said, I I'm putting up a thousand bucks and between now and PNS, I'm going to figure out if I'm to put up my PNS deposit, but I'm being clear to you. I might not. I'm to do a bunch of DD between now and then we'll see if it works out. So that was completed last week. And then you signed the PNS. Nice. What kind of DD did you do? So they, so the, the lot was.
26:14
nonconforming on its width. So it's two and a half acres, but it's only 135 feet wide. And in Weston, you need 150, I think, for width. So nonconforming on frontage. But there was, it was part of a subdivision plan that had been done back in the thirties or forties. And so based on the zoning from when that was done, it was grandfathered in per the seller. Oh, this is starting to sound familiar. And per the seller's
26:43
had hired a zoning attorney in Weston who had done a study that had come back with a zoning opinion that it was per the zoning bylaws from back then. They had a email from the building commissioner confirming the zoning study that it was, buildable. Okay. That was a good step. Um, they, uh, and then, so based on those things, there was enough like, okay, well we can dig into this more. then next step was, let me hire my own zoning attorney.
27:13
and get my own zoning opinion done because I don't want to trust the seller. Seemed very nice, but I want to make sure that an unrelated party gives me a zoning opinion that's the same. first thing, figure out who a zoning attorney is, the nose Weston, hire him, get him going. The next step was there was a wetlands. So we looked up, but we could see there's wetlands in the rear. You can see there's been some new constructions that have happened along that street.
27:42
So that there, and they were built recently. So there's like, okay, well, there's something here you can build here, but there's something happening. So the third part was that it's scenic road. So scenic road has its own rules in Weston. It's like an overlay. Yeah. So there's certain roads that are scenic roads, which has its own requirements with cutting down trees and replacing trees and very complicated landscape plan. So I asked around, it was like, who's the best person in the market on this.
28:10
And so I got put in touch with her and then she gave me the person who had done the wetlands for the property down the street. And so that was, I was like, okay, so I had the girl who did the scenic road for the property two down. I have the wetland specialist who did the project two down. And then I got in touch with the developer who had done the project two down. Nice. And I, and I called her. said, why didn't you buy this? And she's like, honestly, she says we have so many projects going on. came to me. I forwarded it to a few people and then it was gone. You got it under agreement. And I talked her through what my plan was.
28:40
told her what my purchase price was and she's like, that's an incredible purchase price. Nice. She's like, that's an incredible purchase price. And my plan is to not build a massive house. Right? We're just going to build like between 6,000 and 6,500 where everyone else in Weston is building 9,000, 11,000, 12,000. Yeah. We should probably put everything in context for some of our listeners who may not be in Massachusetts. It's like one one five amazing purchase price, raw land, modest house in this town.
29:06
Six thousand. I mean, on the setbacks, I could build like a 20,000 square foot. Oh my God. Like compound. Yeah. And, but you'd be constricted based on the septic, right? Cause you need to have enough space. Oh, it's not town. So you need to fit septic and then, but then the main thing is it's like, okay, well then the wetlands. So then I had, I asked the wetland specialist, do it next week. Can you go out? Cause I had it, I asked him, said, what do you think? goes, he goes, Ricky, that map on the G the GSI map.
29:33
Not reliable. goes, not reliable in that area. He goes, you got the wetlands, you got a stream. You 200 feet from the stream, you need 100 feet from the wetlands. As soon as he said all this, was like, like, we're not signing this, Beans. I was like, can you get out there? He's like, I can go next week on Wednesday. I had to sign the PNS on Wednesday. I was like, all right, well.
29:55
Let see, I can get an extension at Thursday. My client's flying. has no wifi right now. He promises me that when he lands, yeah, I don't know if this flight has no wifi. Every other one does, but Ricky's. I'm on the emails with the attorney. Be like, we can't reach our client. And it's like, he's on the email. He's on the fucking line right now. I fucking love all the excuses I get. I'm always just like, just ask him for a delay. Can we stop the bullshit? Yeah. So then he went out there on that Wednesday.
30:22
And did his test pits and his flags and then did all the measurements and then gave me distance from wetlands to sidewalk, from stream to sidewalk. And then was able to then that night send those to the architect. And then the architect was able to do two yield studies. One, if I don't get the approval to follow the old setback requirements, right? So based on 1943, you only need 15 foot setbacks on each side.
30:50
Based on today, you need 45. Yeah, Newton is the same. it's like they have new lot, like newly created lots and like old lots and the setback requirements for each are different. It's very- Right. So I wanted to say in a situation where they allow me to be buildable, which the building commissioner said, and then I also went and sat with the building commissioner in person and I went and sat with the assistant planner. So all in this little spans. And so then-
31:18
Uh, but I wanted a yield study to tell me what I could build if they make me follow the 45 feet on each side. Right. Versus the 15 feet on each side. And like in a scenario where they make me follow the 15 or the 45, can I still build a good 3000 square foot footprint to build the house I want, which I could. With still fitting a septic. I was gonna say with the septic, yeah. With the septic. And so then now it was like, and if we can go what the zoning opinion says, which is 15 feet on each side.
31:48
We're golden. Knock on wood. All this could still change. Yeah. Come on. I'll be on my fifth time to tell you how, how the project failed and we never built that. How long do you think the approval process for that will take once now, once you close and go through? Well, it's a funny, it's funny being a Boston developer when you talk to these people and they're like, this is not going to happen fast. I'm I'm planning on starting next summer. They're like, oh, you're good.
32:15
And they're like, we thought you were gonna try to start in like, you know, the fall. I'm expecting not to break ground till like May or June. They're like, oh, May or June, like you'll be good. It was like when I was moving my house to Newton, everyone was like, Newton is brutal. It's such a long process to get a special permit and all that stuff. And I was like, how long do you think it will take? the zoning attorney was like, probably like six months. I was like,
32:40
Great. Six months. That's like shorter than to get a building permit in Boston. I can't even get my like TMP or like a permit in six months. Yeah. So yeah, so we'll start, you know, the hope is to start next. You start next summer. Nice. Be about, you know, probably 12 months to build. So we'll be hitting the market, you know, summer of 28. And then the plan is to build, don't build the
33:09
the mansion, right? Right. Build a house that's like 6,500 square feet. Much larger pool of buyers. Much larger pool. And everyone, any agent I talked to, everyone was like, I talked to the developer. told her the plan. She's like, I was like thinking like 4 million bucks, which is still a lot of money, but she's like, four, she's at 4 million bucks. She's like, there'll be, yeah. So that will sell. That's the bottom of the market for new. Like you run a comp search in Weston for new construction. There's nothing that's been built. You be aspirational these days.
33:39
No. So condos, houses. You want to really be conservative. And you want to go on the market at that conservative number. Like you kind of put a scarlet letter on your door, as we know, by going for some long shot. Let me just see how it goes. And then you collect days on market and eventually you get to the same place. Yeah. It's like, don't just, if you're making money or not losing money. I we've been pretty good. Like it's actually looking back. Our single family projects we've done four and a half, this would be our fifth in Newin.
34:06
But the first one was a home run. We modeled the deal. We built it in 12 months. The GC hit the budget and we modeled it, think at like 2.9 and it sold for 3.4. Nice. massive hit, like right off the bat home. This was in Winchester? In Winchester. And then the next one we did. That was the two lots you were telling us about with like the people that were interested in developing it or is that a different building? No, no, different one. Oh, okay. Remember you had that one too. But then the next one we did in Winchester, we.
34:36
Proforma that we'd sell it for four, two, it's sold for four or five. next one we proforma at three, nine, sold for four, two. And then Nahant four, two, sold for four or five. So like we're under promising and over delivering on price. Problem is we just, the construction budgets and timelines just eroded away the profits. I was going to ask if you wanted to speak about Nahant and just before you do that, I don't know if you wanted to speak about the parallels of that grandfathering thing to your place.
35:05
And you know. Well, was a very different situation with mine and the front yard setback and. But because you had a similar thing where like the town did something or the city did something. did a taking. A taking. And back in like the 50s to make like a cul-de-sac. Which forced my lot into like a non-punishment. Something they did. I read in the zoning code that like there's language in the zoning code that said, you know, if the city.
35:33
causes this. Causes or does a taking just to cause the- Can't make someone's building. Yeah. It's grandfathered in or it's like exempt. Yeah, except for the second floor addition. That wall isn't. Correct. Correct. So I wanted to a second story. so that had to follow the new setback and I had to get a special permit. I think the lesson for anyone listening is like, and this is Boston or anywhere in the market, is there anywhere you are, is like understanding that-
36:02
that contingency period of like the things you need to know and try to know who to reach out to so that in that two week period, you can protect yourself by getting the feedback from experts. It's going to cost you a little bit, but as we saw, like when we talked about my deals, it took 30 grand losses. You'd much rather lose three grand on a zoning opinion and then walk from the deal, then buy the property and then lose. DD is very important, especially today. going to the authoritative sources or an authoritative
36:31
an authoritative source, like a professional, instead of just trying to like, do the research on your own. There's only so much you can do on your own. Like you said, the GIS maps were unreliable and you have to go to the professions. favorite DD advice, especially in city of Boston. So our friend, Chris McGee, who runs a site and utility contracting business, there aren't many site work contractors and the few who kind of serve our peers and other developers.
36:57
they seem to have seen everything. So every time I get a deal that's permitted or has been around, I'm wondering what I'm missing about it. Like nine times out of 10, Chris will be like, oh, that one. Oh yeah. Yeah. So-and-so sent that to me. It's dog shit. You're going to need all kinds of support of excavation and the soils over there really suck. He's like, that's been around forever. You're not the first to see that. Yeah. I know. I probably know which one you're talking about.
37:24
It's crazy. Ricky, did you want to talk about the Nahant deal? Cause that was just such an interesting, when it came to market, mean, a, the marketing was amazing. The video was great. And, it was just a beautiful restoration. I'm, sure you got a lot of people's support as opposed to people against. Yeah. whole, that was a whole different world, right? In the hot, like embracing me and loving me. And like, once they heard that we were restoring the house, like they wanted me to come in. I presented to hundreds of people.
37:52
at the town hall who had all been, everyone had a story of like times they broke into the house when it was vacant. I'm like, guys, you're all just, every one of your stories is breaking into the sacks. Like, as a kid. So, no, I think, you know, that was, it was incredible. It was like the fact that they wanted me in and we did, before we did the, I was like, night before we did our big broker open party, we did a community. We had like 150 people from Naha come and spend like two hours. We literally had to kick people out.
38:21
Cause it was like 10 o'clock and people were still like walking around sitting on the couches and I'm like, yeah, that's amazing. Single-handedly restoring people's faith in real estate developers. Yeah. Look at that. There we go. Overall, project, mean, we made a couple bucks in a project that could have been a massive success ended up just, you know, I think in the end you got the investors, their money back a small profit and I'm going to small profit. So what was it then? Just you should mention scope creep on the budget. was just things that.
38:51
When you're doing rehabs, because we had talked about this, when you're doing renovations, too many unknown things that pop up or... I think, you know, as a developer who's... The massive house. It was a ballsy deal, by the way. You come up with that initiative and I sort of like, oh man. I it is beautiful. That is very unique property. That was a long shot and that was more of a passion project. think in the end, I knew the whole time that there might not be a massive amount of upside, but it'd be something that I can drive by.
39:19
for the next 30, 40 years. like, anytime I'm up there, it's like, this house is incredible. I think, you know, as a developer who doesn't self-perform, I you guys all have your, you know, all self-performing. It puts, we're only as good as our inputs. Right. And I think that's as a guy who doesn't self-perform when you are relying on, there's always, there's so many, so many things that I can do from my end. Right. We can, I know I can, I can estimate, as we mentioned, I just did my sell outs. My sell outs have been on the money. I'm under promising over delivering.
39:49
Uh, I can, know, so you can estimate the, you know, the carry costs to some, you know, some amount. mean, looking at crowd on high, you know, the interest rate went to over 10 % midway through that project. Jesus. four and a half to 10 and a half. Yeah. Right. So you can't predict that, but we're only as good as our inputs. And like on the construction side, when I get a budget, like that first house, I got the budget 12 month build built on budget on time delivered. Great. Then you get the next one you have like a 40 % bust on budget.
40:18
and I have a budget from a GC that says he's going to execute on this number. And even with a partnership with a backend kicker or you're aligning interests, if that number doesn't happen, it's very difficult from someone in my shoes to, you know, you're relying on that number. In my career, I don't think I've ever seen a schematic design budget move or evolve to a design development and then construct like a full construction budget.
40:44
and see it taper down at each step. It's just like never. Usually you're bidding the project and like subject to review of more docs and every time that's there, they're like, oh, well, now we have a reason to charge more. You know, I don't blame anyone either because I think like it's sort of the way the game is structured for GCs. Like they're just responding to incentives and like we create them. If we said like, we're going to make GC selection based on the most reasonable and defensible budget, they might.
41:13
I just think like your job to win the job is to look at certain things with I've assumed fairly optimistic soil conditions. know, also tough too is like on the large projects, have large balance sheets. They're large firms. have severe penalties if they miss timeline, severe penalties. And you'd go after their entity. If they don't hit their budget, GMP, fixed price contracts, you have those protections, lots of high paid lawyers.
41:42
On these smaller ones, no matter really who you're working with, if you're hiring these GCs, there's really no way to claw back on a busted budget because in the end, to get rid of them and bring in someone new, that's going to cost you just as much, if not more. So it's very difficult. So like we're trying to do deals now where we're really trying to align on the upside and on the front end. So it's like, you know, Hey, we're fully aligned here.
42:08
Right? you know, your, your, your, some of your fees is going to go into the deal, right? We're going to be riding along, right? And then, so we're going to see how we perform in the backend and then there'll be some large backend to you. Um, and I think that that's the only real, real way to find a partner in a GC. I've done that on some of the deals that I've built recently too, whereby like I'd take a portion of my GC fee and I defer it till the end. Like.
42:31
You don't need to pay interest on my fee. Like I can take some of it now, but like hold the rest until we close. That's the exact, exact model, right? Keep the fee in the deal and then allow for that to ride forward. And then at the backend, there's a backend kicker for you. get it. You're getting more upside than you would for agreeing to be a partner. That's fair. It's a good way to structure. How's the brokerage doing? I we've got 40, you know, 40 agents now. Wow. You know, I think we're, we've got a boatload in the pipeline.
43:01
I think if you look at transactions, it's tough right now. Like there's not a lot of closing. That's what I was going to ask is have you seen, have your agents seen a lot of like a downturn? Yeah. mean, we had a, we had a great Q1, right? Where it's cause early in Q1 rates were low, stuff was going under agreement, lots of transactions. Then I ran rates went up really big slowdown. I think what we have, you know, is a massive amount under construction.
43:27
Right. So we've got projects going on with developers all over, you know, Cambridge, all over the city where there's lots and lots of pipeline coming. But, you know, but it's now it's kind of like survive for these agents until then, because there's not a lot of, there's not a lot of transactions happening, like quick, quick pops. So. any of them kind of pivoting and trying to do some rentals now that it's rental season, stay busy? Yeah. Some of them are doing rentals. think a lot of them have really embraced the idea that if there's not going to be transactions, I'm going to pick up my phone.
43:56
Right. And so, you know, I just came from, uh, meeting one of my agents up in Milton and I didn't have it, you know, I've, I've been brought up to the agents. said, these are the towns where I would buy land. One of them was Milton. Cause I think Milton has the opportunity to sell houses, up to two a half million for land for less than a million. So it qualifies. Um, and he just started ringing people and he was hunting and hunting and he came across an opportunity up there and, know, we, we just drove up and we're going to model it out and see if it could work.
44:25
I love the social media posts too. And I think this is one of your superpowers is your reach. And like, I knew that you were looking at a property in Milton at one o'clock today. And then I see Ricky's story and it's like, anyone have buyers looking for new construction between two and a half and three and a half million in Newton, please DM me like ASAP. Yeah. And like I already have four, I have four agents reach out who have people looking at new construction in Milton that I need to reply to, but it will give me a sense. I'm going to get a sense. I before I even go forward with this.
44:55
I'll have a pretty good sound. could have a buyer already. That would be the best. Yeah. Even absent that, if you never got a response that's telling you something, and if you got four and they're all like, dude, yeah, I've been trying to find that for a while. Like great Intel, I can adjust my acquisition strategy. four or five agents reached out and saying that they have buyers looking for new construction in Millen. That's awesome. mean, knows? We'll see. What's your thoughts on Cambridge? You brought it up earlier. I personally feel like I missed the boat. Like people are shipping me.
45:22
opportunities in Cambridge and I'm just like, I'm not the Cambridge guy. Like that ship seems to have sailed that I wasn't on it. I also think it was like the Gold Rush, right? It was like the Gold Rush in California. You didn't do it. I think we all missed the, maybe, I mean, all of us missed the boat. I mean, I don't know. We'll see. No one knows. The results aren't quite in. No one will know. No one will know. Nothing is... Is the absorption there? because they're building crazy. The first projects to be pulled on the new permitting just
45:52
been pulled. Got it. So the new zoning that just came into place, those are, you only know for a couple of months, I think the early people will have great success. think if you jumped and you got dirt at low prices and you were, you, before the heavy supply hits, I think you'll, you'll see those prices per foot maintain. The question is, when the Cambridge pricing has been, there's been no supply, right? So when there's zero supply that drives up pricing.
46:21
If all of sudden there's a massive supply, is there that many people that want to live in Cambridge to take in a thousand units or 800 units of condos at a thousand a foot? And the context here is they relax their zoning significantly. I actually don't know too much about it. Do you have any 10,000 foot I'll give you a sort of a different answer.
46:42
I think that folks who got in early, it's like every other real estate deal, which is say it's all about your acquisition. Like you can't correct for your acquisition later. So the market has adjusted and the deals that I'm seeing come to me for a piece of dirt really reflect like a tight number for a developer. Like it makes you think twice about it.
47:01
The early ones, assume, were like, dude, I can do nine units. That's a great deal. mean, there's stories of guys wholesaling and wholesaling, like a guy buying a property, selling a property, and then that guy sells it. So you're like a couple of... A guy closes, then the guy sells it, and the guy adds another 200 and sells it. The first guy got in when there was whispers of it. Then the bill was proposed. Then it made it through.
47:27
Then it got signed. Yeah, they've already stuck six, seven, 800 grand between like three different buyers off the table. Yeah. But we won't know until, you know, another. It will be interesting case studies. I think, I think there's going to be some pushback. mean, I just saw something like 56 units proposed in a single family area. So again, I don't know what their zoning allows, but. What's happening is it's allowed, right? It's not a die right. just city-wide? Except historic. Yeah, Did they just blanket everything? Yeah, historic is becoming like the last hurdle.
47:56
and people are leaning on them politically to try to. But then now what you're seeing is like, there's just a big article on the globe about like now they're trying, like the politicians are trying to find out ways to reverse it. And now they're trying ways to halt it and permits aren't being issued and they're delaying stuff to slow it down. It's like when Boston Shames the Selfie. Ask about iPods. And then they had to like pull back and put the The interim planning. Because people flipping out. That was our fault. It's be interesting to see what happens over the next, you know.
48:26
six months if they reverse course. But it'd an interesting case study as a, if this works and prices come down in... Or it opens up more, hold on, or it opens up more supply of middle tier pricing. But it's what everyone's been talking about. We need more housing to bring the cost of housing down. And if it works...
48:52
then it's like, well, what the fuck? Like it's an amazing case study. It's like, if we're able to run condo sales for the time period before, average, not just new construction, average price per foot in the community. And then when everything delivers, we check for two years and we see what they delivered at. And we look at the growth rates and we say, did pricing continue at the same growth rate or did it drop? Right. And we'll know if it drops.
49:18
The problem is, is the guys that built not expecting the drop. flyers. Especially the ones who bought me. You bought my second flip. But I think when we have you on for a fifth episode, we'll be able to turn those cards right side up and see how those stocks performed. I do have one other thing I wanted to close it out. ask you about more on the personal side. You posted recently like your transformation, like from your like what you looked like a couple of years ago to now. And it's like pretty, pretty fucking impressive.
49:47
It's like why, like what changed or what prompted you to kind of? The crazy thing is like I look back at that and I haven't even really posted the fit. When I was 306 pounds, so that's when I was, I think it was it, I was probably like five, six years ago at this point. And when that was when I remember in my phone, like, it was like fit by 20. It says something like fit by 30 or whatever. It was some crazy date. And I was like clearly missed it because I went way past it.
50:15
But was like the kid at that time, like I had young kids and really had just let myself go, right? Business had become a priority, know, time with my kids had become a priority and that, you know, honestly it was like work is a priority and I just wasn't taking any time out to go to the gym. I was eating like crap. was going to these, honestly, one of the worst things was these nightly, this was before zoom. So I would go to the meetings and one, like probably one or three meetings a week at night for neighborhood meetings.
50:42
And every single time afterwards, I'd get ice cream, steak and cheese. You're just like eating your feelings. I'd sit on the couch. I just yelled at for an hour. I'd literally come home and I'd eat a large steak and cheese with a Ben and Jerry's every single, like three nights, four nights a week, just sit there. Were you into working out and stuff like pre-kids and whatever? Yeah, so I mean, I was always like into fitness. played soccer at Northeastern. And then it was, I think when I decided to make that change, I posted on social media, I was like,
51:11
The whole thing started when I was out with my partners at Cove actually in Worcester and I was bitching about how fat I was. And then one of them was like, Ricky, shut the fuck up. He was like, get a trainer. Like you have needs, pay for a trainer. And I go, I don't need a trainer. I know how to work out. He goes, it's accountability. Was he your overweight partner though? No, no, no. I was like, he's the one I met. No, no. But what about the future of your boxing career? The world wants to know. I actually was watching 60 minutes the other night.
51:40
And they had a boxing chess. that. What? saw it too. I thought 60 minutes. Yeah. It could be the future, a boxing chess champion. He could be good at that. I don't know. So you hired a trainer. You went boxing? Oh yeah. So back, yeah. Hired the trainer, right. You know, Chris, Chris Schifaro actually was the trainer at AWP Master Shredder and then started training with him. And I think the main thing is like people, I had that same feeling about it. I was like, I don't need a trainer. I know what I'm doing. It's not about. Yeah.
52:09
It's accountability. It's getting to the gym every day. That's why I don't hire a trainer. And like, you know, the accountability of checking the scale every morning. Oh, I avoid the scale like the plate. Like he would make us, he'd make me send a picture of my feet every single morning. No. When I was doing it, would do He's in the feed, huh? I weekly check-ins and I would have to do the same. Every morning. And if you went up, the phone would ring.
52:35
with a guy like he was like he like he killed his daughter drill sergeant fucking yelling screaming about you cheating on your diet. It was was was awesome. So you still work out with him. No, no, don't still work out with him. But yeah, came nine point three percent body fat the other day. Wow. Yeah, looks looks good. Working out every day. Yeah, like seven six seventies. We were single. You know, Well, anyway, thanks everybody for rating for reviewing and listening and subscribing.
53:05
Um, especially our YouTube channel, which really trying to grow that. broke a hundred. Yay. Well, we're going to now we're a hundred thousand. guys. All right. Cheers. Ricky. it.