Chris is the President and CEO of Smart Growth Inc., a California-based real estate and development firm. They are focused on looking for higher-end development opportunities in mixed-use urban infill transit-oriented markets, primarily on ways to move real estate through the development lifecycle—from unentitled early-stage opportunities to securing entitlements and ultimately converting to an operational income property.
He is also the founder of the Smart Growth Developer Academy, a comprehensive set of training programs geared toward getting started in the real estate market.
In this episode, Chris will share his experiences transitioning from fixing and flipping to running his own firm. He will also be providing some advice to those interested in investing in the real estate development sector.
In 2014, Chris began his real estate career after attending FortuneBuilders’ traditional fix and flip training programs. He said the courses taught him how to fix and flip single-family properties to maximize their potential. It was just a matter of time until he began wholesaling deals and purchasing many single-family properties.
Even if he had gotten the knack of purchasing houses to fix and flip, he knew deep down that he wanted to make a more significant impact in the real estate industry. With this in mind, he founded “Smart Growth,” a company dedicated to facilitating the growth of our urban environment to make it a more sustainable society to live in.
Chris learned more about the development sector through the Urban Land Institute, a global association for real estate developers. He began by reading the real estate development textbooks that they had published. He also completed a professional certificate program to comprehend real estate development better and acquire as much information as possible from the institution.
Despite having an excellent curriculum, they do not cover anything about becoming a real estate entrepreneur. That’s where Chris’s experience with fix-and-flip training programs came in handy. He worked hard to integrate the real estate entrepreneur programs with the FortuneBuilders’ program so that he could help individuals learn how to make money faster and more sustainably by dealing with smaller-scale projects, with an eye toward undertaking larger development projects.
When they propose a development to a property owner and are able to pay them more than the property’s current value, the property owner will usually grant them some amount of flexibility in the contract, such as the option not to buy the deal. With this, they could get into a contract with somebody at a particular price but with a long enough contingency to allow them to navigate the zoning approval.
There are many arrangements, whether a longer zoning contingency or a lease option, where you might lease the land for some time and then gain the approvals to achieve a higher value.
According to Chris, the most significant risk is that most of the time, it’s not an issue of whether or not you’ll be approved for a project, such as an entitlement project, but of when you’ll be approved. If you’re going to seek an entitlement, time is everything, particularly if you involve the public.
Another risk is whether you can sell the entitlement. Since the buyer pool in the development space is much smaller, with much fewer builders than single-family home buyers, you must ensure that you are comfortable exiting at a price that makes sense to the developer buyer. If you’ve proposed a project that doesn’t make sense for the price you need to exit for, you’re left with only one option: build it. In this situation, if you’ve never built anything before and you’re forced to, there are several methods to get past the issues, typically by bringing on partners.
Working with others has always been one of Chris’s primary techniques for mitigating the risks mentioned previously. There are multitude of methods to bring on individuals to reduce the risks, whether it’s teaming with a general contractor or collaborating with a high-net-worth individual who has a lot more capital.
If you’re just beginning out in development, you should start networking with developers, whether they’re small-scale or large-scale national developers. If you can get into those networks, start talking to them, and figure out what they’re looking for, you can start directing your efforts toward sites and opportunities that would make sense for them.
Starting out, one of the most accessible places to begin learning the market players is the city’s website. They often post-development projects that have already been filed for approval, and if you go through those plans, you’ll find contact information for every single developer who owns the site. That creates a buyer pool for those in the market, conducting transactions, and creating ventures. You may then skip trace to figure out the townhome builders who are the multifamily housing builders in that area, which is a key step to figuring out who your buyers will be.
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