Ep. 30 - Mastering the Dance of Development and Investment in Real Estate

Navigating the construction industry's labyrinth can be as daunting as commanding a fleet through a storm. Yet, Eric Howerton and Mark Zweig stand at the helm, ready to chart a course for small business owners piloting through the complexities of construction and renovation projects. In their candid conversation, we tackle everything from orchestrating house renovations with the precision of a seasoned general to the financial savvy and relationship-building that keep a business's engine running smoothly.

As they erect the framework of a 50,000-square-foot office space, the role of a general contractor comes to life, revealing the delicate choreography of planning, designing, and executing. They delve into the nuances of site selection, zoning laws, and financial underpinnings that steer the course of development. They also unravel the tapestry of real estate investment, showcasing strategies that fortify a simple investment into a financial stronghold. From the bedrock of solid banking relationships to the tax benefits that bolster property value, they share invaluable insights.

The loss of lead carpenter, Jack, casts a somber shadow on the discussion, exemplifying the profound impact of each team member on a company's success. They reflect on how the right blend of humor, positivity, and strategic thinking is not just a cornerstone of real estate ventures but the very essence of business longevity. So, don your hard hats and join Eric and Mark on this masterclass voyage through the business of building, where every decision is a brick in the edifice of success.

Episode Transcript

Mark Zweig (00:04):
Welcome back everybody to another episode of
Big Talk About Small Business.
I'm here with my partner incrime, Eric Howerton.
What's up, Mark?

Eric Howerton (00:18):
Everything's up.
Man, You've been dealing withsome stuff, haven't you?

Mark Zweig (00:22):
I don't deal with half the stuff that you deal
with.
These things, no dude.

Eric Howerton (00:26):
I really didn't.
No, there's no way.
There's no way.
I'm the first person I've evermet in my life.

Mark Zweig (00:30):
Well then, I'm busy with a lot of small stuff that
doesn't make the kind of moneyyour stuff does.
I think that's the.

Eric Howerton (00:38):
I'm just spending money man, I'm just spending
money in town.

Mark Zweig (00:42):
I spend so much money.
I closed on this house thatSonia and I are going to move
into in like eight weeks.
Close on on Wednesday, thursday, I had about 15 guys working.
I added it up.
We've already spent $58,000 ina week.
Okay, I mean, I think that's alot, don't you know?

(01:03):
That's a lot of money.

Eric Howerton (01:06):
I mean a lot done though, have you, yeah, so I
want to talk about that, becauseI think that what I actually
was thinking about this justyesterday, when you said that
before that, the very next day,you had all your subcontractors
out at the property in one fellswoop.
One day yes, I did.
How do you get everybody thereat the same time?

Mark Zweig (01:26):
Well, you know, I used to be in that business.
Yeah, it certainly helps.

Eric Howerton (01:29):
So you already have people in the role of that.
You know who to call for acertain thing.

Mark Zweig (01:34):
Yeah, although some of our providers have changed
since we got out of it.
We're just doing our ownprojects, but basically that's
what it is, and you know, myexperience as a contractor is
that if you give people worksteadily, yeah, you just keep
them busy on one job from onejob to the next.

(01:54):
If you don't make them harddollar bid and if you pay the
bill, what do you mean harddollar bid?
Hard dollar bid means, like, Iwant you to do A, b and C.
What's that going to cost me?
Okay, instead of just lettingthem go to work and then give
you a bill.
Oh, that's the goal that way.

Eric Howerton (02:09):
That's the way I generally work.
Wouldn't that put you in asituation where you're like I
mean, they might overcharge you,or?

Mark Zweig (02:15):
It could, but then you never work with them again.
Ah, yeah, okay.
The secret is they all hatebidding.
Okay, and they're.
Either they're going to overbidit because they're all super
busy Sure, the only way toprotect themselves is to overbid
it.
I mean renovations.
You never know what you'regoing to encounter.
Things change Every time mywife walks in or I walk in and
change something.

(02:35):
You know what I mean, becausethere's stuff along the way and
so I never make them hard dollarbid.
I give them work constantly,and the other thing is they want
to get paid immediately.
So, like yesterday, mypainter's like you think I can
get $13,000 from you.
I'm like dude, you're gettingahead of yourself, okay, right.

(02:57):
But he's like yeah, well, I gotto buy all you know, buy the
paint.
Come on, we all had you knowaccounts with the paint company.
You go over there, you get thepaint.
They give you a bill at thebeginning of the next month for
the prior month and then you gotlike 30 days to pay it.
So they didn't have to give methe bullshit about you.
You're not writing a check forthe paint, I know that.

(03:18):
But I gave him the 13 gradanyway Because I trust the guy.
Yeah, and he will finish.
Yeah, you know, just trying tohelp him out Like maybe keep it
going.
Yeah, I just.
But I want this is how I getfast service.
Okay, that's the point of it.
If you want people to jumpthrough hoops, then you need to
jump through hoops for them andrecognize what they're going

(03:40):
through, and so you already hadall these people on Rolodex
though.

Eric Howerton (03:43):
Oh, absolutely yeah.
So like that, you Nobody knewthat I've never worked with when
you're.
When you were closing the house, you already had these folks
and you said hey, on ThursdayI'm with Exactly.

Mark Zweig (03:54):
They were all lined up weeks in advance.
As soon as I had a contract, Istarted calling them, saying Get
ready, this is the day we close.
I need you to be there.

Eric Howerton (04:02):
Got it, and so everybody shows up.
Yeah, that's such a time saverright there, because part of the
problem with this stuff is thesuck of time.

Mark Zweig (04:11):
You cannot manage these jobs closely enough.
I mean, that's the problem,like one of the reasons I got
out of the business, aside fromthe fact that my wife hated it,
which is a good enough reason,okay, and it's self.
Let's face it.
You know her.
Yeah, I mean you don't want herto be unhappy.
It's not going to forget whatshe told you yesterday.
No, she won't forget what shetold you like six years ago,

(04:34):
right, right, 10 years ago,understood, but it's you know
just the amount of supervisionand detail and how things go
wrong.
I mean it just amazes me theway people can mess up.
And so if you really want toget a good job and nobody's got

(04:57):
really super detailedconstruction plans around here
for anything that we do.
I mean commercial jobs.
Yeah, you generally have abetter set of plans because you
got registered architects and todo them you get a permit and
generally have bettersubcontractors.
So it's a little differentworld.
But residential it's likefilled with incompetent thieves,

(05:19):
Okay.
And so you don't have goodplans and that we don't
necessarily have the besttradespeople either here,
because this is not an old citywhere you've got like third
generation carpenters and thehummers and stuff.
You know what I mean.

Eric Howerton (05:36):
Yeah, it's been passed through families.
Yeah, it grows up lard in it.
All the bells and whistles,they're just starting a business
.

Mark Zweig (05:42):
Yeah, exactly, and so I decided I'd make more money
as an HVAC technician than Idid working at the superior
wheel plant, you know, and sothey don't really know a lot
some of them Right, and anywayit just takes this amount of
time to supervise.
I mean, before, when we had ourbusiness, my carpenters told

(06:03):
Sonia well, mark should come bythree times a day.
I'm like, first off, I'mtraveling.
I can't even go there every day.
Secondly, I was likethree-quarter time at the U of A
and I've got this otherbusiness that's doing five to
$10 million a year in revenue.
I mean.
I just can't.
Yeah, there's only so much youcan do you can't full-time

(06:24):
project.

Eric Howerton (06:25):
Manage your jobs.

Mark Zweig (06:26):
Yeah.
So it just takes anunbelievable amount of
supervision.
And I could just tell you storyafter story, and even the
simplest things.
Like, we decided the shelfspacing in the pantry, okay.
And then you come back and theguy is putting a three-inch band
on the front of each shelf.
No other shelf has a three-inchband, but a three-inch band,

(06:50):
which?
What does that do to the shelf?
It reduces the capacity of theshelves, so nothing's going to
fit in the shelves.
You'll have nine inches insteadof 12 inches, right?
So your cereal boxes don't fitin there, you're right.
Okay, so you're going to haveyour pop and lucky charms and
all that, and so you will.

Eric Howerton (07:09):
Unless you go by and you're managing this like
you're not going to see themistakes, it's going to get too
far down the road.
They're going to be painting itNow.
You got to get the paintersback over.

Mark Zweig (07:18):
I mean, it's just Exactly, and then they get
pissed because they don't wantto rip anything out.
Yeah, and it's just, it'shorrible.
So be there all the time, whichmeans all your other shit is
being compromised In a waybecause you're not devoting the
time to it that you really needto.
You know, I know you've got abunch of construction projects

(07:41):
and stuff.
Yeah, they have stuff going on.

Eric Howerton (07:43):
Yeah.
I mean, it's been brutal, I'msure and it's good just to hear
this from me, though, because Imean somebody like you that's
been doing it for so many years,like I feel like here's the
problem and I think that thiswould be good for listeners is
that if you do start theseprojects and you're just trying
to get something done, like youmight have a good idea hey, I'm
going to own my own businessbuilding.

(08:03):
Yes, you know, great might makegood sense, great wealth
builder long term.

Mark Zweig (08:07):
Yeah, absolutely yeah.

Eric Howerton (08:10):
But you don't realize, like when you start
getting into that, like just theamount of just questions, and
then you have to go get permitspulled for this and right and
something, and those finalinspections from the fire
marshal.

Mark Zweig (08:23):
So who's holding you up?
Oh bro.

Eric Howerton (08:25):
And then the city stamps the fire marshal stamp
Right, and then they let youknow you're finally in business.
And that's been kind of myexperience lately about the new
studio we're doing, yeah, like Imean three months past what I
thought that we should have beenin the building and that's
costing a fortune.

Mark Zweig (08:41):
Of course it is.
You're paying rent on thebuilding all that time, and then
your productivity iscompromised.

Eric Howerton (08:46):
And then you're losing business opportunities.
What's the biggest thing?
Sure Right, All the excitementstarts dripping you know going
down.
Yes, and I just felt like I wasan incompetent person, because
of that.

Mark Zweig (08:59):
You know you're not incompetent.
They feel that way though.
Well, it's just.
The problem is that most ofyour contractors are incompetent
when you come down to it,because they're not anticipating
things.
They go there, they do whatthey're going to do that day and
they're not looking ahead,going okay, I'm going to need
this material, I better order itnow.

(09:19):
And because I need it in threeweeks and the last time I went
there to get it they told me itwould be three weeks.
Okay, they wait till the threeweeks go by and they need it,
and then they're like, oh, wedon't have the material, it'll
be three weeks.

Eric Howerton (09:31):
Yeah.

Mark Zweig (09:32):
I mean, it's just bad planning, not anticipating
problems.
Same thing with the firemarshal Get all that scheduled,
yeah, so you know in advance.
So who's responsible for that?
Like that's what I'm talkingabout.
Do you have a generalcontractor?
Like no, Okay, You're thegeneral contractor, I guess.

Eric Howerton (09:50):
I guess I would just think, but I mean, I think
that that's the thing is right,Like, I mean, like, like who is
like in my business, right?
And then in what I've beendoing, we have project managers
that are somebody is laying outthe timeline.
It's like a freaking Ganttchart.
Yes, but I have yet to see asingle Gantt chart from anybody

(10:11):
in this industry.
Nobody wants to own that, dothey?

Mark Zweig (10:13):
Well, I mean, if you moved up the food chain to get
commercial jobs, let's say youand I were going to go build a
$10 million office buildingwhich, if we were doing anything
, we should look at, becausethere you can actually get a
good general contractor Well,first off you'll have better
architects and engineers Okay,because it's a bigger job.
Then you get better contractorsbecause it's a bigger job.

(10:36):
They have professionalmanagement Okay.
So you'll have a really goodset of plans and specs, and then
you'll have a project manager.
And then you know, if you payyour design professionals to do
construction administration,then they are also looking out
for your quality and so when yousay design professionals is
your architect, that's yourengineer, architects and
engineers.

Eric Howerton (10:55):
Yeah, so you're a soft, what you call the soft
part of the whole constructionthing.

Mark Zweig (11:01):
Yeah, which you know .
I was in that business foryears, of course as an owner and
some firms and everything.
But then when I'm a developer Ihate to get paid out of time
for soft cars.

Eric Howerton (11:15):
That's the other part, right.

Mark Zweig (11:16):
I'm sure you're the same, but if you don't have
competent help there, then youend up paying for everything
twice over anyway.

Eric Howerton (11:25):
So in that situation, even in that
situation like who's thisgeneral contractor?
Like if I Google right nowgeneral contractor Northwest
Arkansas yeah, we got to findsomebody that does office
buildouts.

Mark Zweig (11:36):
That's what you did there.
You're in an existing building,you're doing an office buildout
and there will be firms thatshould pop up based on that.
General contractor.

Eric Howerton (11:48):
Yep Office buildout Rogers, arkansas.
I'm going to do that.
Here's my results.
I'm a general contractorCross-Land.

Mark Zweig (11:56):
Mark's Construction Cross-Land?
Yeah, they could do it.
I don't know Mark'sConstruction, it's not me.

Eric Howerton (12:04):
The Yelp.
Well, that Angie List.
No Clark contractors, and sothe Mr Cleans home, no.
Is that like a general contract.

Mark Zweig (12:12):
It sounds like they need some help with their Google
.

Eric Howerton (12:18):
The Google results yeah, Search engine
optimization yeah, SEO neededthat For GCs.
And I mean but like.
But is the GC like a cross,like when these is cross-lane a
general contractor?
Yes, they're a general.

Mark Zweig (12:31):
They would do the managers.

Eric Howerton (12:33):
All kinds of other stuff.

Mark Zweig (12:34):
Yeah, they would be the managers of your job.
They would and they would hirethe subs and they would
coordinate the job, gotcha.

Eric Howerton (12:42):
So that's what I'm kind of figuring out is like
a GC is actually baked in tothe.
They want to own the entireproject.
Yes, then they're the GC.
So they're subcontracting allthe tradespeople, even the
engineering and the architectureas well.

Mark Zweig (12:56):
No, that's if you go design bill, then they would
Generally that'd be likecontractor led design build,
where they hire the architectsand engineers too.
Is that, is that a great deal?
Or you could have architect leddesign build where they hire
the GC, it depends.
I mean, the problem is, youknow, with design build, if you

(13:17):
don't really know what thedesign details are, then it's up
to them and they can cutcorners.
That's the deficiency of designbuild.
It's like well, we thought youwanted this.
If you have it designed, you'vegot a set of plans and
specifications the contractorhas to build according to those.

Eric Howerton (13:33):
So it's almost best.
Would you, if we had a rawpiece of land and we wanted to
build even just a house or evena course building?
Would it be best to go toarchitect day one?

Mark Zweig (13:46):
Probably.
I mean, I'm not necessarilygoing to say for a house.
That depends on the quality ofthe house you're going to build.
You can't afford designprofessionals on a $250 a square
foot subdivision house,probably Okay.
Why?
Because they're going to be tooexpensive and they're going to
design it in such a way that itcosts more than that to build.

(14:07):
Okay.
That's why you would probablyjust go get a builder quote,
unquote which is basically adesign build contractor.

Eric Howerton (14:16):
So the builder that already has that's your
spec.
They'd have a spec.

Mark Zweig (14:20):
Right, they generally would have like a spec
and a budget.
Yeah, like they go.
Okay, well, the kitchen on thishouse.
We're going to allot $35,000for cabinets.
Okay, here's a preliminarydesign for the layout of it, not
detailed, it's like a schematicdesign.

Eric Howerton (14:36):
That's what drives me crazy.
There's no spreadsheet foranything Like as a as anybody
that's going to build something.
You cannot get your hands onanything that's got detailed
spreadsheets of costs.

Mark Zweig (14:48):
Well, they're, yeah.
Well, the GC doesn't want togive you a breakdown.
That's part of the problem.

Eric Howerton (14:55):
Yeah, I mean they really don't because they want
mystery in there, because that'swhat their lifestyle is, right.
I mean, it's their business.

Mark Zweig (15:03):
Right, and they want to have some latitude.
Okay, to move the money around.
They would rather give you aquote based on a price per
square foot and then budget it,or a hard dollar bid to build
your house.
But let's go back to the officefor a minute, okay, because I
do think an office building ifyou have a business whether it's

(15:27):
a manufacturing business, orit's a business that needs
warehouse space, or it's abusiness that needs office space
or retail, depending on thebusiness and what your growth
trajectory is owning your ownbuilding or buildings can be a
really great way for the smallbusiness owner to build wealth

(15:50):
over time.
Yeah, okay.
So instead of paying, let's sayyou've got a business that needs
30,000 square feet of officespace.
Yeah, you can go out thereright now.
In the market that we're in,you'd pay $25 to $30 a square
foot for that for good space peryear.
So if it was 30,000 square feetand you're paying $25, that

(16:12):
would be $75,750,000, is thatright?
Yeah, 30,000 square feet.
You'd be paying $750,000 a yearfor rent.
All right, okay.
So that's a lot of money, right, mm-hmm?
And you get nothing at the end,right?

(16:34):
You're giving somebody else?
Yeah, you're just giving it tothem.
Just make sure I did my mathright on that 30,000 times 25 is
yeah.
Is that 75,000?
No, that's 750,000.

Eric Howerton (16:51):
Did you say 35,000?

Mark Zweig (16:54):
30,000.

Eric Howerton (16:54):
30,000.
Times 25.
750,000.
Right.

Mark Zweig (17:01):
So $750,000 a year you're paying out.
You get nothing to show for it,right?
So let's say you decided we'regonna take a clean sheet of
paper out, we're gonna go buildourselves a 30,000 square foot
building, or better yet we'restill growing.
We don't wanna build what weneed right now.
Right now we need 30,000, butwe might need 50,000 in five

(17:23):
years.
So we're gonna go build a50,000 square foot building.
We'll plan on occupying 30,000of it or 35 by the time we get
it done and move in, and we'llrent out the 15 or 20,000, all
right.
So that's your basic problem,all right.
So let's say you go out andfind a piece of land you can buy

(17:48):
for $2 million, okay.
And then you design a 50,000,.
You have your architects designa 50,000 square foot office
building.
You find architects whospecialize in new office
construction.
It's a specialty.
It's like any otherprofessional service provider

(18:09):
and a lot of small businessesdon't understand this, right,
but I know you've experienced it.
You wanna go to tourney for M&A?
You hire somebody that onlydoes that.
You want somebody for realestate.
You get an attorney who onlydoes real estate.
Same thing with architects andengineers, okay.
Okay, I mean sure, some of thebiggest companies do pretty much

(18:30):
everything, but they'll have awhole group that is dedicated to
new office construction.
All right.
So we find those architects andengineers.
We give them our basic programon what we want.
We want 50,000 square feet.
We wanna occupy 30,000 of itinitially and 20,000 of it's
gonna be rented space.

(18:51):
That impacts the design.
Obviously, right, let's say wedon't want more than two floors,
cause we know if we go too manyfloors each one develops its
own personality.
Yeah, All right.
So we're gonna do 50,000 squarefeet.
We're gonna get 25,000 of ourfeet on the first floor and

(19:12):
5,000 the second floor.
The rest of the second floorwill be lease space.
Or we do it the opposite way,right, mm-hmm.
So we get with our architectsand engineers and they, well, we
take first, we've got our sitewe pay $2 million for.
We've consulted them along theway.
So they say, yeah, we thinkthis site would be good for a

(19:35):
30,000, 50,000 square footbuilding.
All right.
So it's not like we just boughtthe land before we consulted
them.
That's step number one.
Yeah, I mean the zoning's gottabe right.
It's gotta be have a buildablearea that's sufficient for this
building, because so can we hangout there for a second?

Eric Howerton (19:52):
Yeah, because that's really who do you consult
with that, like I mean, so youneed to engage, you really need
to engage your architect andyour engineer, right, you can
find your team, yes, and, toyour point, that's specialized
in this type of stuff.

Mark Zweig (20:08):
Yes, like the engineer would be somebody that
just does like new commercialdevelopment projects.

Eric Howerton (20:13):
Yeah, so you go find them and you meet with them
, yep, and tell them all yourideas and stuff and they're
gonna charge you a retainer.

Mark Zweig (20:21):
It depends.
They might charge you by thehour initially, or maybe they're
willing to, you know, roll thatall into their fee.
Just to give you some quickadvice.
If they're gonna do any realwork, they're gonna charge you.

Eric Howerton (20:33):
Yeah, and so, okay, you get together that
basic plan and then you need togo find you a real estate agent
that goes and looks for theproperty that you're.

Mark Zweig (20:40):
That you're wanting.
Oh well, I was assuming in thiscase we already found some
property.
We thought, yeah, if we'retalking about buying the
property in the first place,yeah, absolutely.
We get a good commercial realestate agent to find us a site
that would support a 50,000square foot building.

Eric Howerton (20:55):
Yeah, because reason I was asking that is
because there's zoningrestrictions or all that kind of
stuff, and if you're justsomebody that's wanting to do
this like you don't know allthis stuff Right.

Mark Zweig (21:05):
The architects and engineers do know that, though.

Eric Howerton (21:07):
But then you gotta find somebody that's gonna
actually go look for theproperty, because otherwise
you're gonna be spending allyour time looking for property.

Mark Zweig (21:13):
Right, I was assuming in this example that we
had a piece of property that wethought we wanted.
Yeah, yeah, yeah.
But yeah, you're right, I meanthe first place is a really good
commercial real estate agentwho understands your goal and
what you're trying to do.
Before we actually commit,though, we're gonna get our AE
team involved right To make sureit's feasible there.

(21:34):
They would do a feasibilitystudy, basically, yeah, to
determine whether or not we canput that building on that site
with the adequate parking,meeting all the requirements of
lot coverage ratio.
So all this stuff.

Eric Howerton (21:48):
So I could go talk to the AE.
We partner up.
I tell them the vision I'mpaying them per hour.
We develop up some preliminaryvision Right.
Go to the real estate person.

Mark Zweig (21:58):
No, no, I'm not gonna design the building before
I have the site.
The first thing is the site.

Eric Howerton (22:05):
But how are you gonna know what site you want if
you don't know what you'regonna be building?

Mark Zweig (22:09):
Well, I'm gonna have a general idea.
I see what you're saying.
Yeah, yeah, yeah.
But the last thing you wanna dois have a concept designed for
a building and then look for aplace to put it.
You go the other way around youget your site, okay, and then
you start to work on the conceptfor the building.

Eric Howerton (22:25):
So if you find your site, though, and then you
start talking with your AE's andyou're paying them, but then
they find out that that's notgonna work, Then you're not
gonna close on it and you're outthe money.
But that's what agents?
That's the reason they're builton a more commission-based.
They get that right Likethey're always the Well, the
agents do they get that?

Mark Zweig (22:44):
Do they always know what's feasible there?
No, but a good one's gonna havea really good idea.

Eric Howerton (22:50):
Yeah.

Mark Zweig (22:51):
Okay, but yeah, I'm glad you you pointed that out.
In the flaw, in what?
I'm saying Start with the site,finding the site and getting
your AE team involved with abasic program for what you're
trying to do.
50,000 square foot building ontwo floors Okay, okay.

Eric Howerton (23:10):
How do you know?
So okay, so I don't almost saylike the first thing to do is to
find you a good commercialagent.
If, like, in all honesty, ifI'm starting from a blank slate
and I got, so, I got myself anda few other folks that were
wanting to put money in this.
You know, my business is goingRight and I'm trying to find a
new place for a studio and Ijust got this idea.

(23:31):
That's the most the motion Iwanna go because I wanna build
wealth and I don't wanna paysomebody else, right, and you
know, to this concept of talkingabout, I would go kinda have
that idea.
Go talk to find a goodcommercial agent.
Commercial agents like yeah,yeah, they seem to know that
crap and then at the same time,when they start looking, I might
go find my AE, right.
And then they have a bring ameeting together with all of

(23:52):
them Exactly.
Okay, cool and then now youragents out looking and talking
with some AE's.
So you kinda got your teamRight, but you're gonna be
paying your AE's a little bit,or a monthly or hourly payment,
but not your agent.

Mark Zweig (24:05):
Right.
I mean you can find AE's thatactually do site selection, okay
.
Okay, so they help.
They'll go out and find all thesites that meet the criteria
for what you wanna do.
If you have good planners, okay.
Are the planners part of the?

Eric Howerton (24:20):
AE's.
Yeah, they're part of the AE's.
Which ones do they belong to?
The architecture of theengineers.

Mark Zweig (24:24):
They fit into both categories and landscape
architects A lot of them areactually landscape architects.
That are the planners.
That are the planners.
Those are the highly paidlandscape architects.
They don't do planting, theydon't put shrubs around the
building, they actually figureout what can be built somewhere.
Really, yeah, those are theplanners.

(24:45):
Where are those planning at?
Well, I had some of those asclients.
They make a lot of money.
Are they at the engineers?
They were for developers.
Sometimes they're inengineering firms, sometimes
they're out on their own,entirely.
Okay.
So, yeah, the good ones areentirely on their own.
They don't wanna work under thedomain of engineers.
How would you search the top ofthem?
Landscape planner, you wouldsay landscape architect, slash

(25:08):
planners.
Again, you're probably gonnafind a problem there, okay?

Eric Howerton (25:14):
And see this is.
But this too, this wholeconversation, is a problem.
Yeah, that which I thinkstumbles growth right, because
you've got some folks that aredoing I'm doing a podcast studio
.

Mark Zweig (25:27):
Right, it's not what you know.
It's not what I know.
You gotta business, but what?

Eric Howerton (25:31):
I do know is in everything else on the planet.
If I'm looking for something, Igo to the Googles.
I understand, oh, I'm hard tofind.

Mark Zweig (25:39):
Yeah.

Eric Howerton (25:40):
And people are gonna be going to the AIS and
the chat GPTs and saying andasking these questions you're
rest nothing there.

Mark Zweig (25:49):
It looks to me.
Well, ignorance is a huge partof the problem.
Are the AESide, and they don'tdo a good job educating people.
No, no, about how everythingworks.
But I mean, you have yetanother option.
You could find a developmentconsultant.
Okay, what are those people?
There's one in Fayetteville,for example.

Eric Howerton (26:12):
That guy would help you with all this, I wanna
show you what I got forlandscape architects and
planners Tree in scapes andlimited Nope.

Mark Zweig (26:22):
Not gonna be the right people.

Eric Howerton (26:24):
Here we go in this PJ architects.

Mark Zweig (26:26):
I don't know, zatar.
There are firms like CEI, whichis predominantly engineers, but
they would do that, okay, you'dlocally, yeah, okay, okay, um,
even, um, like Harris and FrenchAFA they would do.
My son-in-law works over thereas a development guy for site

(26:50):
planning and he's a landscapearchitect.

Eric Howerton (26:52):
So if a, if a small business person they'll
walks in there and calls them,are they going to even entertain
that Cause?
Most of these folks in our areawe have an unenabled.
You got the Walmart JV right,it's like you're a one-off.

Mark Zweig (27:04):
Yeah, I think there's an end here, bro, there
is no you're right there is.
You got to find some smallerfirms.
But anyway, let's get past thatpart, which is a big part of
this.
It's going to come out right.
That's the other frustration.
Okay, so once we get our siteand we get it under contract and
we know that we can build whatwe want to build there, okay,

(27:27):
then the architects andengineers are going to design
that fully Right, and they'regoing to prepare a set of plans
and specifications.
If we're paying them a full feefor this job, which let's say,
that's six to 8% of constructioncost just to throw a number out
of estimated construction cost,and let's say estimated

(27:48):
construction cost for ourbuilding is 10 million, okay,
50,000 square feet, 200 bucks afoot, $10 million budget, 6% is
going to be $600,000, 8% to be800.
Okay, that's a lot of softcosts, admittedly, yes, but a
good set of plans andspecifications now allows us to

(28:10):
put the job out for competitivebid, which means we can then get
general contractors.
Normally the AEs would do thisfor you.
They put the job out to bid toGCs who make a hard dollar bid
on it.
All right, you know they're allbidding on the same thing.
Put the bid out to GCs.

(28:31):
Yeah, they would put the set ofplans and specs out.
They'd advertise they're takingbids.
So the GC general bid, they'retaking bids.

Eric Howerton (28:38):
So the GC general contractor, but that's a
different type of GC than.

Mark Zweig (28:44):
That's a general contractor who specializes in
doing office buildings.

Eric Howerton (28:48):
Because that general contractor knows all the
subs is a general Okay.
So that's the but.
They're going off the spec,they're going after off the AE
plans Correct.

Mark Zweig (28:59):
The plans and specifications are designed by
the AEs, so they're all biddingon the same thing.
You know you're going to getthe exact same product in theory
from all of them.
Okay, okay, yeah.
Like it would say, like, usethis doorknob and it's got the
part number there.
They can't just suddenly go geta different doorknob without
your authorization.
All right, I mean, it's down tothat level of detail.

(29:23):
Okay, yeah, so they put it outfor.
So your good plans andspecifications allow you to hire
a contractor and know whatyou're going to get in the end
and hopefully then, because youcan put it out for competitive
bids, you're going to save somemoney.
You're going to recoup some ofthat six or eight hundred

(29:43):
thousand you spent.

Eric Howerton (29:44):
Because that's going to drive down the overall
cost per square foot for that GC.
Yeah, but why?
How?
The AE's are not going to beincentivized by that dropping?

Mark Zweig (29:55):
The AE's have no incentive to do anything.

Eric Howerton (29:59):
If I was an architect or engineer, I'd be
like this is going to be $250 asquare foot.

Mark Zweig (30:04):
Right.

Eric Howerton (30:05):
And then I'm going to send it out to bid and
they're going to be oncecollecting those bids.
Right, right, on my behalf asan emote owner, right, I would
argue all day long to go with aguy that came back at $230 a
square foot versus the one at150, because this one at 150 is
incompetent from my perspective.

Mark Zweig (30:22):
Well, yeah, and you do that sometimes, a lot of
times they'll throw out the lowbid, automatically, the lowest
bid, especially if there's a biggap.
Yeah, because you don't trustthat.
Right, like the one guy comesin at the one company comes in
at $8 million and the next oneis $9,800,000.
You'd probably throw the $8million out or figure out.

(30:43):
Certainly want to talk withthem, yeah, make sure they
understood what they werebidding on, but don't they just
get a little hurt.

Eric Howerton (30:50):
The fact that I mean, if you did go with a lower
bid, like I mean.

Mark Zweig (30:54):
Well, it depends why the AE is getting paid.
I mean, one way the AE getspaid is on a percentage of
construction cost, right.
Other way is a fixed fee.
They say we're going to chargeyou $800,000 for this job Period
.
The construction cost doesn'tmatter.
Yeah, you see what I mean.
Yeah, so that's, that's a fixedfee AE contract.

(31:18):
So that does happen like that.

Eric Howerton (31:22):
Because I've just think about your typical
behavior of anybody that's inbusiness.
I would much rather have.
I mean, if the constructioncost is higher, I gain from that
Like it's better worth my time.

Mark Zweig (31:34):
Well, there are some firms that work like that.
Mm-hmm One of the firms I workwith, we call it the Bump.
At the end of the job, theactual construction cost was
compared to the budget, the feethey've been billed the client
based on the budget.
Okay, mm-hmm, the cost, but theactual cost?
Then they just gross it up bytheir percentage and send them a

(31:55):
bill, all right.
So yeah, there are some firmsthat work like that.
All depends on the type ofcontract you have with the AE.

Eric Howerton (32:04):
So all right, so we were at the general contract.
They send back the bid, butthey're not sitting back any
detail out of my bids, Likethat's where I they may.

Mark Zweig (32:12):
No, they may.
They may have, they're a wideitem.
They may do it that way, yeah,but they may not.
They may just give you a harddollar price $9.8 million to
build this based on these plansand specs.
So they're detailed.
So what's the?
control being scope-create A lotcrazy, a lot crazy, okay, well

(32:34):
then, if you're going to changethings along the way as the
owner, then the GC is going tosay change order, all right, and
they're going to gig you forthat In their contract.
If you make any deviation fromthe plans and specs, then they
want to be able to charge you achange order.

Eric Howerton (32:53):
What do you do about, let's say, they stuck.
So I'm thinking of thisdriveway.
I'm trying to freaking buildthis whole mystery of how much
labor it's going to cost,because we don't know until we
start digging if we're going tobe hitting rocks and all this
other kind of stuff, and so Ican't get my hands around a true
cost of this thing.
Well, no, you can't.

Mark Zweig (33:15):
Nobody's going to hard dollar bit that I mean.
Having a really good set ofplans from the engineer would be
a good start, yeah.

Eric Howerton (33:24):
I have that.

Mark Zweig (33:25):
That's going to be a good start, but I think what
you're finding is developinganything on a hillside is very
expensive.
So if I was out building newhouses, why do you think the
subdivision developers love allthese flat lots, those hillside
lots I did behind Common Go?

(33:46):
Those were so expensive tobuild.
I mean we couldn't put a.
If you were going to build a$350,000 house, you'd have
$200,000 in the foundationbecause of all the site
engineering and requirements ofthe city.
The road controls yes, thedrainage planned by a
professional engineer.

(34:06):
The foundation is designed by astructural engineer.
Geo tech boardings in order tomake sure the foundation
engineer can decide it right.
Then all the work to make thefoundation.

Eric Howerton (34:17):
That was a brutal project for you, wasn't it?

Mark Zweig (34:19):
Yep, I lost money on every house I did there.
But anyway, let's go back toour example.
We got bits on this building.
Now let's say they came in at$10 million.
We then build the damn building, all right.
So how are we going to pay forthat?

(34:39):
Well, the first thing is we'regoing to get a construction loan
based on our preliminary plansand specs and our construction
cost estimate.
Let's say that we gave thoseplans and specs to our bank.
We haven't got a hard dollarbid on it yet.
We give them to our bank andour bank has an appraiser say

(35:01):
okay, what would this thing beworth?
Okay, based on your lease thatyou're going to give yourself,
let's say you decide we're goingto pay ourselves 30 bucks a
foot.
This is really going to begreat space, all right.
So we're paying ourselves$90,000 or, excuse me, $900,000
a year in rent, okay.

(35:21):
And we're going to rent theother 20,000 square feet for 30
bucks a foot, okay.
So we're going to pick upanother.
Let's see 600,000.
So our total rent income isgoing to be $1.5 million for
this, all right.
So now that goes to theappraiser, the commercial

(35:48):
appraiser that your bank assignsto this deal.
Okay, okay.
And so what's going to happenis now we have total income of
$1.5 million, right?
So let's say this is not atriple net lease.
Let's say, for the 30 bucks afoot, we're covering all the

(36:08):
maintenance utilities and commonarea property insurance, snow
plowing, whatever.
All right, it's all rolled intothe 30 bucks.
Just to keep this simple, okay,so we're bringing in $1.5
million a year in rent.
Okay, the bank is going to say,okay, the appraiser, let's just
say we're going to give theseguys 85% of that because they're

(36:33):
going to have as loan, no, justas income.
Okay, we're going to allow thisas income.
Got it, got it.
Got it 1.5 times 0.85.
They got to pay property taxes,insurance, lawn care, painting,
utilities on the common areas,lights in the parking lot and

(36:53):
yada, yada, yada.
Right, they come up with 1.275million a year net.
That's what you're going to netafter your costs.
All right.
Then how do they come up with avalue?
Well, they say this will be aClass A office building in
Northwest Arkansas, in a goodtown, rogers, arkansas.

(37:15):
All right, now, it's not thesame as saying Siloam Springs
Okay, that's 20 miles away.
It doesn't have the sameeconomic situation we have here.
All right, it's smaller.
It's going to be riskier tobuild the building over there

(37:37):
that we'd find somebody whowants a 50,000 square foot
building in Siloam than Rogers,where there's all these
businesses flooding to the area.
That impacts what's called thewell.
That impacts the cap rate, thecapitalization rate.

(37:59):
So if it was in Rogers today, aClass A building it's a solid
market, right Growing.
Let's just say that you wouldhave that the appraiser would
allow a 6% cap rate.
I'll explain this in a minute.
Let's say, if you were doing itin Siloam, though, they would
say, no, that's an 8% cap rate.

(38:21):
Okay, because I'm going to showyou the difference in value.
So 1.275 at a 6% cap rate,1.275 million a year in income,
after all expenses and allowingfor some vacancy from time to
time.
Right, 85% of our million five.
Okay, that divided by 0.06.

(38:43):
That gives us a number of21,250,000.
Okay, okay.
Now if it was in Siloam Springsand I'm doing my 1.275,000, and
I don't know that this is whatit is for Siloam, but I say,

(39:04):
give a guess that divided by0.08, I get a number of
15,937,000.
You see how that impacted it.
Yeah, $6 million in differentvalue, okay, okay.
Now we know the land's going tocost more in Rogers, though
that's a big chart of it.
Right, yeah, so we're going toput this $10 million building

(39:26):
and let's just say, for the sakeof our example, it's going to
cost us $6 million for the site.
Okay, all right.
So we're going to have $16million in this deal.
Right, to build it, by the way,and everything Right, all right
.
Oh, and add the 800,000 forarchitects and engineers in
there.
We're going to have 1,.
We're going to have 16,800,000in it.

(39:49):
Okay, okay, is that right?
Yeah, yeah, but 1.275,000 Odivided by 0.06, that gives us a
21,250 valuation.
21 million, 250,000 valuation.
Take that minus 16,800.

(40:12):
16 million, 16 million, I'msorry, thank you, yeah, you're
welcome.
16,800.
Now we get 4,450,000 left over.
Okay, okay, so it's going toappraise at 4,450,000 more than
it's going to cost us.
Okay, this is how developersmake money.

(40:33):
Okay, all right.
What can we borrow on that?
Well, they gave us an appraisalof what.
What did I say?
1.275?
What she's made?
1,275,000,000, 275,000 dividedby 0.06.
They're giving us $21,250valuation.

(40:56):
The bank will lend us 80% ofthat.
21,000?
, 21 million?
Okay, excuse me, 21 million,250,000.
The bank will lend us 80% ofthat.
On a construction loan Okay, weuse the construction loan to
first buy the land, then to hirethe architects and engineers,
then build the building Okay,21,250,.
But they'll only give us 80% ofthat.

(41:18):
Yeah, okay.
So that's $17 million is whatthey'll loan us for our
estimated cost of 21,250, forthe appraisal excuse me, not
cost appraised value of thebuilding post construction.

Eric Howerton (41:34):
Okay, so would you have to come out any money
against that then?

Mark Zweig (41:39):
If I could build this for $16,800,000, I would
have $0 in it, other than theinterest carry along the way on
the construction loan, whichwould be an interest only loan.
So for a period of maybe twoyears I'm paying first interest
on the lot, then I'm payinginterest on the construction as

(42:02):
we draw on the line of credit.
Okay.

Eric Howerton (42:06):
So, as an investor, if I was trying to, if
I was trying to build this, I'dget you myself, a couple other
folks and we're going to.
Basically our plan is to paythis interest and we're all
committed to that.

Mark Zweig (42:20):
If yeah, if we have to.
Obviously we have to, thoughright, because they're going to
start charging the interest onit.
We're going to get 200, if wedid it for 16,000, we got
200,000 left over.
It's going to help us pay ourinterest along the way for part
of it Not a lot.

Eric Howerton (42:37):
So you'd have money in the bank to pay the
interest.

Mark Zweig (42:39):
We'd have some money .
But yeah, ideally I mean mostlikely we're going to be
coughing up the interest alongthe way.
Yeah, okay, are you followingthis?

Eric Howerton (42:49):
example yeah, yeah, yeah.

Mark Zweig (42:50):
Okay.
So when it gets done, we movein, we lease up the other 20,000
square feet.
We then convert ourconstruction loan that was $17
million into permanent financing.
Mm-hmm, the appraiser who didthe original pre-construction
appraisal, the subject toimprovement appraisal yeah,

(43:15):
we'll come out there and look atit.
Go to these guys, do what theysaid they would.
Yeah, did they get the rentsthat they said they would?
Well, we know they did, becausewe're in control of our own
lease.
Right, we leased it fromourselves, right, even if it's a
separate entity, right?

Eric Howerton (43:29):
Yeah.

Mark Zweig (43:31):
Okay, so they go.
Yeah, they did all that.
Okay, fine.
So now we turn the $17 millionconstruction loan into an
amortizing 25-year commercialmortgage.

Eric Howerton (43:44):
Which is going to lower the well you're going to
be paying the principal.
Okay, go ahead.

Mark Zweig (43:50):
Yeah, let's say that that's $17 million and let's
say today, today's interestrates, maybe we can get that for
seven and a half.
You'd be a really strong creditto get that.
But let's say you could getthat for seven and a half
million dollars, or 7.5%, ratherinterest.
Okay, now I'm going to see whatI can get here, if I can find

(44:14):
us a loan calculator, and I'lltell you what the payments would
be A loan calculator we knowwe're bringing in 1.5 million a
year in rent, less than 225.
So we're bringing in a net of amillion 275, right, mm-hmm?
So let's take a look at ourloan here.
So we've got a loan for $17million and let's say we got it

(44:40):
on a 25-year term.

Eric Howerton (44:43):
Okay, which would be high for commercial?

Mark Zweig (44:46):
though, wouldn't it?
No, you can get commercial for25 years.
Most of mine, I had 25 years,sometimes 20, but mostly 25.
All right, and our interestrate is 7.5.
We're strong, the bank likes us, they're going to give us a
deal, right?
My point is so we're going tohave a payment, though, okay,

(45:08):
and hopefully that payment isnot greater than our lease rate
after all of our expenses.
Now, at these high interestrates that we have today, it is
a little harder than it was afew years ago, where you could
get everything for 3.5%.

(45:30):
Yeah, okay, Are youunderstanding how people do this
?
Yeah, yeah, this is how it'sdone.
You know everybody's like well,I don't have the 20%, you don't
need the 20%, you just need thecredit.

Eric Howerton (45:44):
Exactly, you need the credit, you need some
collateral or the bank is usingthe land and the property and
all that value.

Mark Zweig (45:51):
Yeah, that's the collateral.
That's the collateral.

Eric Howerton (45:55):
But you can't just walk it Like you'd have to
have some sort of esteem to thebank in order to do this, though
right, I mean you Sure, right,I mean like you can't.
Just, I guess you have to buildslowly and have a relationship
with the bank to kind of buildyourself up, to have that
credibility.

Mark Zweig (46:16):
Yes, to get into that.
Yes, I always had really goodcredit.
So even if I didn't have anycash, I always said this is
really good credit.
Yeah, I could get.
I could go borrow $20 million,okay or more on a piece of
property yeah, on real estateyeah, because I.

(46:38):
But, as you said, I did buildthat up over time and the banks
had faith in me because I'd donethis a lot.
You see, okay, now, I'm gettingclose now and you'll interest
rates in 0.5 amortization term25 and calculate Okay, so this

(47:04):
comes out with payments of125,628.
All right, a month per month.
Per month.

Eric Howerton (47:15):
That includes principal and interest.

Mark Zweig (47:16):
Yeah, that includes principal and it.
So basically, if we had itfully leased out and we weren't
paying any maintenance expenses,I don't know we would make the.
We would be bringing in therent that would cover the
principal and interest and we'dbe paying the maintenance out of

(47:37):
our pocket.
So maybe we need to chargeourselves a little more rent.
Okay, maybe we make ourselvespay the TII or whatever whatever
they call it.
That includes a factor for theinsurance, property taxes,

(47:59):
maintenance and everything else.

Eric Howerton (48:01):
Maybe that's another percentage on top of our
rent, like move to the triplenet scenario, right, so it's on
top of this, right the cover it.

Mark Zweig (48:13):
So if we did that, then we would be able to pay for
the whole deal and kind of havea little cash flow on it.

Eric Howerton (48:22):
So you're making some income.

Mark Zweig (48:23):
Right, we wouldn't really be making money, though,
we'd just be covering our note.

Eric Howerton (48:28):
And the reason you wanna do that is that
eventually you're well, here'show this benefits us.

Mark Zweig (48:37):
Let's say that you and I were the primary owners of
the business that's gonna usethis space, okay, right.
And you and I are the owners ofthe building corporation, right
?
So we've got this $22,500,000building that we can depreciate
over, let's say, 27 and a halfyears or whatever the allotted

(48:58):
schedule is.
I don't remember, I'm not a CPA.
Let's just say, for the sake ofexample, it's 27 and a half
years.
That means that we are gonnashelter about $900,000 of our
income annually.
So you own half the building, Iown half the building.
You get a statement that says450,000.

(49:19):
I get one that says 450,000loss.
Let's say we each made a milliondollars in our business for
that year.
450,000 of our income just goesaway.
Yeah, you don't pay taxes, payzero tax on it.
Meanwhile, this building isgrowing in value, depreciating.

(49:42):
So it's depreciating for taxpurposes, but it's appreciating.
So let's say we're there for 25years.
Even if we sell our business,we rent it out to the new owners
, or maybe the firm we hadeventually moves out.
We rent the whole thing out todifferent people.
Over time we escalate our rents.
Over time our value goes upbased on those higher rents 25

(50:07):
years later.
Let's just say, for the sake ofexample now instead of a $22
million building, we've got a$66 million building and it's
paid off.

Eric Howerton (50:18):
Okay, now you're cash flowing plus, you have that
.

Mark Zweig (50:22):
Huge asset.
Huge asset.
That's how you get rich overtime as a small business by
owning the real estate.
It's a tax strategy.
It's also a wealth buildingstrategy.
Okay, yeah.
The problem is, when you go tosell the building, you've got a
huge gain, obviously Okay.

(50:43):
Then you got a huge tax burden.
So that's why a lot of peoplelet's say, at the end of 25
years we got this building, it'spaid off you and I both say we
don't want this thing anymore.
We sell it for the 66 millionor whatever we get out of it,
and we then take our money andwe roll it into other things
that are real estate related tosave our tax, that's your tax.

(51:06):
31 exchange.
That's your 1031 exchange.
We don't want to show that gain, but we think apartments are
great now.
So we're going to go buy 200apartments in South Florida and
have a property manager, orwe're going to put our money
into a read or some kind of afund that allows us to claim a
1031 on it.
To a read, did you say readReal estate investment trust Got

(51:29):
it.
Then we just have a portion ofa bunch of properties out there
Okay, that somebody's managingas a portfolio.

Eric Howerton (51:37):
Maybe that can invest in other real estate Like
you, basically become aminority shareholder in a bunch
of other real estate.

Mark Zweig (51:42):
Exactly.
There are ways, I believe andagain, I'm not a CPA but to get
your 1031 money by doing that,mm-hmm Okay.

Eric Howerton (51:53):
Yeah, because I think that part of this too, I
mean like we can start talkingabout getting into estate
planning, right, I mean like wemay not want, like I mean if we
pass away and our family getsthat through the trust or
whatever, like they may want tobe cashing out, yeah, but if you
did cash out on that, you wouldget hit with a capital gains
tax of Significant, which is 25,what 25% right?

Mark Zweig (52:15):
26?
I don't know.
It changes every year.
There's some kind of a scale,but I don't know what it is
right now 20, 25%, somewhere inthat domain.
Yeah, I mean this building wejust sold.
We're gonna get hit with440,000 tax bill.
It's selling for 3.5, but it'sdepreciated value is 1.8.

(52:38):
So you take a million seven.
I guess it must be over 20%,Mm-hmm.
Okay.

Eric Howerton (52:47):
But in the midst of all this, I think the point
of the conversation is thissounds great, right, yeah, but
you have to be the one thatfreaking manages this whole
process Like you are the onethat's Driving it.
That's driving it.
I mean, and you gotta be all upin the middle of that business.

Mark Zweig (53:05):
Right, and the downside of it is so, yeah, but
again, if you're doing a projectof this scale, you should be
able to get decent architectsand engineers and good general
contractor that knows whatthey're doing.
It's not like adding on yourhouse.
Yeah, right, where you gotthese guys?
I got a pickup truck and I gota license.
I'm a licensed remodeler.

(53:25):
Lets me do projects up to20,000, but I'm gonna build your
house.
It doesn't matter.
Okay, that's not.

Eric Howerton (53:32):
So, but I mean On the big commercial side.
I mean I think there are.
It seems like what you'retelling us is that from an
industry, broader industryperspective, yeah, the pros are
hanging out on the commercialside.

Mark Zweig (53:44):
Exactly.

Eric Howerton (53:46):
On the residential side.
So now we're talking aboutsomething different.
But there's a lot of folks thatwanna get into residential or I
mean even personal type stuff,or they're wanting to get into
residential investing Right.
That seems like that.
That is the Wild West.
No one has a freakingspreadsheet.
No one's really GC in that atall.

Mark Zweig (54:07):
If I'm wanting to remodel my house or if I wanna
buy If they are, the cost is sohigh that it's hard for you to
make money on it.
I mean, there are people whojust hired GCs to do everything.
Yeah, but then that's gonnagraduate your cost per square
foot yeah, it's gonna kill your,you're probably gonna lose some
money, you know, because it'sgonna cost you more, because the

(54:29):
GCs getting paid roughly 15 to20% of the project cost On top
of what they're paying On top ofwhat they're paying.
Right.
So, like some residentialbuilders were cost plus the way
we did it.
Only way we did it was costplus.
We never gave a hard dollar bid, so we would give you the
invoice from the sub and mark itup by 20% and that was our fee.

(54:52):
So if it's a $500,000 job,we're getting paid $600,000.
We make $100,000.
Yeah, Okay, but that'sgradually, I mean for the older,
the more we spend, the more weget.

Eric Howerton (55:06):
And everybody's incentivized to spend more money
.

Mark Zweig (55:08):
They are, but that, unless they, all are yeah, so
that would.

Eric Howerton (55:12):
that would cause me to go.
I'm not gonna like then I'm notgonna get the general
contractor.

Mark Zweig (55:17):
I'll be the general contractor.
I'll be general contractorBiggo.
Now we're back to your driveway.

Eric Howerton (55:23):
But then you're.
But I think that what I'mstruggling You're half a million
dollar driveway Love.
What I'm struggling with, whatI'm struggling with is, like I'm
just so used to in business,somebody having a pro forma,
some sort of spreadsheet that'sautomizing the cost and I can
see what I'm paying for.

Mark Zweig (55:42):
I always did an estimate for clients.
If I was doing it on a costplus, it would have a breakdown
in it.

Eric Howerton (55:49):
Okay, but it's an estimate, but you, you're not
gonna.
But you're not gonna engage inthat estimate unless you got the
job right.
You're not gonna go spend yourtime as a GC.
Well, I got paid for that wegot.

Mark Zweig (55:59):
We charged for design and cost estimating, Then
we charged 20% on top of theconstruction.

Eric Howerton (56:05):
We were designed so there are people that might
be out there that you could payjust to have this like a pro
forma Correct Done about theproject.

Mark Zweig (56:13):
Yes, there are yeah, we charged for that.
What did you charge?
It just depended.
It was a flat fee based on thecomplexity of the job.
I hated doing cost estimates,therefore they're gonna pay Okay
.
We had in house architecture.
We were really a design buildfirm.

Eric Howerton (56:31):
Okay, but how sophisticated is that estimation
, though?
I mean like cause, I'm justthinking like again, like here's
where my guy have understated.
Okay, that's where my, that'swhere my frustration lies.
It's like I can't get.
I can't seem to find any truthor accuracy in any of this.

Mark Zweig (56:50):
Here's the reason why you can't because we don't
know with certainty.
When we call Jose to give us abid on your driveway, we think
we know what you want for yourdriveway.
We don't have great plans onyour residential job.
Typically, we don't know whatwe're gonna encounter out there.
We don't even know what theprice of concrete is today,
cause it's changing all the time.

(57:11):
Okay, we don't even know ifJose is gonna be able to get
concrete.
Isn't that a freaking softwarefor this stuff, man?
I'm sure there are people thatdo it.
I constantly get emails frompeople in India and stuff.
I wanna do my cost estimating,but I don't trust them.
Okay, and I know it's gonna begarbage, yeah, so you just have

(57:33):
to.
A lot of it is just based on areally good experience.
Gc slash home builder is gonnahave a pretty good idea of what
things cost, based on certainrules of thumb.

Eric Howerton (57:45):
Yeah, which then therefore puts the knowledge
back in this person's head andwhere you have to have, as an
owner and investor, you have tohave a level of trust you do
With that individual personRight, and that's to not
freaking.
Take you to the bank or have anabsolutely devastating project.

Mark Zweig (58:03):
Here's the truth.
Now you do have to have trustand like you know.
So let's say, I was doing a job, I'm building a new house for
you, I'm charging you 20%.
Okay, yeah, they go.
Geez, that's a lot of money,mark whatever, okay.
But then you do some researchand find out that A the people
that have our stuff like it, itholds up.

(58:23):
B if there's a problem, we'refixing it.
Mm-hmm.
C.
We're generally pretty good onour cost estimating.
Okay, this is you'd find thatout by talking with people right
that it used us and indeed theturn time D.

Eric Howerton (58:39):
we're gonna get it done.
The turn time is what we sayIt'll be me and all this stuff.
Yeah, because the Because everymonth is more money, right, I
mean like that's for me like alot of the stuff, like just Like
it gets brutal man.

Mark Zweig (58:54):
In the old days we used to say price, schedule,
quality, pick any two, yeah.
In other words, I can give youa good price and I could maybe
hit your schedule, but thequality is gonna suck.
Or I could give you quality andschedule, but your price is
gonna be high.
You see what I mean?
Yeah, man, but yes, you'reabsolutely right.
So you gotta have arelationship of trust.

(59:15):
But here's the thing I used totell clients and this is not
bullshit, it's true.
So let's say, I'm charging you20% to do what I'm doing.
You're actually not paying 20%.
You know why?
Why?
Because I'm gonna get thatplumber cheaper than you are.
Because he works for me everyday.
He's gonna give me a lowerprice than you.

(59:37):
He knows I'm gonna have my siteprepped, it's gonna be clean,
I'm gonna take care of them.
But you're not gonna pad thatthough.
No, I'm not padding.
And whatever the cost of theplumber, you're gonna pay 20%.
I'm gonna give you the backup.
Okay, so I'm gonna get mypainter cheaper than you are,

(59:59):
because my painter doesn't knowhow to market.
He doesn't want.
He knows I pay his bills.
He doesn't wanna work for otherbuilders.

Eric Howerton (01:00:07):
So he's gonna hook you up Right.
It's everything that he does.

Mark Zweig (01:00:11):
I'm just saying in theory, like my Rufor, I'm gonna
get Rufing far cheaper than youcan buy Rufing for, because the
same guy's done 100 roofs forme and he knows I don't jerk him
around.
Okay, so let's say, of the 20%,maybe I'm saving you 10%.
Now I'm only costing you 10%,yeah.
The other thing is I get to buystuff cheaper.

(01:00:33):
Why is that?
I've got an account at thelumber store.
If I pay him in 10 days, I get2% off.
Yeah, okay, so I could save youanother 2% there.
You're not going to get that asa homeowner.

Eric Howerton (01:00:46):
You see what I mean.
Yeah, you go down the homedepot when you're paying full
retail right.

Mark Zweig (01:00:52):
So I've got a commercial account at Wayfair.
Even if you like, order lightsor plumbing, whatever, I get it
cheaper.

Eric Howerton (01:00:59):
So how does our audience get in touch with you
for their next project?
Do not call me.

Mark Zweig (01:01:08):
I mean the business 20 years ago.
It used to really be fun.
We did one project at a time, Ihad my own carpenters.

Eric Howerton (01:01:15):
Everything was great when I'm met you.
You were rocking at Roller.
Yeah, we were, but that was funfor you then it was fun, do?

Mark Zweig (01:01:22):
you had five, ten million bucks a year in revenue
and doing really high quality.
What really hurt us was when Icame back to Swag Group yeah,
and then my lead carpenter dieda couple years later.

Eric Howerton (01:01:36):
Yeah, jack, jack, that hurt everything, okay
that's because you had somebodyas a GC.
You had a Carpenter, I had asuperintendent jack
superintendent, that was areally good carpenter dude.
He was.

Mark Zweig (01:01:51):
I mean, he's a cool dude, anything, jack, it'd be
like he was such a positive guylike you'd say jack, can we do
that?
Oh, yeah, we can do that.
I mean the whole house is likeFalling off its foundations
Seven inches out of level.
We have to jack the whole thingup, dig everything out, putting
and put a foundation under it,lower it back down.
Sure, we can do that while thehouse is falling apart.

(01:02:11):
You know, no problem.
I mean, he just never broke asweat, he was a positive.
Yeah, can do get it done.

Eric Howerton (01:02:18):
Yeah, you know, the central theme of what we're
talking about today is what wetalk about and value basically
every episode.
It's about good people.
Man, oh man, I'm telling youall the businesses are period I
had good people.

Mark Zweig (01:02:32):
It's so true.
I saw something I linked intoday that was like, as a
startup, what's the mostimportant thing?
You know your lender, yourinvestors, your customers, your
people.
I said people.
Yeah, I was in the minority.
With the good people, you canovercome anything you really can
and that.

Eric Howerton (01:02:49):
And that doesn't mean finding the the brightest,
smartest person that's everexisted, actually that's I mean
I know we can.
We can have an episode aboutthat.

Mark Zweig (01:02:57):
Well, we need to talk about what kind of people
we really want in our businesses.
I can say I could answer thatreal quick.

Eric Howerton (01:03:03):
Okay, attitude, good advice with good attitude,
just like you're talking aboutjack positivity, can do, get her
done, can do is everything.

Mark Zweig (01:03:12):
It is, man, I, I'm very frustrated with somebody.
I'm not going to mention you,because they'll listen and then
say it's them, yeah, but they'llgive you every reason why you
can't do something.
I can't, and I, I'm, I'mAbsolutely at my limit.
They stay for, even to thepoint where they start

(01:03:32):
forgetting whose team they're on.
Totally Okay, it's like a mudin the p.
The enemy is outside thecompany, that inside, that's
right.

Eric Howerton (01:03:43):
That's right.
So and folks got to.
You know there's.
I have some examples too and Iwon't mention too much.
But People can get too wrappedup into the black and white, the
pressure of business and Shuttheir door.
I've seen people change likelegitimately change and they get

(01:04:04):
wrapped up and they lost theirluster, yep of life and in in
they discount that value To theother people in the organization
.
That's the problem is theircancer.

Mark Zweig (01:04:17):
They're even attitude spreads to other people
.
It's like, well, maybe I can'tdo it, maybe management really
is screwed up, maybe managementdoesn't know what they're doing,
maybe Management's going thewrong way.
Okay, and that skepticism andI'm smarter than yes is a big
problem.

Eric Howerton (01:04:37):
Dude, I tell you like it is, and it's not that
hard to just Laughter.

Mark Zweig (01:04:44):
Yeah having fun you are the best at that.
Thanks, man.
It's always fun with you, likeI'm just we're also serious as
hell.

Eric Howerton (01:04:51):
Yeah, but I'm I have realized like To walk in a
room every circumstance possibleTo have a little bit of
laughter and smiling is whatit's all freaking about.
I am.
It keeps you things 100%percent, man.

Mark Zweig (01:05:07):
I'm so with you.
That's why it was so much funto work with you.

Eric Howerton (01:05:10):
Yeah, man, because we only do you know
freaking.
I mean, it didn't matter whatthe hell was going on.
The whole world's candy we oweso much to so many, right, but
we still freaking laugh, right,it's just, it's it.
It's almost like this wholeepisode, like I'm sitting here
dealing with this other stuff.
Yeah, come here to big talk andI'll actually consider it
therapeutic Because we can havea real conversation and I'm

(01:05:33):
feeling like a freaking humanagain.

Mark Zweig (01:05:35):
I wish we could carry this conversation on
longer.
We're gonna have to pick it upagain, because I do want to talk
about employees.
Okay, and and I think I thinkit'll be good for some people to
listen- yes if they want to getahead and maybe be a firm owner
or entrepreneur someday, mm-hmm, I think we can help them.

(01:05:56):
I think so too.
You know, I think so too, butnow we're out of time and I
gotta go meet an electrician.
Damn it on my job site, yeah, soanyway.
Well, listen everybody um.
We appreciate your tuning in.
Yes please check us out at www.

(01:06:18):
Big talk about smallbusinesscom.

Eric Howerton (01:06:20):
There's a dot in there after the w.
Oh yeah, and I'm not here tojudge you.

Mark Zweig (01:06:25):
Big talk about smallbusinesscom.
Um, we still are looking forsponsors.
We have an interest in Inputting out some good
information.
Um to small businesses.
Please help us with sponsors.
We'll probably keep doing itthough, and it's doing anyway.
Right, you can ride along withthe cool factor though you could

(01:06:50):
, if you you know, you couldtell me how I should sponsor
this episode.

Eric Howerton (01:06:53):
They somebody like that should um, but anyway
um.

Mark Zweig (01:06:57):
So we really appreciate your tuning in and we
will see you next week onanother episode of big talk
about smallbusiness.

Eric Howerton (01:07:13):
Business.
Thank y'all.

Narrator (01:07:23):
Thanks for tuning into this episode of big talk
about small business.
If you have any questions orideas for upcoming shows, be
sure to head over to our website,
wwwbigtalkaboutsmallbusinesscomand click on the ask the host
button for the chance to haveyour questions Answered on the
show.
Stay connected with us onlinkedin at big talk about small

(01:07:44):
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