Los Angeles County Builder Insight with Member Mike Marshall (LA 966)
Los Angeles County Builder Insight with Member Mike Marshall (LA 966)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to The Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala-
Jill DeWit: And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk with member Mike Marshall, who shares his professional experience with us here at Land Academy.
Jill DeWit: He’s also in sunny Southern California.
Mike Marshall: Really. Absolutely.
Steven Butala: His signal’s going through satellites and stuff, but I really think it’s like three miles from each other.
Mike Marshall: I know, yeah. Exactly. No, it’s great. Lucky to be here right now. Weather’s beautiful, so I’m grateful.
Jill DeWit: It is.
Steven Butala: We … Before we get into it, let’s talk about your position at Los Angeles County and what that’s all about, and man, I got to tell you before you even start how beneficial it is to have you in our Land Academy crew.
Mike Marshall: Great. Yeah. No, absolutely. It’s been a pleasure helping people out and being a part of the group, absolutely. My experience over the last 15 years has been working in different jurisdictions in Texas and here in California, basically with the planning departments, and so heavily involved in land development, land use, and that kind of thing. I come from more of like the land development side of the equation, and so a lot of my experience and a lot of my contacts are in that world specifically here in Southern California and Los Angeles. I deal with anything from … Beginning of my career, it was anything from small residential additions and everything, but where I’m at now I’m working on large residential subdivisions for large home builders. Maybe 1200 residential units for KB or for party homes. Working on hundred thousand-square-foot large commercial developments as well.
Mike Marshall: Right now, where I’m at is kind of like these larger projects, larger subdivisions. Maybe annexation projects for different jurisdictions, but a lot of what I’m doing like I said is really more working with developers one on one, bringing their projects through the entitlement process. When you look at a development project, you’ll have the beginning part of it where there’s the entitlement process basically giving you the approval to do the project, and then you have maybe going through your building permit process, getting your building permits issued and then going through construction. I’m really more on the front end from the conceptual part of the project all the way through the actual granting of those entitlements, and that’s really where my career’s focused on in the last 15 years.
Steven Butala: I’m gonna ask the question that every single person who’s listening to this really wants to ask and they’re thinking. Why is it such a pain in the ass to get anything built?
Mike Marshall: Especially in California.
Jill DeWit: I was fixing [crosstalk 00:02:43] to say [crosstalk 00:02:44] totally.
Mike Marshall: That’s the thing. My career is like the total polar opposites. Texas is so different. Texas is a lot easier comparatively than in California. California is a lot about like you said, environmental regulations. Just that loan and how steep those are in California. Slows the process down and that means that it’s more money and there’s less certainty from the developer’s side of the equation. What they want is they want certainty more than anything else, and the process doesn’t allow for them to have that certainty, and so the development process, again, especially in California, is just looked at as it’s just more risky. It just takes a long time to get through the process.
Mike Marshall: It’s not uncommon to see … Like that project I mentioned, those 1200 units, that project was in probably about 10, 15 years ago when it was originally submitted and now it’s just getting on the ground today. That’s how kind of cumbersome and ridiculous in some cases it is to develop in California specifically. With the exception of infill lots. Infill lots is a lot better.
Steven Butala: I’d love to hear about that. How does that go?
Mike Marshall: What you have in that situation is, again, if you … How we been talking about it in Land Academy is just a vacant lot between two houses, but it can also apply to commercial infill as well. In that situation, the environmental regulations, there’s exemptions in the law that say, “Hey, if you’re aren’t gonna … 10,000-square-foot lot and there’s no possibility for environmental impacts, you can get through that process a lot quicker.” Just infill in of itself right there, you’ve cut maybe eight to 12 months out of the process just in something like that.
Mike Marshall: Again, infill is much better, and the way that regulations are going in California right now at the state level, they’re really obviously concerned about affordable housing. We keep hearing that over and over and over. The state is creating regulations and legislation that basically streamline the development process and make it easier for developers to actually add more density and add more housing on projects. That’s really where the push is right now [crosstalk 00:04:56].
Mike Marshall: A little push and pull between the state and local jurisdictions. Local jurisdictions want to have control. They want to be able to say, “We want to control what it looks like and what it feels like and everything else”, and the state is more concerned about providing the housing. That’s a lot of what’s going on in California, at least right now.
Jill DeWit: All the more reason to do what we’re doing and not do it ourselves and flip it to somebody else.
Mike Marshall: Oh, absolutely, and even though I have that experience, I don’t know that I want to go through it myself, truthfully. I mean, we … Yeah.
Steven Butala: No one’s more qualified than you to make that decision.
Jill DeWit: Right. “Hang with me, baby. In 15 years, we’re gonna be rolling in it.”
Mike Marshall: Exactly, and I think it’s different people have a different stomach for it, you know? If you’ve been doing it for a while, then more power to you. I’m much more along the line of, “Hey, I’ll find the opportunities. I’ll help you through the acquisition process and I’ll pass it on and I’ll move on to the next one.”
Steven Butala: That’s our whole business model, obviously [crosstalk 00:05:51]-
Jill DeWit: Exactly. Oh, man.
Mike Marshall: They had … Yeah, so it’s a really … It’s really interesting in California right now, but that’s really where my focus is at, and a lot of that is just because of the relationships that I’ve built more than anything else and trying to like take advantage of those things that you have. I remember yesterday, things Matt was talking about in one of the calls about the relationships. How he’s really great at building relationships. I think it’s a huge key is to use those assets and the things that you have to your advantage, and that’s what I’ve been trying to do.
Jill DeWit: I a hundred percent agree.
Steven Butala: Yeah, me, too [crosstalk 00:06:24]-
Jill DeWit: We tell our kids that all the time. If you don’t use every resource you have like us and something like that, it’s … You’re not doing it wrong. You need to use your contacts and who you know, and that’s okay. There’s nothing [crosstalk 00:06:38] with that-
Mike Marshall: Absolutely. You have to. I mean, that’s just the way that the world works, and there’s no shame in it at all. It’s an absolute skill, and that’s again what I’ve been trying to leverage that as much as possible.
Steven Butala: It took me a long time … It took me till recently to really realize that when you talk about these contacts and these relationships, they need you, whatever you’re offering, as much as you need them.
Jill DeWit: Totally [crosstalk 00:07:00]-
Steven Butala: It’s not like you’re coming to somebody and saying, “Hey, give me a break”, or, “Do me a favor.” It’s like, “Hey [crosstalk 00:07:06]-
Jill DeWit: How can we make this [crosstalk 00:07:06] work together? Yeah.
Steven Butala: The people that we sell this property to are dying for good transaction deal flow from rational people like us.
Mike Marshall: I gotta tell you, I’ve been meeting with a lot of these buyers and developers and even with some of these smaller regional home builders and I tell ’em about what we’re doing and what the approach is and how it’s heavily data-centric and that’s where the focus is, and they just get excited. Their eyes light up because their in-house teams don’t really have either the knowledge, skill, or ability or willingness to go out and do it. They’re kind of stuck doing it through either maybe their contacts, driving around, whatever they’re gonna do, but the notion of using data is not something that they’re really used to, so when they hear that, they really perk up and they’re really interested, so [crosstalk 00:07:55]-
Jill DeWit: That’s awesome.
Mike Marshall: It gives them an advantage.
Steven Butala: Why is that? It’s amazing, ’cause I come from a commercial real estate/Wall Street-driven acquisition background, and with a dash of accounting, and we did stuff really intelligently, and here we are. I don’t know why the acquisition staff on a large home builder like Toll Brothers or something, they haven’t caught on to this.
Jill DeWit: I know.
Mike Marshall: It’s amazing, and then I … I don’t really know, either. I don’t know where it’s at, and I think at least my experience recently has been that because of the market in Southern California, you have larger builders like the Pardees and the Toll Brothers, then you have these smaller regional ones, they’re trying to find their place in the market, and so they can’t really compete on these large-acreage, big huge properties, so they’re looking at a little more infill stuff. I think that’s a little bit outside their experience, and so they’re looking for people like us that can actually go out and source these deals for them.
Jill DeWit: It’s amazing. I’m just thinking about what a difference it was coming from … Texas was probably just good ol’ boys like, “Yeah, go ahead.” Getting what you’re … To probably the most difficult … I can’t think of a more difficult state or environment to get something done. We all know. We all drive around looking at things being built in our neighborhood, and we all see … Steve and I in particular, we watch the work stop, and we all know that there’s some holdup and it’s probably not money. There’s some other legal holdup as why this construction is on pause for four weeks or something ridiculous.
Steven Butala: Or four months.
Jill DeWit: Exactly.
Mike Marshall: Right. Yeah, you’ll see them. They’ll pull their crews on and off to meet demand is one thing. Or there’s some other circumstances come up like you said. It’s gonna be interesting to see out here in terms of how many units are coming on the ground. Even though they need housing, you’re still seeing a large supply of houses getting built at least in North L.A. County, so it’s a really interesting market to see and see what’s gonna get overran. It’ll be interesting.
Steven Butala: Is Santa Clarita in L.A. County?
Mike Marshall: Yeah, just the northern portion. If you … Any of you guys are familiar with like Palmdale, Lancaster, that area, so we’re just … We’re at the junction of the 5 and the 14 where Magic Mountain is, the theme park, so we’re right there. Yeah, we’re at the northern parts of L.A. County. Just north of us would be portions of Los Padres National Forest and you’re getting into Kern County.
Steven Butala: Let’s say I buy it … This is all theoretical … 10 acres in Santa Clarita that’s got county access and all utilities are at the road and it’s flat. I want to go through the entitlement process and develop a bunch of lots, do the infrastructure in the lots, and then sell all the lots with the infrastructure in place to Toll Brothers to finish ’em and sell ’em. How long would that process take from the landowner perspective?
Mike Marshall: Right, so from the day that you … Maybe you kind of start consulting with a civil engineer to the day that you can start selling those lots, I think you’re easily 18 to 24 months, and that’s having really professional people. If somebody ever wants to get into this game, the biggest advice I can ever give anybody is find professional people that are in that area that have done projects in your area. Don’t go cheap. Cheap is always gonna cost you more in the end because they’re gonna drag it out. They’re gonna make the process work worse for you, so pay for the qualified people and get it done right the first time.
Jill DeWit: I love that. I believe you get what you pay for with everything/
Mike Marshall: I agree. Jewelry as well?
Jill DeWit: Exactly [crosstalk 00:11:41]-
Steven Butala: I think [crosstalk 00:11:41]-
Mike Marshall: Yes.
Steven Butala: I thought you were gonna say two or three years. I mean, well, I thought you were gonna say longer than that.
Jill DeWit: Well, that [crosstalk 00:11:46]-
Steven Butala: 24 months is not bad [crosstalk 00:11:46]-
Jill DeWit: Best case scenario with pros, so 18 to 24 months, which for probably somebody really trying, this is probably three years, right?
Steven Butala: Yeah.
Mike Marshall: Right, and … Good.
Jill DeWit: That was the perfect scenario.
Mike Marshall: It is. That is the perfect scenario, and you never know. I mean, and that’s like a flat piece of land. It doesn’t have a lot of environmental issues that you have to deal with, and the truth of the matter is that property you described, it really doesn’t even exist. I mean, especially up here [crosstalk 00:12:16] and so up here, everything has some sort of hangup with it, you know? That’s why I can’t even say a lot of times … There’s always a reason why it hasn’t been developed yet. The easy low-hanging fruit has already been grabbed and down, especially in L.A. County.
Jill DeWit: You know what? I was gonna say, I loved when you came to our live event last fall and what you brought to the table, we were both totally blown away and there were so many things that I never would have thought of.
Steven Butala: Me too.
Jill DeWit: It was so awesome for us all to hear and learn from you and the beauty of it is, now knowing what I know and in the most complicated areas that probably anywhere else I try this is gonna be easier. I know … I … So many things like you even brought up yesterday on the call about these trees. I mean, this tree thing [crosstalk 00:13:06]-
Steven Butala: Oak trees.
Jill DeWit: Totally [crosstalk 00:13:06] me, like the cost involved of moving it. You think you just rip up this tree? Guess again, guess [crosstalk 00:13:15]. You can’t just do that, and by the way, now you’re … The removal of the tree might cost more than what you paid for the property.
Mike Marshall: Absolutely. In many cases it very well could, and just in one oak tree sitting in the middle of a parcel, that could actually just be the one thing that’s prohibited development up until now.
Jill DeWit: Exactly.
Mike Marshall: I’ve [crosstalk 00:13:33] seen it happen.
Jill DeWit: It’s like we tell the kids. The kid’s like, “Oh, but”, when they’re little. “But Mommy, it’s free.” Hold on a moment. There’s a reason why … This is why the whole Driving For Dollars drives me batty. You think you’re the first person that came across this gorgeous parcel in the middle of this awesome area and it’s just sitting there available. There’s something going on.
Mike Marshall: That’s my call. Every day I talk to somebody about that same exact thing. Everybody thinks they’re the one that found that jewel and it’s weird. It’s kind of leading me into the InfillReports is that I know that there’s … I know we try to say that there’s no such thing as junk property, and I believe that. There really is no such thing as junk property, but there is property that doesn’t work for people, given what their intent actually is. If your intent is to build on a lot, there’s a lot out there that you theoretically could, but the cost and the time to do it is just gonna kill you and do you really want to do it? Do you really want to engage in that?
Mike Marshall: There’s examples up here where there’s lots that are maybe like 50 to 60 lots that are landlocked on the top of the hillside that were originally deeded as part of subscriptions that The L.A. Times sold back in like the early 1900s, and so you give away these parcels of land and they’re all landlocked and nobody could ever access ’em. You have 40 people you have to get easements from. The only way it’s ever gonna work is if one developer goes in and buys all of ’em, but good luck finding everybody. These things keep showing up and they show up on the tax sale list and people will pick ’em up and they call and say, “What can I do with it?” Well, not a lot, honestly. I mean, you [crosstalk 00:15:15]-
Jill DeWit: Go to your paper.
Mike Marshall: Right, and that’s happened [crosstalk 00:15:18]-
Jill DeWit: That came with.
Mike Marshall: Right, right.
Steven Butala: They had a survey, frame it, put it a picture frame and hang it above the fireplace because that’s really all [crosstalk 00:15:27] it’s good for.
Jill DeWit: That’s about it.
Mike Marshall: Right, exactly. I mean, unless you’re somebody that’s from out of state or out of the country and you’re like, “I just want to feel good about owning a piece of California property”, and that happens, too.
Jill DeWit: That’s okay [crosstalk 00:15:38]-
Mike Marshall: Happens, too, so …
Jill DeWit: Like people buy … People buy shares of stock that they have no interest in doing anything with. They’re just saying, “Hey, I own a piece of Apple”, or something like that. “That’s all I want, in the frame, on the wall. I’m a shareholder.”
Mike Marshall: Right, yeah. I mean, the value is with the person that bought it, so yeah. If they value it, hey, by all means, so …
Jill DeWit: That’s so great. You started to talk about InfillReports, so do you want me to put that to you, Steven?
Steven Butala: Well, yeah. I mean, Mike is the founding … The brainchild of and the founding partner in a company that we have InfillReports, infillreports.com or report.com, and essentially if you’re a member or if you’re anybody who owns a piece of property or wants to buy a piece of property and you’re wondering how it can get used or can you build a house on it, where are the utilities, and all different other types of facts, you order an InfillReport and it comes out on the other side and it tells you, within reason, if these things are possible and what’s possible.
Steven Butala: It’s … We’ve had a great response so far. We quite honestly haven’t marketed it at all or the way we should. It’s slated to be marketed later this year, but I had not … A lot of people in our group have purchased InfillReports and I have not had one person come back and say, “This information is just not what I thought. It’s not helpful.”
Jill DeWit: It’s fantastic, and I hear everything from “Yah! I knew I was on the right path”, and the other flip side is, “Oh my gosh, that was money well spent. I didn’t buy that property because of the way the report went back. Thank goodness.”
Steven Butala: That’s nationwide [crosstalk 00:17:12] too, it’s not just California.
Mike Marshall: Absolutely. I mean, that one … I mean, that idea was just born out of my experiences working in these jurisdictions and talking with people that would be like, “Hey, I bought this property and now what can I do with it?” Then I have to be the one to break the bad news to them, and it was like … That happened all the time and I’m like, “Geez, it would be great to do something that at least help people be more informed”, and not give them advice as far as to buy and not buy. They can make that choice, but as long as you have the information and can make the decision for yourself, that’s what it was all about. It was trying to like at least provide people with that opportunity and have the information to do it, so that’s really what that was born out of.
Jill DeWit: I love the way that you have … You have the numbers set up that tells you the level of “ready to go, it needs something, not gonna happen, run.”
Steven Butala: Not gonna happen. I mean [crosstalk 00:18:04] Jill nailed it. Jill nailed it. The real value is getting an InfillReport during the acquisition stage, not after you purchase the property.
Jill DeWit: Exactly. You do it [crosstalk 00:18:14] ahead of time.
Mike Marshall: Absolutely. Agreed.
Steven Butala: You’re so … I mean, when we sat down at the … I remember it, I’ll remember it forever. We sat down and originally talked about this. My first thought was, “Where the hell have you been all my life?” Back in the day, Jill and I were buying properties in Riverside, San Bernardino, and counties in the Southeastern part, even San Diego County, and big properties. Like 120 acres for very little, and I … Over the years we’d get these calls like two years later after we’d sell it and people said, “Hey, thanks. Do you have any more property like that? We just sold this property for $2 million that we bought from you like three years ago for $80,000.”
Mike Marshall: Wow.
Steven Butala: I could have ordered an InfillReport and figured out, “Oh yeah, there’s all these utilities they set up for this, this, and this [crosstalk 00:18:57]-
Jill DeWit: The true value [crosstalk 00:18:57]-
Steven Butala: I would have done something else.
Mike Marshall: Really, that’s a great point ’cause it’s not only just highlighting the things that might be wrong, but you need to uncover things that you can do with the property that you didn’t know before and then all of a sudden there’s that unvalue … Or that value you that you can unlock. Yeah, that’s a [crosstalk 00:19:12]-
Jill DeWit: I look at it like giving it forward. When you pull an InfillReport and you have this great property that we’re talking about and you buy it and you can go to a builder or somebody else and hand it to ’em and go, “Look how valuable this is. I’ve already got all these questions answered for you.” That is so valuable. I love it.
Mike Marshall: Yeah, absolutely. I think that is the key part of the value, absolutely.
Steven Butala: What do you know … Speaking of San Bernardino County and Riverside and some of the adjacent counties to Los Angeles, is it easier to get stuff done? I don’t want to get you in trouble here. Maybe you don’t even know [crosstalk 00:19:45] I’m wondering.
Mike Marshall: I have my contacts, professional contacts in those jurisdictions, and yes, it will be easier in those more rural counties to get some stuff done. Historically in a lot of those cities where they’re really kind of hurting for economic development, they’re gonna be more apt to be flexible in getting things done, whether it’s streamlining the process or what have you. Large employers is always a big thing, so they’ll tend to get things done a lot easier.
Mike Marshall: Yes, some of those more outlying counties will be a little bit more simple. There are some things that are state legislation regarding like subdivisions and things like that that you can’t get through. Again, that’s why I love Texas. I mean, it’s the best situation and how you can do subdivisions specifically in Texas is amazing, but yeah, it will be a little bit easier in Riverside, San Bernardino, Imperial, those areas if you want to go [crosstalk 00:20:45]-
Steven Butala: You know that Santa Clarita question about that flat 10 acres?
Mike Marshall: Mm-hmm (affirmative).
Steven Butala: What’s the timeframe in Texas where you are?
Mike Marshall: Now, I have to really think back. I think timeframe in Texas would be easily in half. I mean, but the cool part, depending on where you’re at, you can … The subdivision itself can be done [crosstalk 00:21:02]-
Jill DeWit: Happen to see what time is it? 11:30? I make some calls [crosstalk 00:21:05]-
Mike Marshall: You can get [crosstalk 00:21:05] by noon.
Jill DeWit: Have it done at noon.
Mike Marshall: Yeah, yeah. That’s how it is [crosstalk 00:21:09]-
Steven Butala: That’s how she does everything, by the way. It is.
Jill DeWit: I do. Watch me go.
Steven Butala: What’s for you next? Are you buying property? I know you’ve got some pretty heavy hitters asking you to find them property, so what’s next for you? What are you working [crosstalk 00:21:31]-
Mike Marshall: Yeah, the way that I kind of came and started searching for Land Academy ultimately was that I had a team of people, developers that were looking for projects. I was working with them and bringing them through the process, so this is outside my job. I’d be somewhere else, some other jurisdiction. I’d be helping them through the process and getting those projects done, but the thing that they were always complaining about, again, is that they just couldn’t find the properties. They couldn’t find stuff in terms of acquisitions, and at that time, I didn’t really have much of an answer for them.
Mike Marshall: Me and another coworker, we were kind of business partners on the side. We said, “Well, let’s try to figure this out.” I was kind of tasked as the one to kind of go and start looking at different ways to do that. That’s when I started looking. I came across somebody else in the space, didn’t really like that approach. Found you guys. Loved it, and so then I really started to go and really start buying real vacant land for myself. Really more if nothing else just to really try to perfect the mailing and pricing process and just that methodology and try to get that sunken into my head. The whole thing all along was I always knew that I was gonna bring it back and apply it to these buyers that I had.
Mike Marshall: It’s kind of like reversing the wholesale model and doing more of like a reverse wholesale thing where I have these buyers and they’re placing orders and I’ll take those and I’ll go and I’ll assign ’em whatever we work out, but some I’m really holding stuff in inventory. I’m really going out and fulfilling orders and doing it that way. I’ve been able to work situations out where I’ll get an assignment fee and then I’ll maybe negotiate that down for a little bit of the equity on the backend as well on the project, so I kind of have those opportunities that it work out as well [crosstalk 00:23:17].
Mike Marshall: That’s where I’m headed is doing that. Right now, I’m working on a pretty big mailer for the City of L.A. and their real strategy is is that we’re looking at underutilized parcels. We’re looking at things .. For example, you might have a single-family house that’s on an 8,000-square-foot lot, but the zoning allows for much higher density, and so these tend to be like older homes, maybe built in the ’40s and ’50s.
Mike Marshall: We’ll go out, we’ll acquire those with the intention of ultimately taking those down and building an extra higher density multi-family building. That’s what my buyers are looking at doing all throughout the city, and so again, it’s just a niche thing. You have to kind of really understand zoning, understand what you can get on the properties, but RealQuest Pro is awesome because it really allows you to sift by zoning and all these other things so I can really narrow it down exactly what I’m looking for.
Steven Butala: In that scenario, you got an old house built in the ’20s or something like that on an 8,000-square-foot lot on a thoroughfare way, large street, and it’s zoned up already for you. What would you do there? Walk us through that process, how long it might take, what the City of L.A. … Just generally, what … If it all went really well for these guys, what would they do?
Mike Marshall: Right, so I’ll kind of start with the end answer is that you can probably get through that process in terms of planning approval, building permit issuance, and you’re kind of breaking ground … You can get through that process probably within a year once you know the people that to how to process it in L.A. City, how to get it through, kind of have your contacts in there. You can get it done and start moving within a year.
Mike Marshall: You may get lucky, get it done a little bit quicker, but especially on an infill lot, something like that where it’s not really raising a lot of attention of like council members or any of the electeds, it’s really flying under the radar, something like that you can get done within a year. That’s the goal. I mean, I don’t want to be on anybody’s radar. I want to like fly right underneath it.
Jill DeWit: Me too.
Mike Marshall: Yeah [crosstalk 00:25:24] exactly. I don’t want anybody looking up what I’m doing. I don’t want any of that, so I just want to like kind of squeak [crosstalk 00:25:30]-
Jill DeWit: Exactly. I’m not here to brag about it or anything [crosstalk 00:25:33]. No, just quietly get it done.
Mike Marshall: Exactly, and I’ll do it in volume. I don’t need prestige and I don’t need ego. I don’t need to have somebody to go look at this building that I did. I don’t need any of that.
Jill DeWit: Nope.
Steven Butala: Says three people in front of a camera with microphones.
Mike Marshall: No, you’re right.
Jill DeWit: It’s very … This is not gonna air.
Steven Butala: All right, so the approval process is done in a year, and then you go vertical and then it takes how long it takes.
Mike Marshall: Yeah, and depending on what you run into, but I mean, you’ll probably … On a situation like I said, maybe you’ll have like an eight- or 10-unit building. You’ll probably get up and done in, gosh, probably another year. Probably even less than that, honestly, and in this scenario, a lot of the people that I sell to, what they’ll do is they’ll actually go and entitle it and bring it through that part of the process and all the way to the point where it’s actually ready to have building permits issued, and then they’ll sell to the builder.
Steven Butala: That’s what I would do [crosstalk 00:26:30]-
Mike Marshall: You kind of step in the middle.
Steven Butala: There are totally … Yeah, there’s actually three talents here in my opinion. There’s sourcing the land, which is what we do. There’s the entitlement process and what I would call … It’s not really technically soft costs, but it’s part of the soft costs, which is kind of what you do, or [crosstalk 00:26:48]-
Mike Marshall: No-
Steven Butala: You’re aware of more than most people, and then there’s construction, which that’s a whole different thing.
Mike Marshall: Exactly, and so I don’t really ever get into that side of it. I have people that I work with and partners that do all of that and they price all of that out, but yeah, I really just bring it up to the … If I do work on that side of it, it’ll bring it from submittal all the way through building permit issuance and then I walk out at that point. Where I’m at really at this point, I don’t even really all that often want to get involved in that part of it. I just really want to more do the acquisitions and sell to the entitlement guys, you know? The knowledge and the experience is really useful because I can understand what they’re looking for and what they need, and then if I do want to get involved, it just becomes another revenue stream.
Steven Butala: You know what I have never gotten over or past in my professional real estate career and I never will at this point? Is the risks between … There’s always a moment … We were talking about this on a show … There’s always a moment of confidence where, “You know what? I’m gonna buy this piece of property. I know exactly what I’m gonna do with it and how long it’s gonna take, and plus or minus 10%, I know how much money I’m gonna make on it.” When it comes to entitlements and even zoning changes or whatever’s involved, it’s been very difficult for me historically to say, “Hey, I wonder if this stuff’s really gonna actually happen at the city level? Nah, I’m not gonna buy that property. I don’t want to take the chance.”
Mike Marshall: Right. I agree. No, I … Talking with some of these larger builders, the issue is that you can really do anything to get it entitled. You can go and do whatever the city or the county is asking you for, but at the end of it all, can you actually build it? Can you actually build what you’ve gotten approved? If you don’t have the mind for the construction side of it as you’re going through the entitlement process, you don’t know where to pick your fights and everything, otherwise you’re gonna end up with this project that’s great and it looks beautiful, it’s approved, but it doesn’t pencil. The builders get really kind of frustrated with that, with the guys that are the entitlement focus side of it, so you have to work in conjunction with it and know what you’re doing. It’s tough.
Steven Butala: I mean, the job … The underlying job of every architect is to make a non-feasible project.
Mike Marshall: Right, yeah. Absolutely. Yeah, and it’s like they treat it like an art project, and it’s not how it is. Not what it is.
Steven Butala: It’s only gonna cost $42 million and then it’s, “I’m gonna win an award.”
Mike Marshall: Exactly [crosstalk 00:29:06]. I’ll have that nice little trophy on my desk and everything will be wonderful. Yeah. No, it’s so true [crosstalk 00:29:12]-
Jill DeWit: Plaque of the L.A. County roof … Property that you own.
Mike Marshall: Yeah, exactly [crosstalk 00:29:17]. Yeah, that’s funny.
Steven Butala: There’s a documentary on Netflix right now about Lego Corporation, Legos. They took their Scandinavian world headquarters and rebuilt it and they got architects involved and made it a museum, you know?
Mike Marshall: Oh, wow.
Steven Butala: Kids can play and walk through it, and the whole time I’m watching it going, “How much did that cost?” I mean, it was cool [crosstalk 00:29:40] like, they won awards for it. I’m like, “There’s no way it stands on its own feet financially at all.”
Mike Marshall: Right, right [crosstalk 00:29:46]. It’s like how do you justify that? I don’t know, I guess … I don’t know how you do that, either, and [crosstalk 00:29:51]-
Jill DeWit: You’re either gonna win it emotionally or financially. You rarely [crosstalk 00:29:55]-
Mike Marshall: Exactly.
Jill DeWit: Get both.
Mike Marshall: Yeah, that makes a lot of sense. Yeah.
Jill DeWit: We choose to win financially over emotionally.
Steven Butala: Yeah, I leave the emotional stuff for fishing and all of that.
Mike Marshall: Exactly. That makes sense.
Steven Butala: Have you done a deal recently that you’re super proud of or one that blew up or anything like that? Or do you have any good deal stories? Even if they’re not your own, like people’s like … Everybody loves to hear stories about [crosstalk 00:30:18] a bunch of people that submitted some stuff to the City of Los Angeles and it just blew up in their face, ’cause it’s not us, you know?
Mike Marshall: Yeah. There’s two … I’ve had two that I’ve worked on and they’ve gone exact polar opposites. One was a 10 … Yeah, a 10-unit multi-family building on a major highway or major roadway and we thought that that one was gonna go through really, really well, and then the other one was a 12-lot subdivision that was for 12 residential houses that we thought was gonna kind of cause some issues, and that one went through really, really easily. You have like … You never kind of know what you’re gonna get sometimes. In that particular part of L.A., there’s a … They have like these community plans and one of ’em was like there’s this big equestrian focus, which is really funny because the community wants this historical equestrian focus, yet it’s a very highly-urbanized area and it just doesn’t really meet.
Mike Marshall: You go to these community meetings, you’re like, “Well, here’s this multi-family building.” We’re providing houses and they want like horse hitches outside. It’s like you’re like, “My goodness”, and you had these community meetings and like one person takes control of the whole thing and I’m at this community meeting making this presentation and I happen to be sick with a cold and I’m like coughing, coughing. This lady is talking about horses and horse hitches and I’m like, “My goodness” [crosstalk 00:31:44] … Yeah, and it was just crazy. She kind of hijacked that process to a degree because you really had to get support from the local council district and everything like that. Then on top of it, we had a civil engineer that didn’t know what they were doing, and so that delayed the process at the city.
Mike Marshall: The flip side is just like two blocks away we had that 12-lot subdivision and it was the same community group, but that one lady was gone from the group, and then all of a sudden that whole group loved our project. “Oh, we love it. This is great. Architecture’s wonderful. Go through.” It’s … Sometimes it’s two things. It’s the city process and sometimes it’s the community, too, and so when I talk about flying under their radar, I try to … I want to try to do projects that don’t require community involvement, that don’t require public noticing. Just again, just … I don’t want to involve other people if I don’t have to.
Jill DeWit: This is unfortunately further perpetuating our crazy Southern California viewpoint people have about us, so now I think what everybody hears is, “I have to have a horse hitch next to my electric car plug-in. They gotta be right next to [crosstalk 00:32:53].
Mike Marshall: Exactly. You got it.
Jill DeWit: Hello, everybody. Yes.
Steven Butala: That’s [crosstalk 00:32:58].
Mike Marshall: She’s actually not too far off.
Jill DeWit: Welcome to Southern California.
Mike Marshall: Yeah, that’s funny. It does get interesting. It can get really sideways really quick.
Steven Butala: I love the weather here. I really do, but Jill grew up here in the ’70s and ’80s, and I … Statistically I read recently that there are five times more people … There are five times more people here than back then with no … I knew … We all know, the infrastructure has not kept up with that in any way.
Mike Marshall: Right. I have similar rants that you do I think Steven about California. I was born and raised. I left for a while to Texas. I almost left and went to Idaho, actually. There’s … It’s hard. It’s a lot of reasons that frustrate me and make me want to move, and then I look outside at the weather and I know that I can go to the beach, the desert, and the snow all in a matter of a day and there’s nowhere else you can do that. It’s expensive as anything else and I can’t stand that, too, but at the end of it all, it’s like sometimes it’s in your blood, too. It’s just like hard to leave.
Steven Butala: Less than 10 minutes away from fishing on the Pacific Ocean from where I’m sitting right now.
Mike Marshall: That’s just got to be the saving grace. You always know you can go.
Jill DeWit: That includes getting in the boat.
Steven Butala: All of that. That includes everything.
Jill DeWit: Includes walking on the marina and getting in the boat.
Mike Marshall: Yeah. The other thing that keeps me in L.A. or at least in Southern California is the Mexican food. I’ve learn that like I can go [crosstalk 00:34:34] … I go to like Texas and the Tex-Mex is something completely different [crosstalk 00:34:37]-
Jill DeWit: Totally.
Mike Marshall: And I missed it. I missed it so much. I … Just not being able to get like street tacos and stuff like that, oh man.
Jill DeWit: I agree.
Mike Marshall: That keeps me, too.
Jill DeWit: Yep, you are right.
Steven Butala: Los Angeles is awesome if you just don’t have to travel that far every day.
Jill DeWit: That’s [crosstalk 00:34:52]-
Mike Marshall: Right [crosstalk 00:34:53]-
Steven Butala: That’s really what … People say they hate L.A., I don’t think they hate L.A., I think they hate traveling around in L.A.
Mike Marshall: Yeah, absolutely. I mean, yeah. If I could just work from home … I’m lucky. I mean, I only travel a few minutes to work in the day, so I can’t complain too much, but yeah, that’s my ultimate goal, thought, too, is just work remote from home and then, I don’t know, probably move to the beach somewhere. Targeting San Luis Obispo area I think. That’s kind of where [crosstalk 00:35:19]-
Steven Butala: Yeah, that’s great. You know, it’s amazing to me that the smaller communities all over California, the small towns, are truly amazing, and it’s … I’m waiting … I keep wondering why it’s taking so long because everybody’s on a computer now. We’re so connected and I wonder why these smaller communities haven’t developed more or why I guess there hasn’t been more younger people like us that have just … We don’t need … I think maybe you might … Construction or municipal stuff is different, but so many people are just on a computer. I don’t know why you’d move to a small town where it’s cheap and all of that.
Mike Marshall: Yeah, I don’t know, either. I hear all these reports about the preferences of Millennials and what they want and like the talking about how they don’t really care about having cars anymore. In my role in planning, they’re always trying to look forward and see what’s going on, sort of looking at trends in that sense. It’s hard for me to swallow. I mean, growing up in California, highly car culture, it’s hard for me to believe that. It’s hard for me to believe that anybody would want to live in a building that has no parking for you, but they’re building those buildings in downtown L.A. right now. Multi-family buildings that have no parking at all [crosstalk 00:36:35] providing. Yeah, just street parking and that’s it.
Mike Marshall: What they’re trying to do is they’re just trying to force you to walk, they’re trying to force you to use public transit. They’re trying to force it as much as they can and it’s getting built, so I don’t know.
Steven Butala: History of humanity, forcing people to do stuff they don’t want to do doesn’t work.
Mike Marshall: Right, yeah, so I don’t get it. I don’t see where the demand is in that, but it happens. Then I just kind of go to a place where I’m just not the target market, then. I’m just not what they’re looking for.
Steven Butala: Yeah, we say that all the time.
Jill DeWit: Exactly.
Steven Butala: Go ahead, Jill.
Jill DeWit: Cool. Well, this has been awesome.
Steven Butala: Yeah, truly.
Jill DeWit: Thank you so much.
Mike Marshall: Absolutely.
Jill DeWit: Really glad you’re here-
Steven Butala: Thank you for being part of that community, man. I mean, you’re truly adding a tremendous fit [crosstalk 00:37:21] as a member. It’s truly amazing/
Jill DeWit: We appreciate you show up on the calls and you’re there and you’re able to quickly give some free insight to all of our members, like, “Yeah, look for this. Just to give you a heads up, I see this slope might mean this”, and I know that is so valuable for everyone [crosstalk 00:37:38]-
Steven Butala: Great.
Jill DeWit: Thank you.
Mike Marshall: Yeah, just hoping to help out, provide information and hopefully that helps people out. Like I said, it’s just information and they can decide which way they want to go, so I’m enjoying it. I really am.
Jill DeWit: Good.
Steven Butala: Excellent.
Jill DeWit: Thank you.
Steven Butala: Join us next time for another interesting episode, and we answer your questions posted on our online community.
Jill DeWit: LandInvestors.com, it’s free. Is that my turn? I already forgot.
Steven Butala: We’re all … Mike … We’re so interested in what [crosstalk 00:38:03]-
Jill DeWit: We’re all different.
Steven Butala: We’re talking about.
Jill DeWit: This is so good. You are not alone in your real estate ambitions.
Steven Butala: Thanks again, Mike. It’s really great to talk to you as always.
Mike Marshall: Absolutely. Good talking to you as well. Good seeing you guys.
Jill DeWit: Thank you.
Steven Butala: Thanks.
Mike Marshall: All right. All right, take care.
Steven Butala: Bye.
If you enjoyed the podcast, please review it in iTunes . Reviews are incredibly important for rankings on iTunes. My staff and I read each and every one.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
The BuWit Family of Companies include:
I would like to think it’s entertaining and informative and in the end profitable.
And finally, don’t forget to subscribe to the show on iTunes.
