ADUs, Deals, And Battle Scars | Brian Koons E30

In this Paradyme Shift episode, Ryan Garland sits down with Brian Koons, a seasoned ADU developer and investor whose career spans more than 500 accessory dwelling unit (ADU) projects across Southern California. Together, they unpack how legislation, zoning reform, and creative financing have reshaped residential development—and why the next wealth wave is being built in backyards.

The conversation blends strategic investing lessons with raw operator insight, diving into:

• The evolution of the ADU movement and how California’s housing crisis turned regulation into opportunity.
• Lessons from scaling from single-lot flips to multi-unit infill projects—and the painful mistakes that came with growth.
• The power of partnerships, transparency, and setting up protective fund structures to safeguard investors and operators alike.
• Why focus, patience, and legal preparedness define the new generation of developers.
• Real-world stories: from 2.5x exits on value-add properties to the deals nearly lost to divorces and legal battles.

Ryan and Brian peel back the layers of entrepreneurship, showing that success in real estate isn’t about luck or timing—it’s about discipline, due diligence, and building systems that outlast hype. This is an inside look at how Paradyme and its network of visionaries are shaping the next era of intelligent, community-driven development.

For more information on Brian: https://hkdevelopmentgroup.com/

Paradyme

Episode Transcript

SPEAKER_03 (00:20):
Hey everybody, Ryan Garlin here, founder and
chairman of Paradigm.
Welcome to the Paradigm Shift.
It is my honor today tointroduce you to Brian Koons.
Brian has some really coolbackground, not only from the
military, and we're going to lethim share a little bit of his
story, but to really talk aboutADUs.
And I don't think I've ever metsomebody who has gotten so
involved in that product or thatasset class.
And I really want you guys assome of my clients and investors

(00:41):
to get to know a little bitabout him.
And he's created a niche.
He's been involved in over 500projects.
He's done his own ADUdevelopments.
He's exited it, come back to it.
He's had some a really cool uhexperience and some, I think
some uh scars from it, which isimportant because you without
growth, man, you got to get somescars, man.
You got it's the only way yougo, right?
So Brian, thanks for joining metoday.

SPEAKER_02 (01:00):
Dude, I'm I'm so grateful to have you know to be
here.
I'm excited to to rap with youfor a little bit and you know,
share, share the love.

SPEAKER_03 (01:06):
Well, you drove five hours to get here.

SPEAKER_02 (01:07):
Uh you know, we uh I woke up at at 12 30 this morning
because I had to hit the gymbeforehand.
Oh dude.

SPEAKER_03 (01:13):
Um lucky I haven't I haven't hit the gym yet.

SPEAKER_02 (01:15):
It uh so it was mainly for the caffeine too, to
to get in, you know, get somecaffeine for the for the drive.
And it was, yeah.
So I'm I'm excited to be here,man.

SPEAKER_03 (01:23):
So what did you think when you pulled up to uh
the storage unit?

SPEAKER_02 (01:25):
I was dude, I was blown away when I saw the gym
from the from the get-go.
I was just like, there's no waythis dude has a gym inside of
the unit itself.
And then you just drove me, youknow, 30 seconds one way and you
show me boats, and you drive me30 seconds the other way.
You say those are where the youknow the the spaces to live are
gonna be above.
Like it's just it's crazy, bro.

SPEAKER_03 (01:43):
It's good stuff to see, right?

SPEAKER_02 (01:44):
I I've never I don't even I've never even dreamed of
something like this, right?
And so it's it to see it alreadyexist is just like one of the
craziest things.

SPEAKER_03 (01:52):
And it totally morphed.
We didn't we went uh a directionwe didn't think it was going to.
You know, when and when thepandemic hit, I was I had uh
office space, I had uh we hadour um our winery, we had all
kinds of other different assetclasses, and obviously the
pandemic really drove certainasset classes well, and then it
also shut down like office,right?
Retail got hit, certain areas inthe country got hit.

(02:13):
So really what it did for us iszone in on what asset class was
gonna work best for us, and Iwas already uh in escrow to buy
this project.
So I'm I've been coming out herefor 35 years, so I already knew
the demand, right?
So I'm like, shoot, if I couldbuy that, build that, that'd be
killer.
And then I over time and withthe pandemic and everyone being
shut down in California and mebeing here more, I just kept
buying more and more land.
So now I'm like, all right,well, I guess I'll just make

(02:34):
this headquarters and and livehere, and that's really what we
did to get here.

SPEAKER_02 (02:37):
Dude, you solved the problem and you were you're
continuing to just more and moreuniquely solve the same issue.

SPEAKER_03 (02:42):
Yeah, we we're blessed because I think the
brand just kind of morphed fromthere.
You know, we just I think whathappened is we just put all of
our energy in one basket, inessence, and it just took off,
right?
So we're we feel honored, we'reblessed.

SPEAKER_02 (02:52):
I think that's so important to be able to just
focus on one thing and getreally, really undeniably good
at that one thing.
Yeah, and it, yeah.

SPEAKER_03 (03:00):
It's so true, dude.
A lot of people, I think they'rejust they go too far, they're
too diverse, and they're andthey they need to hone in and
and perfect a craft first beforethey start shifting and bring
everybody that's in your team toget to understand that that
product well, and then you startgrowing, you know, separately.
But that's the that's the onethat's funny you brought that up
because I've been trying topreach that to my network, like,
hey, you know, pick a lane anddo real well at it.

(03:22):
And that's what it sounds likeyou did with your ADUs.
Yeah, so let's talk about that.
First and foremost, you servedin the military.
What branch?

SPEAKER_02 (03:28):
Uh Marine Corps.

SPEAKER_03 (03:28):
And where were you stationed originally?

SPEAKER_02 (03:30):
Originally, Virginia and then North Carolina, and
then San Diego, uh starting in2019.

SPEAKER_03 (03:34):
And you fell in love with San Diego.

SPEAKER_02 (03:36):
Fell in love with San Diego.

SPEAKER_03 (03:37):
There's nothing better than Southern dude,
Southern California, weather,and then San Diego.
I like it's just they keep itclean.
San Diego's a really cool spot.

SPEAKER_02 (03:44):
Yeah, it's so funny.
Like when I got there, I did Ididn't even know what's funny is
I didn't even know San Diegoexisted, existed until I was in
the military and they startedstationing people at this place
called San Diego.
And I was like, what is that?
I had no idea.
And I got here and it just Ididn't realize this, you know,
kind of wasn't in the realestate space at all.
I didn't even know what a duplexwas when I got to San Diego.

(04:07):
And looking back at it now, I'mlike, this is literally one of
the fucking best markets in thecountry for you know, X reason,
X reason, but you know, it'slandlocked is like one of the
biggest things where you havethe ocean, you have you know
parks, you have Camp Pendleton,and you have Mexico.
Yep.
There is no place to buildexcept up.
So the only thing isre-densification.

SPEAKER_03 (04:26):
Yeah.
And and and it's such a big cityas it is, with and it has so
much history.
So going after some of the oldproduct, tearing it down,
building new, or again, goingafter those slots that are kind
of slender, but you know, long,where you can drop these ADUs in
there, right?
Yeah, I kind of do it.
It's funny because I had beenlending on ADUs for a long time,
right?
As a lender.

SPEAKER_01 (04:45):
Yeah.

SPEAKER_03 (04:46):
Um, and so I really got to know that space well
because I did a lot in LA.
Um, ironically, I just had apodcast with uh Alex yesterday,
and we talked about the samething.
But um, that's where I feel likepeople saw the value in it as
far as the homeowners, or froman investor's perspective, you
can add almost immediatelyadditional living space and
generate more income immediatelyor value.

(05:07):
And then you're getting thatextra bedroom bathroom, which
most of the time is morevaluable, especially with an
older home when they're twobedroom, one baths, or two twos,
or three twos or three ones.
Just the older homes are justdon't their layouts suck
compared to the modern way ofdoing things.
Yep.
So adding that ADU has added,you know, it does a lot of value
for everybody involved, right?
So let's talk a little bit aboutyour history in ADUs, how long

(05:28):
you've been doing it.
Um tell me a little bit aboutthe story too, when how you got
into it, because I thoughtthat's that's impressive on how
you got into it.

SPEAKER_02 (05:35):
Yeah.
Um, so started off, I was in themilitary at the time.
I had moved to San Diego and atso I was a drill instructor.
Um and so when I come over whenI came over there to be a drill
instructor, they had somebodycome and talk about the VA loan
because everyone moves fromwhatever place and they don't
don't actually uh get stationedthere until they actually pass
drill instructor school becausethere's such a high attrition

(05:56):
rate.
So he talks to the people whilethey're there and says, Hey,
once you pass, like when you'reready to buy a home, you know,
here's what you can do, your VAloan, and you know, he has his
brokerage, he has his lendinglicense, and so like there's a
natural progression to you knowusing him and whatever.

SPEAKER_00 (06:09):
Sure.

SPEAKER_02 (06:09):
Um, but he had this one little piece that basically
talked about house hacking.
It was like how to make ahundred thousand dollars in
three years when you'restationed here, uh like tax, you
know, debt pay down and andsaving up, you know, cash flow
or whatever.
And he talks about renting outthe other spaces.
And I was like, that thatfucking makes sense.
And so for me, I was still asergeant at the time.
So we I didn't get uh thehousing allowance.
So it wasn't wasn't really on inthe playbook for me at the time.

(06:32):
And then once I, you know,actually became a drill
instructor, it was, you know, Iwas working seven days a week,
20 to 24 hours a day.
I got like one night a week thatI got sent home until like four
in the morning.
So there was no time to doanything.
But then COVID happened, andthat was when interest rates
dropped.
A lot of things basically I Ihad read like three books in
that time, and I was like, realestate makes sense, eventually,

(06:52):
cool.
COVID happened, and I went to asupplementary job to a drill
instructor, which essentiallywas way less time.
I was quarantining, I was incharge of taking care of all the
recruits when they werequarantined before they actually
went to boot camp.

SPEAKER_03 (07:03):
Got it.

SPEAKER_02 (07:03):
So I was like working at a hotel.

SPEAKER_03 (07:05):
As they were coming in, they go through the
quarantine of books and sit fortwo weeks, right?

SPEAKER_02 (07:08):
Sit for two weeks, and then they can go to actual
boot camp.
So at that hotel, they needed ababy uh glorified babysitter.
So I was a glorified babysitterfor a year, but that time was
this time.
So that was uh basically middleof April.
They kicked us out, and it wasimmediately from their uh middle
of April, they were like, youneed to be out by the end of
April.
So we had two weeks to go findsomewhere to live because they
needed our uh barracks rooms toactually quarantine those

(07:30):
recruits.
About a you know, three days in,they're like, actually, we need
you out by the 23rd.
So I had like a week to find aplace to live.
Uh, and I was like, I'm gonnamake a shit decision if I like
just try and buy a house rightnow.
So I ended up renting withsomebody, and then uh about
middle of May was when I waslike, all right, I'm gonna start
like you know, doing this.
Um, and then early June, I wasin escrow on a fourplex uh with
my VA loan, interest rates, allthese things.

(07:52):
Like I didn't even understandwhat debt to income ratio was.
So I ended up, you know, longstory short, I bought that, and
then I had no leftover income tosupport buying another property,
but I was like, let's go, thisis amazing.
And uh bought some, you know,ended up finding out through
just meetups and things aboutthis thing called ADUs.
And the whole concept was like,you know, you build at 300 a

(08:13):
square foot, you sell at 700square foot.
I'm like, that math makes senseto me.

SPEAKER_03 (08:16):
Easy easy value add.

SPEAKER_02 (08:18):
Easy value add.
And so I just as through thethrough that, just ended up
meeting a couple partners whoboth wanted to get in the space.
The one guy said I was like,hey, my dad's a contractor, he's
been doing this for a long time,he'll make sure we don't crash
and burn.
And we're all like sick.
So we met in November and wewere in escrow on this land in
December.
So we ended up buying twovacant, vacant lots.
It had a house that got demoed.

(08:39):
So there was already existingutilities and things.
So vacant land, way better thanraw land.
Um, and the month that we wentinto escrow was uh the the same
month that this program calledthe bonus ADU program came out,
which is a San Diego Cityspecific thing that essentially
allowed unlimited ADUs on anyproperty within a set amount of

(08:59):
space from a major publictransit stop.

SPEAKER_00 (09:01):
Wow.

SPEAKER_02 (09:02):
And what that actually equated to an
application at that time, Ididn't really know what it was.
We bought this land expecting toput four units on it.
And just by me reading a bunchof stuff called municipal code
for a month and a half andasking a bunch of questions of
the city, we were able to doublethe unit amount, make eight
units.
And so that intrinsic justability to do that paired with

(09:24):
this timing in the market justblew my mind, right?
Like I literally, I I make thejoke all the time.
I felt like a Jehovah's Witnessspreading the gospel of ADUs
because I was like, I was like,this is amazing.
Why is everyone not doing this?
Like, you just gotta like readthis like two-page document and
and you know, and I, you know,over time I learned that it's
extremely complicated andthere's a lot of layers to it,
and people don't want to spendthe time doing it.
Yeah, and that's why you have aa nerd like me that wants to go

(09:46):
and and actually you know figureit out.
And that, you know, timing inthe market, it I just you know,
I my brain blew up and I justfigured out ways to get in other
deals.
So I used my owner occupiedloan, but I had my buddy, my
partner co-sign because he mademore money than I did.
That was another developmentdeal.
We just we just kept rolling it.
And and so that was kind of howI got into it was that land, but
we ended up selling that landbefore we even bought it.

(10:08):
Or so we bought it for 420 withthe intrinsic value we added
from being able to double theunit count and then COVID just
doing what it did to values.
We sold it for a million fifty,like a year and a half later.
Holy gee! And talking about avalue add.
Oh, the value add and just whatwhat a way to get your ego so
high up in the clouds whereyou're like, every deal is easy.

(10:31):
Real estate, what are peopletalking?
Like, I got this, bro.
So we rolled that into threedeals.

SPEAKER_03 (10:37):
1031 exchange.

SPEAKER_02 (10:38):
1031 exchange.
So we basically kept half the uhhalf the land or half the money
for holding costs and thingslike that.
That wasn't taxed.
That wasn't taxed, and then theremaining we 1031 into three
deals, and we leveraged as muchas we possibly could.
It was every penny we had 20%solar finance in one of the
deals, so we only had to comedown with 10% on that, and then

(10:59):
just hard money loans oneverything.
I'm like, ah, interest rateshould Mr.
Straight, like it doesn'tmatter.
Uh, and we ended up just youknow, a lot of learning lessons
went to basically managing 13units of renovation at the same
time from managing land.
And so just I had no idea, I hadno concept of that to begin
with, and then I had no conceptof the cash flow required for
the holding cost.

SPEAKER_00 (11:19):
Yeah.

SPEAKER_02 (11:20):
Paired with we had some issues with the lender
because we had a code violationon one of the properties.
So we got about a hundred grandinto renovation and then we were
like ready for the first job.
And they're like, Where's yourpermit, bud?
Yeah, and so just a whole bunchof learned lessons there.
And so that was around the sametime that I had gotten out of
the military and I startedworking at this company in San
Diego that ended up beingprobably the largest ADU design

(11:42):
firm in San Diego and probablyone of the largest design.

SPEAKER_03 (11:44):
So they were design and building ADUs?

SPEAKER_02 (11:46):
They were just designing.
Okay.
So they started design,basically, the the CEO, the
founder had his dad who wantedto do an ADU back in like 2018,
2019, started the process.
The architect was like, Oh,yeah, I'll draw this for you.
And then he was like, Oh, by theway, we need a soil study, and
then oh, hey, we actually need astructural engineer to get
involved.
That'll be five grand, threegrand.
And so they got like 20 grandin, submitted to the city, and

(12:07):
then they the city's like, youcan't build this here.
Like there's there's an issuewith whatever it was, you can't
build it.
So six months, 20 grand wasted.
And so he just wanted to fixthat.
He was like, I want to actuallygive people the tools that they
need to understand what they'regetting into day one.

SPEAKER_00 (12:21):
Yeah.

SPEAKER_02 (12:22):
And so that was kind of uh it was a very unique uh
company, and that's why it grewso much because it wasn't an
architect who was just like,Yeah, the industry standard,
I'll draw it, and then I'm notgonna tell you I I have no
concept of finances, I have noconcept of like how to evaluate.

SPEAKER_03 (12:35):
A lot of architects have no idea about the capital
stack.
Yeah, right.

SPEAKER_02 (12:38):
And so there's no, so they didn't know they don't
understand that.
And the contractors gengenerally don't tend to
understand from the design sideor from the financial side.
They just say, Oh yeah, likeI'll you know, I can build it.
That's how much it cost tobuild.
I have no idea if you can buildit, right?
Um, or if you if you can get itapproved.
And so this company was kind ofthis this you know, framed
itself as this buffer bridgebetween the two.

(12:59):
Um, and so I started workingthere.
Long story short, they had like500 ADU projects while I was
working there.
I ran development for them.
So I was basically the front endof every project.
Anyone who came in had a deal,I'm the one who looked at it,
I'm the one who underwrote it,I'm the one who determined
feasibility on it, helped themdetermine the scope of work, and
helped get them to what webelieve was the best thesis

(13:19):
project based on all theprevious experiences.

SPEAKER_03 (13:21):
Did you help them with the finance if they needed
it?

SPEAKER_02 (13:23):
So that's something I I get I got asked that a lot,
right?
How do you finance it?
Like, how do I finance my ADU?
And my easiest answer is buy afucking good deal.
Yeah, right.
Like I have people who can'tcome to me with an
owner-occupied loan who have put2% or 3%, 5%, or 0% down, and
they're like, I want to do uh,you know, three units in the
backyard or two units, and it'syou know, it basically the cost

(13:43):
to build because I want to buildit on a hillside and and you
know, build above the garagebecause I want to keep the
garage and stuff, they're like,How do I find it?
So I'm like, you get more equityin the deal by either building a
better product or having a housethat has ex you know existing
equity, you know, renovating theexisting house.
And so, um, so we, you know, wehad partners and uh that do the
you know, broke have a brokerageor have different partnerships.

SPEAKER_03 (14:05):
Second loan, second mortgage kind of thing, yeah.

SPEAKER_02 (14:07):
But it's just it's so hard where it's like if you
have a quality deal to beginwith, it's it's so easy to find
finance.

SPEAKER_03 (14:13):
How much were these units typically cost?

SPEAKER_02 (14:15):
Um, I mean a one bedroom, you know, a lot of them
were like four to four hundredand fifty square feet, probably
between one thirty and onesixty.
Really?
Um, so yeah, they're not, Imean, they're not cheap.
Like out there, I mean, you'rebuilding right now.
Like, I just got four bids forthree projects.
Every one of them came inbetween like 350 and 400.

SPEAKER_03 (14:33):
Well, that's inflation.
Cost of construction right nowis insane.

SPEAKER_02 (14:36):
Yeah, the the main thing is labor, honestly, out
there.
And and because they'rerealizing that ADUs are so
rampant, they've somewhatmonopolized in a way.
And ever since COVID, right?
Like that's when it shot up.
When we bought that land, wewere expecting to build at 200
to square foot.
We didn't build it 200 squarefoot with um, uh, we went up to
300.
The issue is even after whenmaterial shortages came back

(14:58):
down to reality, they're like,I'll just keep charging this.
Like, um, and so that's kind ofwhat what's happened is so now
that's that's like a big hurdlethat we're getting over, is
we're figuring out ways to getour construction costs down
because that's it's not a ashortage of deals, right?
Every single property inCalifornia can have four units
on it.
So there's no shortage of it.

SPEAKER_03 (15:16):
Yeah, so single family zoned four units, max.
So if you already have a one onedwelling, you can get three
more.

SPEAKER_02 (15:21):
Yeah, single family is dead.

SPEAKER_03 (15:22):
Do they have do they are they uh do they want
individual meters?

SPEAKER_02 (15:26):
Yeah, so you do individual meters on them.
Um, you know, there's nuances ofsome of them can be attached,
some of them have to bedetached, but by you know, on a
on the right property, you canleverage it the right way and
get four units, and every unitis in an independent living
facility.

SPEAKER_03 (15:40):
And everything's a little different.
So setbacks and property lines,all that has to be considered.
So everything's unique.
You just have to kind of look atwhat you have to work with and
just work around it kind ofthing.

SPEAKER_02 (15:48):
Yep, yeah, exactly.
And that's like that was wheremy like special sauce was was I
was the one who helped you likewhat are the setbacks?
How high can you build?
Like, what are all of theselittle nuances to be able to
plug and play?
And that's like it started rightwhen I bought that land because
I'm like, oh, if we do thisthing with the code and then we
like leverage this little piece,then we like do this thing with
the building and then do thisafter.
Like it was just it, it's agame, it's a puzzle.
Yeah, like it's so fun.

SPEAKER_03 (16:08):
So let's talk about because I know this is gonna be
a little awkward, but I'm gonnapull it out of you.
So talk about the uh story howyou had a partner that was going
through a divorce and you guyswere trying to refinance the
building.
Yes.
So what does this which is theproject you were just talking
about?
What was it, 11 units?

SPEAKER_02 (16:20):
Oh, yeah.
So this one's 11.
We're almost done withconstruction now.
Um, yeah.

SPEAKER_03 (16:23):
So you finally got over that hurdle, of course.

SPEAKER_02 (16:26):
Uh so yeah, so basically, you know, we at the
beginning, I was so loose withhow I frame my partnerships,
with the way that I structureddeals.
It was hilariously uh, you know,incorrect.

SPEAKER_00 (16:38):
Yeah.

SPEAKER_02 (16:39):
And so we straight we, you know, did this
partnership.
We didn't do the paperwork theright way, or basically we f we
signed a JV agreement, but wedidn't actually go to title and
add the JV agreement to title.
So there was no record that thethe entity was associated with
the property because weoriginally, because it was the
1031, we bought it in our uh youknow our personal names,
personal names.

(17:00):
Um so because of that, uh thewife in the divorce was able to
This is your partner, mypartner, yes.
Um, and so the wife, we neededher permission in order to
basically have a set I can'tremember the exact terminology,
but basically have a transfer ofownership.

SPEAKER_03 (17:15):
Was it a tenant in common or a tick?

SPEAKER_02 (17:17):
Uh it was just uh or yeah, yeah.
It was a tenant in common, yeah,untitled.

SPEAKER_03 (17:21):
Got it.

SPEAKER_02 (17:21):
So he and you were all both on title.
It was three of us, yeah.
Got it, okay.
So and so yeah, so we were goingthrough this process, there was
a lot of stuff going on, and sowe essentially were not able to
refinance till we got herpermission, we were not getting
her permission.

SPEAKER_00 (17:33):
Yeah.

SPEAKER_02 (17:33):
Uh there was yeah, questions that she had, and just
you know, there was an abilityto make a decision on those
questions.
And uh we the issue is that ifwe would have paid the mortgages
at the time, which we basicallywe were so cash poor at the
time, like we we couldn't evenpay the mortgages, but even if
we scrounged up and pulled cash,that would take away the urgency
for her to make the decision.

(17:54):
So there was it was this takingtime bomb exactly.
So we went all the way throughto where I literally hired a
lawyer in Idaho and had tobasically sue her to make a
decision or to intervene in thedivorce to take that asset and
make a decision on what to dowith it.
Got was on Zoom with Idaholawyers in a in a court and they

(18:15):
denied it.
They denied not the motion tosell, but the motion to
intervene.
So we didn't even get to thesecond part of it.
And uh essentially the lawyerwas just like, yeah, or the the
judge was like, I'm not gonnamuddy my divorce with your
bullshit because you guys did itwrong.
But this also was like awful,and it like absolutely you need
like lawyers make a decisiontoday.
Uh so we were able to, aftermonths, like literally months,

(18:38):
three or three or four months ofback and forth trying to push to
a decision, um, thousands ofdollars in loyal legal fees, we
were able to you know get to anagreement and and get her out,
and we've been able to pushthrough and get to uh where
we're out.
So I'll almost get on buildingit out.

SPEAKER_03 (18:52):
Yeah, thank goodness, huh?
Oh, yeah, what a nightmare.
It's it's actually more commonthan most people know, though.

SPEAKER_01 (18:57):
Really?

SPEAKER_03 (18:58):
Yeah.
So anytime you have two partnersthat are managing partners on an
entity is as an example, youwant to do an interspatial uh um
agreement, meaning that, likefor me, I would go out and
develop projects and I'd have tohave my wife sign off on any
decision making, and ifsomething happens to her and I,
that she can't tie that up.
So I had to learn that the hardway in the past as well.

(19:19):
And it was all through my firstdivorce.
I had to move assets around andand her attorney was just
advising her, don't do itbecause he'll just pay you out
real fast.
And it's not like I couldbecause I had I didn't have the
liquidity.
I had to do something with theseassets to be able to give her
the freedom that she needed orthe cash that she needed.
So it was really rough.
Thank God I didn't have anypartners at the time.
It was just kind of my ownstuff.

(19:39):
But man, I learned the hard wayfor that.
And what's crazy is the largerinvestors and check writers,
they typically have attorneys.
And if they're like seasonedreal estate attorneys, they're
gonna bring that up in thebeginning of the partnership.
Like, hey, are you married?
Have you been married?
Have you gone through this?
Like they want to know certainthings so they can structure the
contract appropriately, and thenthey usually go into the
interspousal uh conversation.

(20:00):
It's like standard process now,right?
Yeah, you know, in these joy joyJV uh contracts.
So it's kind of wild, man, howyou never think you have to
think of that way.
Yep.
You know, he's like this, me andthe partner, and that's like
that's you guys.
How does she have it?
Just whatever you're goingthrough.
How the hell is that supposed tohave any type of impact on the
project that we both havepartnerships on?

SPEAKER_02 (20:19):
Right.
And it's funny because like whenwe did it, we probably did it
just because we were like, oh,we're gonna save the you know
500 bucks to get the lawyer todraft it.
Where now it cost me like youknow 20 grand a month in float
and holding costs for fourmonths.
It cost me probably 10 grand inlegal fees, it cost me the lost
rents from the project, whichare about you know$30,000 in
rents a month, four months.

(20:40):
So you know it's cost me aquarter million dollars just on
that one mistake on the project.

SPEAKER_03 (20:44):
Just one thing crazy over something that has nothing
to do with your yeah, andsomething unless you ask the
question, you just don't eventhink about it.
So I had been really involved inlike Beverly Hills and like
funding a lot of thoseproperties that you see in like
million dollars million dollarlisting and so forth.
We were getting to a point whenthey when we would fund the
construction loan, we would lookat their pro forma and make sure
that they have like$250,000,$300,000 in legal fees because

(21:05):
what's very popular out there isyour neighbors sue you.

SPEAKER_01 (21:07):
Oh, yeah.

SPEAKER_03 (21:08):
So if you have your construction trucks or you're
too loud, or this or materialsout there, it's not clean, or
the street had this, orwhatever, dude, your neighbors
sue you constantly.
And these attorneys do it oncontingency.
So you're constantly settlingout with your neighbors.
In fact, one of ourdevelopments, it was a four-year
place, it was a big house on theside of a hill, the whole nine
yards.
That the neighbor sued him threeseparate times.

(21:29):
And dude, he paid out like ahalf a million bucks just to get
this guy to go away.
That's not crazy.
My uh you can tank you can tankproperties that way.
So now, depending on whereyou're building and the culture
of the area, you have literallyhave to put legal fees and for
lawsuits into your po your proforma and budget it.

SPEAKER_02 (21:45):
It's so funny you mentioned that.
My my partner has anotherproject with some other some
other guys, uh buddies of his,and it's in a very nice
neighborhood in San Diego, andthey're building uh nine ADUs on
it.

SPEAKER_00 (21:56):
Wow.

SPEAKER_02 (21:57):
Uh so very unhappy neighbors.
Sure.
And they're doing that rightnow.
They they try have tried to shutdown the project since day one
they're building right now, andthey're actively suing them.
One of the one of the thingsthey're suing them for is the
added carbon emissions from morecars in the neighborhood.
I don't know if you've neverseen that.

SPEAKER_03 (22:11):
Uh but yeah, these attorneys make money, dude.
The only people that make moneyare these attorney.
Oh, I learned I learned thatduring the divorce.
How can you someone sue you forthe admissions?
But they do, and they take iton.
Like it should be a frivolouslawsuit.
You know what I mean?
But who who are you whatattorney are you gonna find to
sue another attorney?
It's like a cop pulling overanother cop and giving them a
ticket, like you just don't doit.

SPEAKER_01 (22:29):
Right.

SPEAKER_03 (22:29):
You know, so attorney, a lot of attorneys,
it's just frowned upon to sueother attorneys for malpractice.
You have to find a male practiceattorney that simply does not
care and is willing to go afterattorneys like that.
But how for like what grounds?
Like, is that even is there anycodes, legal codes about suing
somebody for admissions?
Like, come on, dude.

SPEAKER_02 (22:45):
No, it's crazy.
And and on these projects arethey're they're ministerial,
right?
So they're they're buy right andthey just they just keep trying
to fight it.

SPEAKER_03 (22:52):
And it's like like what a nightmare, man.
Yeah, so that it's it's funnybecause we do that too.
Most of our legal fees out here,we don't have to deal with it
because we're just this is stillkind of like the good old boy
area.
We don't highly have, I mean,look at my neighbors.
Right.
No, I have my I'm my I'm I'm oneof my own neighbors.
I'm my own neighbor, you know.
So you out here I get a lot moreflexibility.
So we don't have that type oflegal.
Uh we have legal, but it's morefor just contracts and so forth.

(23:15):
It's not any litigation legalburied into our pro forma, but
there is something in there, ifGod forbid something happens, we
do have a little bit ofplayroom.
But man, it's uh it's crazy kindof how the world works.
It's really bad.

SPEAKER_02 (23:25):
Yeah.

SPEAKER_03 (23:25):
So thank God you got through that though.

SPEAKER_02 (23:27):
Oh, and you know, learning lessons and like you
said, battle scars like that wasthat was just like one that had
nothing to do with the property.
And yeah, just gotten gotten allthe learning lessons.

SPEAKER_03 (23:36):
So, what's your big vision?
Where do you want to go?
What's your this what's yourfive-year play?

SPEAKER_02 (23:40):
Yeah, so the uh I left that job where I'd seen you
know that many ADU projects.
I left there about six monthsago.
It was just it was just time.
I more or less, like I don'tlike the term inherently, but
like kind of became the subjectmatter expert of ADU development
in San Diego.
And uh I love I love doing myown developments.
And so what I do now is thatwe're we're working on creating

(24:02):
and really diving into thisdevelopment company.
So we have, I mean, we haveabout 40 units in the pipeline
right now.

SPEAKER_00 (24:07):
Red.

SPEAKER_02 (24:07):
Um, and and just you know, it's funny because because
of the the volume we saw, andbecause of the volume and you
know, and strategicallypartnering with my my partner on
this company, we have bandwidth.
And it's cool, you know, it's afun problem to solve because
it's like there's so many deals.
If you find the right money andyou find the right way to
structure the deals, like Isaid, every single single family

(24:30):
home is a four-unit or can be afour-unit if as long as the lot
fits.
Like single family is dead.
And so it's a matter of solvingthose little issues and the
structuring things, and thenjust finding the capital to to
do the projects because there'sit's such a great pocket.

SPEAKER_03 (24:44):
I would almost bet that right now a lot of guys
like you are getting prettybullish because rates are coming
down, homes are coming down insome cases.
Um, I have a house that I listedin Marietta, and I just dropped
the price to move it.
Not by a lot, but a little bit,right?
And I'm I'm at a point where Idon't necessarily need to, but
if I want to get it off mybalance sheet, I can.
And I'll just drop the price alittle bit.

(25:06):
So you're seeing you know pricereductions across the board.
Um, and I think if you were tofind additional value by just
doing a like a square footageplay, you're doing really well.
And if you could find, you know,maybe an older home that had a
three-bedroom, one bath house,and now you're adding an extra
bedroom bathroom, that's a bigdeal.

SPEAKER_02 (25:24):
Yeah, we we literally just did that.
We bought one in September.
Uh, we're doing a we turned thetwo one into a three-two, and
we're doing a big 1200 squarefoot ADU, which is almost heard
of in San Diego.
God forbid somebody buildssomething above 400 square feet.

SPEAKER_03 (25:38):
Yeah, uh it's basically almost as big as this
garage here.
Yeah, yeah.

SPEAKER_02 (25:41):
And so it'll be 1200 with a garage underneath.
Yep.
Oh wow.
And so yeah, we're like, we'redoing it because they actually
just legalized theconduitization of the so you're
not doing one stories, you'redoing also two-story ADUs.

SPEAKER_03 (25:50):
Yeah, yeah.

SPEAKER_02 (25:51):
I have two the 11 units are three-story,
three-story build.

SPEAKER_03 (25:53):
Really?
Yep, good for you.
Three-story products is hard todeal with.

SPEAKER_02 (25:56):
They're they're crazy.

SPEAKER_03 (25:56):
People don't understand how hard three
stories are.

SPEAKER_01 (25:58):
Yeah.

SPEAKER_03 (25:58):
I have a three-story apartment so I'm finishing right
now in San Antonio.
We did stuff in Denver, allthree-story townhomes, shared
wall.
That was rough.
And then our our uh our barncaves are all three stories.
So we have a big garage likethis, and then we have two
stories above of residential,right?
So or living space.
It's three-story products, it'sdifferent.
It's a niche in itself.
People don't know.
They're like, oh, it's aone-story, two-story, it's a

(26:19):
little bit of a difference.
Three-story, it's a whole notherlevel of engineering.

SPEAKER_02 (26:21):
It's so weird, it's so interesting how it changes so
drastically, which is the extrastory.
But yeah, it's it totallychanges.
You need soil, you know, that'swhere you're like you soil
studies in and just everyonestarts to get involved and ask
more questions.

SPEAKER_03 (26:33):
The city, everything else.
So once you start goingvertical, that they people want
to know.
Yep.
Especially like three-storyproduct, and would depend on
what you have around you.
If you don't have a lot of otherthree-story products around you,
you're you're you have someheadwinds to get the approvals.
If you have a lot of stuffaround you that there is
three-story or even four-storyand you're doing a three-story
product, sweet.
You know, like one of the bigmovements, like in Long Beach, I
did a lot of loans in Long Beachwhere guys would buy like a like

(26:53):
a two-one that's an old house,but it had a huge lot where you
could build a six-unit or afive-unit or even a beautiful
four-unit, and they would tearit down and they would buy it
for a picket number 800 to amillion bucks.
They'd tear it down, they wouldbuild, put two million into it,
but they'd sell for four and ahalf, five million.
You know, they're making coins.
But it'd take them a long timebecause the approval's just in
that area.
But it was nice because therewas already other product that

(27:15):
is very similar, new, built,CO'd, sold.
So we had a lot of comps, butthat's a big deal right now.
You know, especially LA highdense areas, uh, San Diego.
I mean, we do stuff inNashville, all pretty much
anything that's more of aprimary market that you have the
ability to find old homes and dothat.
It's it's booming right now.
Yeah.
And that's really the only wayto do it.
Again, square footage.
If you're gonna, if you're andthat's why builders are doing so

(27:37):
well.
Did you see Warren Buffett justinvested$800 million into D.R.
Horton and Lenar?

SPEAKER_01 (27:41):
Yeah, it's crazy.

SPEAKER_03 (27:41):
Well, he was he moved into treasuries, and I
think we had$286 billion hepulled out of stocks, stuck it
into, in essence, JP Morgan,generating 5%, right?
Waited for the for to to seewhere the world was gonna go,
and then boom, dumped a bunch ofmoney into a home builder's
right.

SPEAKER_02 (27:58):
Yeah, it's it's this missing middle, right?
Like it's the middle market,multifamily, so small, urban and
vill, and these like I said,being able to just look at any
property in California and beinglike, yep, you can do this,
this, this, and add, add thesquare footage, add the density
to it.
There's just there's an unrealopportunity.

SPEAKER_03 (28:13):
Yeah, and there I know there was a couple lenders
out in San Diego, I forgot theguys' names, but they were
literally focusing on financingpeople who wanted to add ADUs to
the property.
So, like it's a movement.

SPEAKER_02 (28:22):
Yeah, there's definitely more capital coming
into the space, uh, aspartially, you know, they
realizing that a lot of peoplehave these low interest rate
loans or they're kind of lockedinto what they have, but an ADU
just adds cash flow, it addsequity.
There's there's no reason not todo it, but they don't want to
get rid of that first loan.
So there's looking no, there'smore strategic seconds that are
coming into play.
Yep.
But then simultaneously, theissue is that City of San Diego

(28:45):
kind of revolutionized somethingwith the bonus ADU program of
multiple ADUs.
Banks didn't understand that,and so they didn't have good
financing products for it.
You're only playing with the SERat the end of the day.
Now they're starting to makemore sense of it and they're
starting to get a little moremature in the space, and so now
there's more lending products atthe same time.
So there's this whole headwindwith the legislation.

(29:05):
Like I said, they city of SanDiego in August just finally
allowed the conduization of ADU,so now you can conduize the ADU.
Killer.
And so I've like, I'm like, nameanother industry in in the
country right now in real estatethat is legislation is making it
easier to do.
There's more finance coming, orthere's more finance coming in
the space, and also like there'sso much confusion at the low

(29:27):
level because all the homeownersare now the developers.
The homeowners can be thedevelopers.
So being able to fill that role,and that's really what we do, is
like we're, you know, we're adevelopment company, we're a
development manager.
Cause at the end of the day,like that's what's missing is
the person that can help themactually be a developer.

SPEAKER_03 (29:43):
Yeah, that's cool, man.
And I think a lot of people arestarting to realize, especially
boomers.
Most of my investors areboomers.
And when you look at what theydid, well, they're the first
responders.
Yeah, they had a great 401k andthey retired, but where the
value of the real wealth camefrom was in real estate.
Some of them had maybe two,three homes, they're 1031
exchanging, they're starting tomove their assets around because
they want to repurpose it, getmax cash flow or accumulation.

(30:04):
And these are where my podcastsdo well.
People love to listen to what wehave going on, but being diverse
is important.
You know, I love when investorsI had yesterday.
I was telling you the story.
I had a guy call me, I got amillion bucks, right?
And I'm like, okay, well, youcould park in all of here.
Here's all the options that wehave.
And he's like, Well, maybe Ishould dip my toe in the water.
I'm like, yeah, you probablyshould.
You know, don't put all youreggs in one basket.
You got to kind of shift itaround.

(30:26):
So I love to build awareness forthis because I personally think
that ADUs, dropping ADUs is aneasy play.
It's much easier than doing whatI do.
Yeah.
You know, this is a whole lotmore moving pieces, approvals
and you know, planning and kiss,shaking hands, kissing babies
with the city.
Like it's a whole notherconversation, right?
But ADUs are great becauseagain, it's a quick value.
It's like flipping homes.

(30:46):
It's just a unique way offlipping the home.

SPEAKER_02 (30:48):
It is.
And and the cool thing with theADU play is, you know, when when
we started with this, especiallywith this bonus ADU thing, it
was you could do so many units,you could do, you know, 10, 15.
There's somebody trying to do126 ADUs on a property.
And it's cool, but it it takeslonger.

SPEAKER_00 (31:02):
Yeah.

SPEAKER_02 (31:02):
Where what the re I've kind of shifted my model
to, like I said, the cash flowon paper is not as good, but the
product so much better.
And so doing these small singlefamily duplex add two, three
units to it, ending up generallybetween like four and and maybe
eight units max, it's so muchquicker.
I'm in and out.
And yo, uh right now I'd I'dsay, you know, we're estimating
18.

(31:23):
We're we're gonna hit 12 on mostof the projects.

SPEAKER_03 (31:25):
So are you guys building them from scratch?
Are they basically buildingsthat are coming and you're
dropping them down?

SPEAKER_02 (31:30):
We're building them on site most of the time.
So most of them are custombuilds.
Obviously, I I have there's acouple of people that have done
these prefabs on a couple ofthem.
Most of the time, those don'tmake sense because the value
reduction from not being able tocustomize it in the right way.

SPEAKER_03 (31:46):
Right.

SPEAKER_02 (31:46):
And also the multiple stories on it, because
prefabricated, you can only doone story.
Uh it it just doesn't have theintrinsic value.

SPEAKER_03 (31:54):
It doesn't connect with the house.

SPEAKER_02 (31:55):
Yeah, and so it makes more sense to build
custom.
It it costs more, but you canget more square footage, you can
get a better product at the endof the day.
Where there are certainneighborhoods, generally lower
rent with these larger lots, notas high a density, that actually
do make a hell of a lot of sensefor these.
And so if you can find the rightlot in the lower income
neighborhoods that large flatlot and then just stack, you

(32:16):
know, multiple kind of do thatcottage style.
The the ones that I've I've seenmy buddies do rushed.

SPEAKER_00 (32:22):
Rubbing.

SPEAKER_02 (32:23):
Um, so like that's a whole plane itself.

SPEAKER_03 (32:25):
So, you know, and it's probably even better if
you're able to do two or threeADUs on one shot because you're
doing you're tying into the samesewer line and water lines, and
it's a little bit, yeah.
So that's what builders do,right?
Home builders are just buildmultiple homes and tie into the
same lines.

SPEAKER_01 (32:38):
Exactly.

SPEAKER_03 (32:38):
So you actually make more, definitely make more money
because you're adding moresquare footage.
But if you look at it, it'scheaper to build you know, two
or three on a lot.

SPEAKER_02 (32:47):
Yeah, it well, exactly.
And and so, you know, when youthink of things like water lines
and the uh just solar and thingslike that, you by building more
units, you will get a lower costper square foot inherently
because you're still only doingone water line upgrade, whether
you one unit or three.
Right.
And those costs are crazycompared to the the cost to
build.

(33:08):
And that's one of the thingswhen you know somebody asks how
what's your cost of cost tobuild per square foot.
I'm like, how about we figureout what you're actually
building?
Because all of those things cancan shift depending on what
you're trying to build.
And so yeah, the model, themodel is building you know, a
few units on a property in avery tasteful way, not just
shoving them in like sardinesjust because you can, building a
good product.

(33:28):
And five, 10 years from now,like that's my that's my play.
And that's why that's where I'mI'm bullish right now, is not
these multifamilies where cashflow is killer.
It's these small single familyneighborhoods that you're
building a couple units andyou've now monopolized a product
and there's parking everywherebecause it's not as dense.
Like you don't have to worryabout any of those problems.

SPEAKER_03 (33:45):
Well, you and if you're let's say you're you know
you're somebody maybe strugglinga little bit and you have a
little bit of coin and maybeyour IRA or 401k, you can
liquidate that, build an ADU,generate some additional cash to
cover your overhead on your ownmortgage.
That's why so many people lovefourplexes or you know,
triplexes is you can buy one,live in one, rent out the other
units, and get enough cash flowto cover your own overhead.

SPEAKER_01 (34:04):
Yeah.

SPEAKER_03 (34:04):
Now that's so it's it's I bet you that's a really
common practice right now.

SPEAKER_02 (34:07):
Yeah, exactly.
The the biggest thing is, youknow, ADUs and development as a
whole, it's expensive, timeconsuming, and confusing.
Right.
So a lot of people, they theydon't know.
I mean, I think uh there's like56% of people who don't even
start the project based on astudy in Seattle that they asked
because they just are confused.
They don't even know where tostart.
And then from this point of I'vedecided to put in a permit and

(34:30):
go through that headache andthat process, over 40% of those
don't actually get built.
And it's because either it'sthey built the wrong product so
they can't get it financed, orthey can't figure out how to you
know do the construction.
Like there's just there's somany pieces to it.

SPEAKER_03 (34:43):
Yeah, and then and all the way down to like who
you're gonna use as your GC,like that's a whole nother
stress in itself.
Like, do they are they are theygood guys?
Is this do they have they donethis before?
You know, what's their theirlabor base look like?
And they what trades are theygonna outsource?
Yeah, what charge what trades dothey have in-house?
You know, that's that's usuallyanother pain point, if you will,

(35:03):
right?
How have you how have you haveyou had bad contractors in the
past?

SPEAKER_02 (35:07):
Oh yeah.
I've had I've had my experiencesthat same time we went from the
land to 13 units of renovation.
Uh, it wasn't it wasn't all thecontractors' fault.
We uh managed poorly.
We were managing cash flow, notthe project.
So it was just we weren't payingthem on time because cash was
tight.
And it just there were so manythings going wrong.
Um, but there was there was alevel of craftsmanship that was

(35:29):
not where it needed to be.
Um and and so yeah, I just had alot of a lot of rough times
there and then you know, acouple other projects, and so
you started to learn how tomanage these guys.
What I've actually learned is mybest partners are contractors.
My my skill set is putting thedeal together, building the
right product, making sure thatwhat we're doing is actually

(35:49):
gonna be a fucking good productat the end of the day.
Um, and and then taking itthrough permitting.
Like permit is like my secretsauce, like getting it, getting
it to the to the permit.
That's where I like that's mysuperpower from from day one to
to there.
And so what I found is like mypartner on the development
company, he is probably the bestcontractor I found in San Diego.
And he's on multiple otherprojects with other partners

(36:11):
because and all developers, likedevelopers, not just the guy who
like needs to hire a contractor,because they see like he's a
fucking good project manager.
He gets it.

SPEAKER_00 (36:18):
Yeah.

SPEAKER_02 (36:19):
Um, and so that's where I've kind of found my my
skill set was you know, this thefirst half, find the partner
who's good on the second half,and all of a sudden, you have
probably one of the most solid,most experienced development
teams for small urban infilldevelopment in San Diego.

SPEAKER_03 (36:35):
I love it, dude.
I'll especially, especiallyfocused on ADUs.
You just you're strategicallypositioned yourself on a product
that makes sense that you know.
And you know that's anotherthing to give you um, you know,
a lot of recognition on isestablishing a relationship with
the city and getting throughpermits.
That's another, again, that'sanother language in itself.
Um and now you're probablysubmitting more permits for ADUs

(36:57):
than anybody else in the city.
So as you're submitting permitsand seeing your name go over,
they're like, There he is.
Brian Koons is coming backthrough on another project.
That's what was happening forus.
When they the city sees thatwe're submitting stuff, they're
like, well, they're probablyhaving it in a nice little bow.
They know what they're doing.
Let's just kind of fast trackthis.
We just got uh one of our uh oneitem and one of our projects
approved in two weeks when itwas supposed to be a 90-day

(37:18):
turnaround, you know.
So I think they're justrealizing, no, these guys are
pushing and they're doing itwell.
So we've gotten lucky there too.
But it took time to establishthat and earn the trust.
Yeah.

SPEAKER_02 (37:26):
You know?

SPEAKER_03 (37:27):
So kudos to you.

SPEAKER_02 (37:28):
Thank you.
Yeah, it's it's something whereI think the more you get the
reps in with a specific spot,like this, the more that they're
gonna recognize you, but themore that you're gonna recognize
how to work with them.
I think that that's a veryundervalued thing is, you know,
I get I get asked all the time,like how to like literally I
just got asked, like, how do youpay school fees?
And it's like they've they'vebeen sitting on that for a week
at the end of their projectbecause they just like don't

(37:49):
even know where to ask andfigure it out.
I'm like, oh, do you you have togo?
And it's like, it's like they'reonly open Mondays and Wednesdays
at this time, and you have to goand bring a check.
And it's like a super like justwild way to do it.
But it's like these littlenuances, like, hey, when you're
submitting to the city, here'show you check like where you're
at.
So the day that it comes backfrom the city, you can go hit up
your architect and be like, hey,like it's back from the city,
let's get working on it.

SPEAKER_03 (38:09):
Yeah, or or red lines, let's get that thing
cooking.

SPEAKER_02 (38:12):
Exactly.
And so, yeah, so that's that's abig piece is you know, when I
just getting so many reps in thesame city, you know all these
little leverage points to pushthe pro and I call it like
pushing the project forwardrather than just going through
permitting because no one iscares about your project as much
as you do.
So your architect doesn't give ashit.
Uh you know, he's got the threeother developers yelling at him
to push their project through.

(38:32):
So it's like you have to be thesqueaky wheel strategically, not
to not to make, you know, toannoy them, but to hold them
accountable.

SPEAKER_03 (38:39):
It's consistency and consistency.

SPEAKER_02 (38:40):
And yeah, I like joke, like being a developer is
like 90% emails.

SPEAKER_03 (38:44):
It's it's babysitting.
It's babysitting, and you'rejust trying to keep that needle
moving, but not piss anybody offat the same time.
Exactly.

SPEAKER_02 (38:51):
It's it's the the level of emotional intelligence
and psychology that goes into itis I I very understated as a
developer.
Because yeah, you can burn abridge real quick because
inherently designers,architects, the team, you know,
a lot of pretty much everysingle person is never going to
make a deadline the actual daythat you think they're gonna
make the deadline.
So you can either be mad aboutit and and or say, like, hey,
like, here's how we need to fixthis, let's work on it together.

(39:14):
And it just it can, you know, ifyou say it wrong, like they they
probably have other projects orother people that that want to
develop with them becausethere's so much development
going on right now.

SPEAKER_03 (39:21):
Absolutely.
All right.
So I have a question for you.
What do you what is the biggestlesson and the hardest lesson
you've learned so far in thereal estate space?
ADUs, selling, dealing withcontractors, what like what's
the worst?
The the worst what's the bigworst thing that's happened to
you so far in your real estateuh venture?

SPEAKER_02 (39:42):
The worst thing was thinking that I had it figured
out before I did.
So I've been very much a personthat just dives in headfirst,
builds the parachute on the waydown, like literally from I'm
gonna buy real estate to like Ibought a$1.2 million property
was two weeks.
So it it's it it I'm and samewith land.
I'm gonna buy land November, inDecember, we're in Asgrow.

(40:03):
So it's like I I'll I'll fuckingmove, right?
But to think that you know, youmove intentionally, yeah.
Get the right team around you.
If you like not don't go big,but get the right team around
you to make sure that whenyou're going and you can give up
equity to do it.
I think that that's where a lotof people stay small is because
they want the biggest piece ofthe pie, right?

(40:24):
Where like you said it, we weretalking about before.
I've done it on I get I have somany, I've I have probably too
many partnerships at this point,but I have so many partnerships
because I know that it's okay togive up a part of it to make
sure that it gets executed well.

SPEAKER_00 (40:38):
Right.

SPEAKER_02 (40:38):
And that's something that I'm happy I've done, but
also I think where some of thebiggest mistakes were that I
didn't bring in the right peoplefor the right pieces.

SPEAKER_03 (40:47):
Yeah, I've been down that road, dude.
I can tell you until I'm blue inthe face.
I've had so a lot of myrelationships, partners,
employees, it's 19 to nover.
So I usually have to kiss 19frogs to find my prints, bro, is
really what's going on.
Yeah.
So uh bringing as you know,especially with my firm, I I am
I am not a normal employer.
You'll get like the most bestfriend in the world, but then

(41:09):
there's like a massive amount ofrespect that I require.
And I also require that you'regonna work to my level.
And not, and and it's hardbecause in reality, no one's
gonna work as hard as I will formy own company.
But I want people to take pridein ownership because if they do,
they get a position within thiscompany that gives them equity.
It's almost like we're literallyin the same boat with the same

(41:30):
row.
Here's your lane, stay in it, gohard.
My lane is over here, I'll gohard, and we're equally yoked,
but you have to operate at mylevel.
And it's not because it's notbecause I demand it, it's what
the requ what the world demands.
This is what it's gonna take.
So it's not it takes a lot ofthat emotion out of it, right?
Having good partners can make orbreak you.

(41:51):
Could be the same thing inmarriages, could be in dating.
It's just the way it goes acrossthe board.
It's really hard to find peoplethat have integrity, and when
they say they're gonna dosomething, they do it.
You know, but it's true.
If you can have the rightpartners, you can scale and you
can go big.
That's why we brought on theexecutive team that we have.
These guys have a track recordand background and they're
pulling their weight on certaindepartments, and it's allowing

(42:11):
us to get to where we are today.

SPEAKER_01 (42:13):
Yeah.

SPEAKER_03 (42:13):
So I tell everybody this has nothing, this, yes, I'm
a visionary and I have a lot ofrelationships and I deal with
the acquisitions and time, youknow, legal and fund uh
structure and capital structureand raise capital, right?
The whole thing.
But once I get it to a pointwhere we're in escrow, now I
offload it to my team and go,okay, guys, it's it's it's go
time.
And you know, our marketing's ona whole nother level.

(42:33):
So that alone is like its ownproblem child.
Then it's bringing everybody upto par to understand what we're
trying to do.
So now the amount of coachinginternally goes through the
roof, right?
Because I never want to bringpeople in until we know what
we're doing.
Otherwise, it will I thought wewere doing this.
Yeah, well, it shifted.
Oh, well, shift, then it shiftedagain.
So until I know exactly ourdirection, we got our engineers,

(42:53):
architects, all the fun stuffkind of circled the wagon.
Then we know exactly what ourdirection is.
And okay, team, we got it.
Here's what we're doing.
Well, let's go.
Right.
And once you, when you're ableto articulate something and you
have enough homework done,everybody's bought in, they see
it too.
And when they when they see thevision and they're bought in,
it'll do well.
So having good partners isabsolutely key for me, man, and

(43:16):
for you.

SPEAKER_02 (43:17):
Yeah, it's it's been one of the the biggest
realizations is getting theright guys in in the room.
Like it it everyone hears it thewho not how, but it's like
tangibly, I think you're sayingit is you have to find people
that do what they say they'regonna do, have a track record of
that.
Yep.
And I and aren't the same as youeither.
Like that's I think one of thebiggest things is I have found

(43:38):
people that just have otherskill sets.
They what like my my partner,he's an engineer by trade.
He is so much different in howhe thinks than me.

SPEAKER_03 (43:48):
Barely laughs, that guy.

SPEAKER_02 (43:49):
Oh my god, it's it's it's comical.
Um, but it it it is so everylike all of our conversations
are just so they move forwardeverything so much faster
because I think it just we buildoff each other in such a good
way.
And I think that that's one ofthe biggest things.
Don't find, don't find yourbuddy per se.
Find you know the person that'sgonna you know work with you and

(44:10):
and and compliment you.

SPEAKER_03 (44:11):
So it's the best when you do find the right
people.
It's it's because they becomefamily.
You know, a lot of times we talkabout it, you know, internally
is we spend more time with eachother than we typically do our
own family.
So you kind of have to genuinelylike each other.
And then if everyone's doingtheir job, you really love each
other because everyone's makingmoney together.
That's when you're really lovingeach other, right?

SPEAKER_01 (44:28):
Exactly.

SPEAKER_03 (44:28):
So, okay, so let's uh let's kind of wrap it up from
here.
So you guys are expanding yourADU vision.

unknown (44:34):
Yep.

SPEAKER_03 (44:34):
And right now you're looking to raise capital.
Yep.
You haven't opened up a fundyet, but that's your kind of
your next play.
So you've had what, one, twoinvestors per deal.

SPEAKER_02 (44:41):
Yeah, it's it's been scrappy.
We've gotten, you know, wegenerally have been raising, you
know, quarter million on a deal.
Which isn't much.

SPEAKER_03 (44:47):
Is it much?

SPEAKER_02 (44:49):
No, it's I mean, deal by deal basis.
If somebody understands theproduct, they understand the
returns.
Like I said, the the productsare there.
And we the the real value isthat we know how to execute them
really, really fucking well.
Um, and that's the most excitingpart.
And so yeah, it's just findingthe right capital for the deals
that believe in the product.
Right.
And we're yeah, we're we'reripping them.

SPEAKER_03 (45:08):
So rule of thumb, when you're right, you're
opening up uh a fund or you'reraising capital, you typically
want, you don't want more thanseven investors involved into
one project or on one LLCwithout having a fund.
That's kind of legality, butrule of thumb.
Yep.
Now that you're scaling, theonly way to scale is go get more
money.
Right.
So therefore, protecting you andthe investors by having a fund

(45:29):
is important.
Because really, a fund is toprotect you and individual
investors that are in the fundfrom other investors going
rogue.
Not saying that they will, butpeople go through divorces,
right?
And when you have a 56% divorcerate, you kind of have to go,
well, are you guys all married?
Okay, well, 50% of these peopleare gonna go through a divorce,
right?
Not really, but you know, youkind of have to think that way.
And since you've got theexperience, it's really

(45:49):
important.
So that's really what it is is adisclosure package of your
overall business model, yourstrategy, your projections.
And people do their own homeworkto verify that they have done
their homework in essence onwhat you're doing, looked at
your track record, maybe you'veseen your properties and
understand it.
So when they sign that document,say, I'm in and here's the
money, they're not sitting theregoing, Oh, I didn't know what I

(46:10):
get myself into.
No, you did know what you gotyourself into.
We've we've met, we've walkedproperties, you've met other
investors, you've seen myprojects.
Like you absolutely knew.
Don't tell me you didn't.
And that way, other investorsdon't get hurt, right?
Because that's the whole pointto having a fund.
So I'm here to help you anytimeyou want to scale that side,
man.
I feel so it's funny, I'll tellyou real quick story.
So, you know, Grant Cardone.

(46:31):
Yep.
So the attorney that wrote hisoffering originally, her name
was Gillian Sedotti with thecrowdfunding attorneys.
Me and Gillian ironically livein the same town.
So she's in Marietta, and I wasintroduced to her by a friend of
mine that had not opened a fund,but it was like, hey, this
attorney lives in your town anddid Grant Cardone's first reggae
fund.
So it's a non-accredited fund.
So I engage with her, we we hangout, we meet up, we're going to

(46:53):
the wineries in Temecula,totally getting to know each
other, love her.
She still to this day, I justspoke at one of her coaching
events because she still bringsme on.
And this is by this by the way,this was bro, this was like
2017, 16, 17.
So we uh so she sends me thisthis offering, uh, and I'm
filling this out.
Well, mind you, I've nevercreated a fund before.
And if and a reg A is it it's apublic fund.

(47:16):
It's a mini, they call a miniIPL.
You have to submit your businessplan to the the SEC.
The SEC has to sign off on it.
So it's not a PPM or privateplacement memorandum.
This isn't a 506C reg Daccredited investors only.
I can go after anybodybasically.
So she sends me all thisquestionnaire and I'm filling
all this stuff out, and I'mlike, I have no idea what the
hell we're doing.
I have no clue, right?
Well, I was having a really hardtime getting her to go back and

(47:37):
forth with me on strategy, andshe's getting tired of my shit
because I'm like, I want to trythis.
Okay, I want to add this.
Okay, well, this is how big myportfolio is.
And she's basically trying totell me do one thing and one
thing good when you do a fund.
Don't try to be too diverse andopen it up to everybody to
invest and just all thesedifferent assets, like hone in
on it on one asset class.
So I said, Well, I so I kind ofgo back and forth.

(47:59):
She's like, I'm gonna send youGrant Cardone's fund.
Mind you, it's public, but she'sI'm gonna send this, I'm gonna
send you Grant Cardone's fund.
I want you to read it.
So I read it and I was like, youknow what?
I'm gonna write my own fund.
I literally wrote my first fund.
Oh my god.
Yeah, I sat at the it's funnybecause my son at the time, so I
had three kids.
My youngest son at the time hadlike one of those little like
um, put your feet in the chair.
He was like two, put your feetin a little, he has like your

(48:21):
little food tray in the frontand it's on wheels and you kind
of wheel reel around the house.
He's not quite wal walking.
Well, he was walking, but notfast yet.
And uh, and so he was goingaround the island.
I sat at the island for 14 hoursone day straight, like on a
Saturday with all the kids goingcrazy in and out of the house,
and I just buckled down and Iliterally drafted my very first
fund.

SPEAKER_02 (48:40):
And this was before ChatGPT.

SPEAKER_03 (48:41):
Oh, by far, dude.
And I didn't I don't even thinkI Googled anything at that time,
dude.
So I literally read GrantCardone's fund because he raised
hundreds of millions of dollarsby this point.
So I read his first fund and Iliterally catered and drafted my
fund to his fund, but withcertain verbiage, and I adjusted
my my, he was more inapartments, I was doing other
stuff.
So, but I I understood the flowof what they're trying to

(49:03):
create.
So yeah, I ended up writing myvery first fund and my
securities attorney like that'simpressive.
We had one round of comments,and then I got approved right
after that.
It took her and I originallylike eight months, and she's
like, Ryan, you keep changingyour mind, and that's why
comments keep coming back.
So I was like, all right, giveme, give me, you know, give me
something because I couldn'tunderstand what she's trying to
tell me.
So I was like, give me a fund.

(49:23):
She's all here's Grant Cardone'sfund, read it, and then get to
know absolutely every inch ofthis.
There's 180 pages.
And when you're done, let meknow.
So I wrote, I think I wroteprobably about a hundred of
those pages because most of it'sjust kind of copy and paste
disclosures.
But yeah, I ended up opening myrunning my first fund and
opening up my own first fund andwriting it.

SPEAKER_02 (49:41):
That's that's so funny.
Cause I you like just describedsomething that I think is
incredibly understated is thatbeing able to know what the
leverage point is for your timeis more important than anything
else.
Like, so for for you, yeah, foryou it it was reading all that
and just doing it yourself.
Right.
Like for me, it was I realizedlike I didn't have money, I
didn't have any stuff.

(50:02):
I just read municipal code allday.

SPEAKER_03 (50:03):
Like I just read the But that's where you found the
the bodies, man.
You're able to find and then youcreated a model around it.

SPEAKER_02 (50:09):
Right.
And you create value veryquickly.
And and yeah, I in a niche.
In a niche.
And I love that.
I love the fact that you're ableto synthesize that and just just
get it done.
And it's like it's the boot job,it's the it's the thing that no
one wants to do, but it is 99%of the time, it's the thing that
will move things forward.
It'll add the most value.

SPEAKER_03 (50:27):
I realize that the less I understand it, the longer
it takes for me to get the jobdone.
So a lot of times I'll justbuckle down and go, okay, how do
I understand what I'm trying toaccomplish, right?
Or understand what new ventureI'm trying to get into.
And I try to go, you know, meetthe right people.
Books, which you've nailed it.
You said you wrote you readthree books before you got into
real estate.
I love that, man.
A lot of people don't, I don'tknow why they don't do that more
often.

(50:47):
If you can find a couple ofreally good operators that have
also written a book, that tellsso like I've written, I'm on my
second book.
And the first book was reallyactually I launched it right in
the middle of the pandemic.
I think I let I think I releasedit like middle of 21.
So I had I was writing itbefore, and then I shifted it
with the pandemic and all thePPP loans and money getting
pumped in how politically andthings changed so quickly from

(51:11):
how politics really made animpact on a lot of different
stuff.
And how did that correlate toreal estate and then investing
and making the right decisionsand investments?
I started showing the level oftransparency that operators need
to have for their investors andreally kind of how to create the
um, I would say, the vision ofwhat you see and how other
investors can see and understandwhat you're trying to do.

(51:33):
It's really about articulatingand providing information and
data on how to get there.
And then always, obviously,after the investment's made, how
to create the right reporting,how to show transparency, how to
just keep those relationshipstight, because the market shifts
all the time.
And people are scared when Trumpgot shot.
Dude, I I called a mandatorymeeting immediately for my
entire team.
I text, I said, everyone get ona call right now because I was

(51:55):
like, we need to tell you what'sgonna happen for about a week,
dude.
My investors were blowing me up.
Like, what's that mean?
What's this gonna do?
What do you see?
What do you hit now?
And so I ended up releasingstatements.
So it really sucked because Ididn't want to lean onto the
political side, but I had toexplain to people what I think
is going to happen.
And my first book, I literallypredicted exactly what was gonna
happen in the real estatemarket, and that's why I'm

(52:16):
writing a second book because Iwas so right on the first one
that that's why a lot of myinvestors are like, dude, how
did you see that?
I'm like, it's a gut.
Like the writing's on the wall,though, too, right?
You have every book, cost ofstuff in California is going
through the roof, politics suck.
Yes, people are gonna migrate.
Boomer, baby boomers, you know,are getting older and getting
more frail, and healthcare isthe fastest growing industry
because boomers are gettingthat's the largest generation,

(52:38):
they're getting older.
They need healthcare.
It's not rocket science.
You know, you look at you lookat uh uh lifestyle, right?
You can RVs, boats, they'reselling like crazy, not just
from boomers, butmulti-generational.
You look at, you know, the waythe world's working with
Instagram, like it's not rocketscience.
And so I tell people tell peoplethis is how it works.
And if you could paint thatpicture of why it works, your

(53:00):
investors are like, I'm in.
Because it makes sense to themtoo.
Yeah, I'm like, have you everbeen to Havasu?
Oh yeah, do you know how bigvoting is here?
Yeah, great.
You want to write a check?
Because then you know peopleneed storage.
It's like just that simple.
Yep.
But really, the idea is just tobe able to articulate exactly
what you're doing, show abusiness model, proof of
concept, that track record'severything.
Yep.
And being honest, that's why Ilove that that I brought that

(53:22):
out of you here is to tellpeople what you've done wrong.
Because no one really believesall the pretty masks.
Dude, you gotta bring that downbecause your investors have
gotten kicked in the teeth aswell, personally in life.
It's the relationship game.
They're gonna invest into you,not necessarily the deal.
Yes, the track record's there,but it's you that matters.
You know, they're gonna investinto you and they're gonna
believe that you know how tooperate because without you,

(53:44):
it's not gonna work, right?
That's why when you get biggerand bigger and bigger, and we'll
talk about this later, key maninsurance.
How to create an insurancepolicy off your management fees.
So if something happens to you,like you die, when you get
larger check writers, theirattorneys are gonna get
involved.
And they're gonna ask you, well,what have who okay, who's in
who's in who's in the face?
Yeah, who's in line if you wereto die?
And it's funny because I've hadthat obviously in the past, how

(54:04):
I learned.
I'm like, I'm not gonna die.
And they're like, okay, you'reeven dumber for saying that.
You know, you could get anaccident today after this phone
call and die.
And then what's gonna happen tomy three or four million I've
invested?
And I started thinking of that,going, like, yeah, man, we need
to be more institutionallystructured to go after those
larger check writers, but evenit protects the smaller check
writers, it protects everybodyinvolved.
So I through time and trial anderror, I've we've gotten to

(54:28):
where we are today, but wedidn't get here by you know soft
knocks.
We've got here through hardknocks.
You had to learn the hard way.
A lot of people say, no, you'renot ready for this.
I have a lot of money, but Idon't trust you guys yet.
You know, whatever the case maybe, need a bigger track record.
It just you got to keep going.
So I would say if you're ifyou're at$200,000,$250,000,
$300,000, dude, investors canwrite a check for$50,000, get

(54:49):
in, dip their toe in the water,see how you do.
And if you're if you're doublingtheir money or whatever the case
may be, they can go harder andharder and harder with you.
But it's great for accumulation.

SPEAKER_00 (54:56):
Yeah.

SPEAKER_03 (54:57):
And if they have an IRA, which is I'd say 60% of our
clients are investing throughIRAs, dude, that's a good,
that's a good target market foryou.
Because that money will justcome out of their IRA.
And then once it comes back withprofit, it's tax-free.
It's until they take that moneyout personally, is when they get
taxed, right?
So they can roll with you andstick with you for five years,
10 years, and you can make themtons of money.

(55:17):
They started off with 50 grand,now they got 250, 300,000,
$500,000 with you.
And they're like, dang, Brian, Igotta keep I gotta keep going
with you.
Thanks for making me so muchmoney.
How much do you want?
Give me 100 grand.
I need it right now, right?
Where we talked about before.
So yeah, man, I think it'sgreat.
You're on the right track.
Yeah, I think your next playwould be maybe do a couple more
deals the way you're structurednow because it's still safe.
Until you have a lot ofinvestors, you don't need a

(55:39):
fund, but a fund will protecteverybody involved.
So I'm here to help as much asanybody.

SPEAKER_01 (55:43):
Dude, I appreciate it, man.

SPEAKER_03 (55:43):
So touche, thanks for coming out, man.
I really appreciate you.
I I it was an honor to meet youin Tulum.
Um, you know, being a part of uhI feel like everybody that was a
part of Rich's network and thatwas at that event were great
people.

SPEAKER_02 (55:55):
It was it was the most I I don't think there'll be
a meetup like that.
I don't know how I made themoney for that.
Yeah, like it was, but I was,yeah, I was so happy because I
almost didn't go.

SPEAKER_03 (56:03):
Yeah, you know what's funny?
I almost didn't go too, but wepaid money to be the one of the
sponsors.
Yeah.
And I was like, uh, we'll seehow this goes.
But I think I just enjoyed morethan anything, just why
actually, so like I was sayingbefore, when people actually
take the step and do that, theyreally want it.
They want it, they want to grow.
You know, they're take they'respending money to get there
because they need to gainknowledge, they really want to

(56:25):
make something of themselves.
And I hear it all the time.
I say I feel bad at people, I'mI'm hurting for money, I'm
hurting for this.
And yeah, everybody is too.
Let's be honest.
I'm still like balling on abudget, right?
But it's at this point whereyou're like, if you want more,
then do it.
If if you but you have to put inthe work, you have to make you
have to make time, you gottamake sacrifices.
And everybody that was in thatroom, I had private
conversations, have made a lotof sacrifices either to get

(56:46):
there or in their personal lifeto grow, and they're there
because they are really seriousabout growing.
Yeah, so man, I I really Ireally appreciate meeting you
and uh your girlfriend, right?
Now you're not married yet?
Correct.

SPEAKER_01 (56:56):
Yeah, not married.

SPEAKER_03 (56:57):
When are you gonna pop the question?

SPEAKER_01 (56:58):
Oh, that's uh she's here by the way.
I just have to pull it.
I have to pull it out on them.

SPEAKER_03 (57:02):
She's sitting there listening.

SPEAKER_01 (57:03):
Within one to one hundred years.

unknown (57:05):
Oh gosh.

SPEAKER_03 (57:06):
I'll just see you walking down the street by
yourself here deciding to like.
You want to ride?
Oh, yeah, no, we're yeah, I'malready I'm yep, there it is.
Go.
Well, thanks for joining metoday, brother.
For every uh how can peoplereach you?
What's the best way to reachyou?

SPEAKER_02 (57:18):
Instagram, uh or the builderbrian is the easiest way,
or Brian at theBuilderNation.com.

SPEAKER_03 (57:24):
And Brian at the BuilderNation.com, it's your
website?
Yep.
Is your contact information onthere?

SPEAKER_02 (57:28):
Uh yeah.
Or it's not, it's contact at thebuilder nation.
Yeah.

SPEAKER_03 (57:31):
Well, we'll put it on the podcast on all the
platforms so people can reachyou.
Yeah.
So thank you for joining me.
Let's go have some fun today.

SPEAKER_02 (57:35):
Absolutely.

SPEAKER_03 (57:36):
Cool.
Thanks, bud.

SPEAKER_02 (57:37):
Appreciate it.
Appreciate it.