Adrian is a full-stack real estate entrepreneur. His background is in the tech industry. Based in Seattle, he does brokerages, mortgages, investments, and developments. He’s acquainted with some members of the Bay Area real estate community and travels to the Bay Area a bit. He’s even lived here from 2011-12. In this episode, Adrian talks about his jump from the tech industry into a full-time real estate entrepreneur.
Adrian got interested in real estate at a young age. When he was in 7th grade, he read a copy of the real estate fundamentals textbook which is for those taking the licensing exam.
At 19, he got his real estate license while still studying. After finishing school, he went into the tech industry which allowed him to save up the initial capital for when he starts investing.
In 2012, he bought his first place and expanded from there into bigger projects such as fix and flips, rental properties, brokerage, and later worked with international investors.
He later on pivoted into land acquisition for builders and listing new construction homes.
Since Adrian wasn’t ready to leave the tech industry and he was interested in pursuing real estate, he treated them both as full-time jobs. He spent his evenings and the weekends working on real estate.
He shifted from doing fix and flips into investing in rental properties. For him, fix and flips are more about trading your time for money as you have to keep finding deals and there are huge opportunity costs from missing out on long-term investments.
Adrian focuses on finding a balance between cash flow and appreciation with more weight on the appreciation. He doesn’t believe in the 1% rule. The rule says that you should only buy a property with rents at 1% of the purchase. He thinks the rule doesn’t apply to markets like the Bay Area and Seattle.
For him, the idea of the strategy is to minimize the opportunity costs of holding onto an investment rather than being able to cash flow after pulling out.
When it comes to getting a conventional loan, it helps to have multiple real estate related businesses that bring in multiple income streams.
He’s now looking for properties with development potential such as existing houses where he can build more units into. With recent changes to the zoning of single-family homes, he can build up to 3 units to any single-family zone lot and rent them out.
Adrian believes there’s going to be a lot of demand in Seattle, so he prefers to buy close to the city. The city is expected to appreciate more than other areas.
He mostly looks for properties at below median price points usually between $300,000-500,000. Single-family homes usually rent for $1,800-2,500.
He worked with a lot of builders when he was doing the brokerage side of his business. So he learned the trade and even studied land-use code to see the value of a site others don’t see.
He prefers buying in future rezone sites or buying for known rezones. He also likes optimizing sites through new land-use codes.
After a few years, Adrian became more active in his brokerage business than his tech job. Also, since his income was higher than the salary he receives, he thought that it would be the right time to leave the tech industry.
It took him 6-7 years of building a significant amount of capital from working in tech while simultaneously earning revenue from the real estate before he was comfortable to focus only on real estate.
Adrian relies on conventional lending, local banks, and at times, hard money lending depending on the project.
With the current Coronavirus situation, there’s been a hold on new construction lending and hard money lending.
Since the virus struck, offers have gone down from 3-10 to only 1-2. Also, the bidding war velocity wasn’t as high as before.
Listings are still pretty active. There is still a lot of pending activity. People are still making offers, and offers are still getting accepted.
Depending on where you set your expectations, there’s only a little bit of drop in prices. But that is if you set your expectations at market price rather than compare it with the highest prices the properties received before.
Adrian treats everything he does seriously and as far as his brokerage and mortgage business goes, they are long term plays.
His businesses are still running, and he has 2 projects in the pipeline. As much as possible, he wants to minimize the impact of the virus and adapt to the current environment.
Construction is halted because of the shelter in place orders, but his brokerage and mortgage businesses are considered essential.
With JPMorgan Chase Bank raising its standards for loans, he believes it opens up opportunities for other players to step in.
Since he has access to 30 different wholesale lenders, he is a lot more flexible compared to retail banks.
Adapt to the current market situation. Have multiple exit strategies in mind.
Building multiple income streams is very important.
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Adrian Chu is a liar. Karma will catch up with him.