¶ Challenges in Real Estate Development
Hello , this is Brad Wiseman . You're listening to Real Estate and You We are back in the studio with another awesome show , i have to say , and this guy has been here before , so this is a return guest , so that must mean we like him , right , hugo ? That's right , okay , i thought we do .
We do like him , he likes us back too , yeah yeah , that's right , and he's dressed up too very nicely .
I feel very underdressed , but we got Kevin Timoshenko in the studio again . You must have did something right to get to back in the studio here You did something right .
I feel like I'm one of Johnny Carson's favorite guests . He only brings a few hosts . Well , you'll be hosting it soon is what happens , doesn't ?
that what he used to do ? Yeah , they used to host it then , exactly , yeah , yeah , so you might get me to host it . Yeah , maybe you could definitely host it . I love that , that'd be wonderful .
Yeah , so we got Kevin here from Metropolitan Development Group , or actually Metropolitan Companies , because he's got all kinds of stuff under one umbrella , and I have a couple bullet points I wanted to bring up And I want to say thanks for coming in too . I appreciate it .
I know you got a lot going on . Yeah , I just came from a funeral .
I know , i know , sorry about that , Sorry about that . Yeah , so we are in a housing shortage .
We were just talking about this before we started hitting record And I was saying one of the things I'm going to say this story right off the bat you're building a place at Iroquois The reserves , i think it is at Iroquois , i think is the name of it And it just shows you that housing is housing , because when you started leasing that space there , i got two
phone calls from two separate customers saying come list my house . How cool is that ? It's really cool . Yeah , because the listing is the name of the game . That's where it's about And it just shows you when people and a lot of times realtors will say , well , we don't need any more apartments , we need houses to sell .
Well , no , when you have a housing shortage , you need anything that people can live in . Basically , as we talked earlier , it's not a zero sum game .
No , it's not , definitely , not Absolutely . Apartment doesn't necessarily hurt housing . Housing doesn't hurt apartments . You can actually coexist .
Yes , exactly , And I'm so extremely happy that you're building that over there And I'm hoping that you're going to build more . But one of the things that I have , one of my first things I wanted to ask , is what are the challenges you're facing right now as a developer ? Because you're not .
You're developing , you're building , you're renting , you're managing places , but you're developing a lot . That's a big part of what you're doing .
So what's the challenges ? What's going on ? We take it from A to Z , though I have in-house architects , in-house engineer , i mean , we have attorneys , smart , we take it all the way through the process . So the biggest challenges are probably the same for everybody right now One is interest rate and two is cost of goods .
The third one would be just a constant , constant arguing and fighting with townships to get approvals .
What does that mean , like what is going on with the townships and the approvals , and is it what we call red tape ? Is that what you call it ? Is it necessary ?
Well , i think and this is just me speaking , i can't speak to anybody , I just think it's a cultural shift . There needs to be a cultural shift And I think I said this on your show last time If you travel throughout the country let's say you're in a country how many other states are pro-business ?
If I went to South Carolina right now , i could start a piece of land and be building in six months .
You're serious . That's the difference Six months . What is it here in Pennsylvania ?
Two and a half three years . I've owned properties for 15 and 18 . I know Iroquois , for example . I told you this before I've owned Iroquois for 18 years , So it just graduated high school Exactly Your son , iroquois is just graduating high school .
It's amazing .
And the funny thing is you know all Iroquois . The whole neighborhood fights you because there's just so much Not in my backyard . Not my ignorance , yeah , because they thought it was going to be sectioning housing or something .
Oh , i'm stuck , Kevin , i got . That's nothing I want to say . I have been defending that for at least two or three years with friends of mine . Yeah , and it's not . And it's just that the rumor goes around . I swear every new apartment place going in these days is section eight . Is section eight .
Yeah , the ignorance is It costs approximately 150,000 to 200,000 per apartment to build today . Wow , i want that to sink in , so we'll go to a town .
It's a house . It's a small house .
It's under well with construction costs and the cost of land and cost of improvements . Wow , So you see people around you . just so you're clear , every single tenant in New York , every single one , could buy every house around them . Yeah .
They wanted to .
Yeah , they don't want to . They want to rent . I like the two people that you were talking about Absolutely . They just simplify life , they want it . It's a big simple . Yeah , it's a little right under 30 and simplify , over 50 . Yeah , they're just , they don't want it . Yeah , like no . I want my weekends , i want to travel .
I don't want to care the lawn , it's a beautiful thing .
And they're on the people that they've got the first floor ones because they're in early Right . You got in early Right . I mean the one's not settling until mid-September , the one's mid-August . But that's great , it's how hot your queues . I can only imagine .
We , it's 20 units per building . They're moving in this weekend . The first building is being delivered . All 20 are rented . Wow , july 1st . All 20 are rented . Unbelievable August 1st . It's not even there yet . Half of August is building . That's how much of a demand there is for high quality . I mean these are high end apartments . Yeah , they are .
You know , it's better than it goes for like $2,000 . I mean , it's not , it's not cheap apartments , i know . No , no , no , these are mortgages . Yeah , these are mortgages . Exactly These are mortgages .
And I've seen your apartments and they're nice . They've got grant-a-countertops , they've got the nice appliances , they've got . They've got all the things that you want to see in a home today .
Plus a clubhouse .
I just want to go , oh yeah a clubhouse .
A clubhouse I just want to go back real quick .
So people don't think we're busting on Section 8 , because I don't want them to think that The thing is is that , as soon as somebody does say like I have no problem with Section 8 . Right , i don't give a rip about it , i don't care , i don't know , i have no problem .
What's amazing is that the public is the one that has this thing in their head , that Section 8 is this , this terrible thing , and I don't understand why , even though and we're not- you're not , but I'm just saying it's incredible .
That's a really good point for bringing up . Thank you for bringing this thing .
I was a landlord very small landlord at one point , and I had Section 8 renters And they were great tenants . They were great tenants , you know it was . You know it was nice . I always knew I was getting a check every month . And the other thing is is that if they screwed up , they're the government or the local government would help me get them out ?
Yep , you know what I mean . So there's nothing wrong with Section 8 . It's just that it's funny that the public thinks there's something wrong with it . Correct , yeah .
The public Ignorance Yeah , specifically Brooks County . Yeah , still thinks that people who rent apartments are poor . Yeah , they're not poor anymore . No , that changed .
20 years ago . There's no low rent anywhere . No , there's not . There really isn't , and that's what's funny about it . So , yeah , so I love that you're doing Irrequined , i love that you're going to be doing more projects like that . But going back to the townships are what is it ? So ? what is it that they're doing to hold things up ? It's got to it needs .
There needs to be a cultural shift . Okay , And we talk about South Carolina . Yeah , Yeah , Yeah .
Everything delays at the end The township engineers delay it , The township solicitors delay it , The township the , all the red tape , all the because every time there's a meeting you get some advice and then the next meeting is two months later And then you get more advice and they go no , change this .
And now you're into it for eight months before , before you even get to the meeting you got to get to .
Yeah , yeah , i got you . Is there a way that they could just say Hey , look , you can either go , you can either get a fast pass , like they do in Disney , or you can do and , and . And what if you could just pay a little more to do the fast pass way you know , and get the things done quicker , and then ?
then it would actually maybe be cheaper , because you're not doing it over 16 years , you know , i guess that makes too much sense .
God damn it , brad , stop thinking logically . This is the problem .
Oh man See , now he's yelling at me . It's a logical conversation Like listen , I feel like I'm playing bocce ball with you . It's a story that I used to play bocce ball with Kevin . When you play bocce ball with Kevin , he yells at you .
So you know , we've offered townships , We'll buy your fire truck .
We'll do anything Listen legally . You're not trying to . I got you . We're not asking for a favor .
Just help us get through the process faster , because time is money . Absolutely , especially in development . Absolutely . You're spending millions of millions of dollars before you even go vertical on building a building . So and if you don't time the market right , you're you know you're sitting on that money .
Yeah , what if you started boiling the Irrequy and we were in a situation where we had too much inventory ?
Exactly , Exactly , seriously , yeah , that could be five years to go through the process .
Different experience then . Right Yeah , different experience . It's amazing . Well , that's what we hope , that we can start doing that . But where does that start ? Does that start at the state level ? Is it local government ? Is it federal government , like , where does that stop ? Where does that culture shift that you're talking about ? Where does that ?
where does that start ?
100% local , local 100% . Because it's not the state that's making , that's doing that right The state can hold you up a little bit , but it's the process on the local level .
That's where it's getting held up ?
Yeah , because ?
well , it's interesting because the state can be so long but the local government is so much longer that it makes the state look good , exactly , exactly , so you don't even care about the state Right , the state might take you 12 to 18 months .
You're like yeah .
That's fine . We won't be there anyway . Exactly , i got you Amazing , amazing . So then , so those are the challenges . And you say cost and also you know we were talking about this a little earlier the , the fed rate that's going up . You think it's gone too far , do you think they should stop ?
You think is that's going to affect pricing , obviously for building , because you're , because you're not paying it for everything cash You're , you're loaning money , i would think , for projects . I mean , why would you pay cash ? Right ? Or maybe you are paying cash , i don't know . The look that you're giving me is like I don't know money .
Your works . I don't borrow money , You don't borrow money at all .
No , no , we do for a multifamily .
I'm going to build 300 homes . Our company will build 300 homes here and a thousand apartments . So so you know I understand why the fed raises rates , because they wouldn't want to , and we talked to us earlier . They want to dampen inflation Absolutely . But at the same time , when you raise interest rates , obviously it costs me more money to borrow Absolutely .
I've got to pass that cost on to you , so I'm not really sure if it works or not . In regards to this , it's interesting .
I'm not sure . Well , i think I think the only thing that it does I mean I think their whole thing is they don't , you're not going to stop .
I'm not going to stop .
You're not going to stop , but there are people that will stop . You have to stop
¶ Challenges in Local Building and Procurement
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Right , luckily enough , we've been doing this long enough where we we have how deep you want to get it We started a whole procurement department , yeah , two years ago , just to be able to buy direct from from the manufacturer , which is a big deal , huge , huge deal , huge . Yeah .
We cut out the distributor , we cut out the wholesale , or we cut out , actually , we cut out the sub who's marking it up , also , absolutely . So now we just do , we just buy the products . We just we buy the product and we do labor only . Yeah , and it's smart , it's works , it's works . Yeah , we've had it , otherwise we couldn't build it all .
We just we could not have built it . Well , it gets the point . Yeah , you can't . Yeah , i get it , especially with with inflation . Right , you had to find a way to keep the costs bearable , correct , without without going out of business or without stopping , and you guys need to build . I mean , that's that's what you do , right ? That's how you make money .
So that's interesting . So the challenge is there , it's , it's coming back to the same thing you said before , basically local government . That's the biggest thing , because I think we , and I think we would have more people doing what you're doing if , if , it was a faster track .
Well , it's interesting because you know I bitch about this all the time . Yeah , i bitch about it and then I go yeah , but high barrier entry , it's keeping other people from competing with me .
So as much as I bitch , i'm like yeah , you can't , you just it's a tough business to do .
Even if you had the money , who in their right mind would want to go to these township meetings ? You just sometimes when I township meetings , they hate each other . No , i'm not , they're like it's like the Kardashians Like okay . I just have to give her approvals . You guys hate it , Like why don't you guys solve your problems first ? I'll come back next month .
It's true . No , it's crazy , It's just crazy . I'm fortunate I am one of planning commission and you know that , And it's for spring township . I gotta say we all get along really well . We have a good commission there and we're very common sense , I feel , for what we have there .
So yeah , be pro business . Listen , you can be pro business . Absolutely And still protect the environment and all the good things you want to do . Absolutely , You can act . they can coexist too . Yes , absolutely .
It has to Right Or we will . We will not exist . Right You have to coexist . If you're not , building .
People are losing their jobs . Yeah , building is , I think , after entertainment , travel , travel , after that , i think building is the second biggest employer in the world .
Oh , i don't doubt that So Well , if you think about it , it's all the things that go into it , correct ? All the refrigerators , furniture , refrigerators like everything that . Yeah , Walter used to say it all the time about a house . Actually building a home employs more people , I think , than pretty much anything does . It might If you actually add it all up .
It might Because furniture , lights , electric , all the things that go into a home , I mean it's everything .
We employ . I tell you , i think I probably employ indirectly 10,000 people . That's crazy . That's great , though , because we spent $100 million a year on materials . I mean , it's coming from .
Arkansas .
California , Florida , Georgia . You're giving people jobs .
I love it . Yeah , that's awesome . Okay , so what ? what can we do to increase the , the local inventory ? I mean , i think it's basically what you're saying is is give up some of the regulations , give up some of the time that's involved there . I mean , i don't see , are we out of land in this Inverx County ?
I'm asking a dumb question , so I figured you could give me a dumb answer .
I'm not gonna justify the dumb answer . No , we're not out of land , we're near out of land .
Of course not . Coming from a developer . I don't know You're , you're so right . Yeah , there's a lot .
Two things It's it's difficult . It's difficult to build Inverx County and make money .
Yeah .
You were saying this before I did You know we'll build the same house in Montgomery County and actually charge twice . Now . The land price Might be a little bit more , But my material prices aren't Right .
The labor might be a little bit more .
But I mean , we'll sell a house for a twin , a semi , for a million dollars . It's just incredible , It's . but here I don't know . You tell me that you're the 400 , 300 , 300 , 400 .
Yeah , 350 to 400 is max .
And we'll sell for a million . So , where would you go ?
I would go down where you're building for a million . Yeah , absolutely . That's incredible , amazing . So we talked about the Fed rate hike . You know , i think I think we're almost at the end of that .
I think they're going to start calming that down a little bit , i hope , because it is starting to affect even our business , like I always said that , well , the interest rate for home sales does not correlate completely with the Fed rate hike . So what's interesting with that is that it's starting to , and what happens is because of what's happening with money .
Now , all of a sudden , the mortgage rates are starting to go up , and now they're at 7% , and that's affecting people buying A big time Yeah , especially higher price range Ah , higher price . What's that ? I disagree .
Really , yeah , interesting . Our higher price range is flying off the shelves , but not in Berks County . That's correct Yeah .
Not in Berks County .
You cannot believe how many people buy it $500,000 down , that they pay for it . You just cannot believe the wealth in this country .
Just where's the money ?
coming from ? I have no goddamn clue . I think I saw it coming .
Who's got all this money ?
¶ Housing, Government, and Future Outlook
I say it all the time , yeah , before they have a house in here in Florida and like they're buying it , so you think they're pulling equity from properties and then they're just putting it into that price . It's amazing . Honestly , i don't know , i don't know where it's .
Yeah it's incredible . Yeah , but aren't you like we'll buy rates down ? Yeah , Are you finding most people are doing a seven-year rate ? or You can ? yeah , absolutely You can do that , Which makes sense . The rates are not going to be the same in seven years . I think , we can all .
I don't know where they're going in the next year or two , but in seven years I doubt they're going to be where they're at .
I highly doubt that too . Everybody says we're the buddy we look at , says it's going to be around , you know , around five and a half five percent . something like that is where they're going to end up , hopefully by the end of this year , which would be wonderful . I don't know that .
Yeah , That's what they're saying What are you here ?
You know , I stopped trying to read tea leaves a long time ago .
I've been a bit , I've met with my CF .
Well , you know , I usually use this as an eight ball . That's what I use . I use this eight ball to find out what it's going to happen .
And then it tells me you know , i have one of those on my desk . Deerily , i'm not far behind you . I swear to God .
What's really funny is my son came down here this weekend . He goes that's my eight ball . I couldn't find it .
So I actually stole his eight ball .
Absolutely .
It's not like I'm the brightest guy in the world .
So this is how he does it . Should I build your coin ? Um ? this says , uh , no , freaking way No , but so let's keep moving here . What else we got ? The federal government is now saying they're going to start trying to help with housing , and I'm trying to figure out how that's going to work .
Anytime federal government gets involved in anything run I mean it's just you know it makes so much sense . You know , this is where you you're one of the big difference between ours and D's Yeah . You know , let government just get government out of your lives and let people run . I have to agree earlier . I agree with the iPhone would not be invented .
Oh , that's a great analogy . If , if , if the federal government was involved in tech like they are in housing and everything else , they never would have built , They could never got developed The iPhone .
You're exactly right , and that's so true .
Let's see who uses an iPhone today .
I believe we're not using Android .
Well , everybody except for me .
But you get my point . I totally . Everyone uses it . Yeah , absolutely , absolutely . Let's go back to the federal government . This is what's interesting too , that some of the things I'm going to get your opinion on this they're trying to make . They're saying , okay , let's make , make it more affordable for first time buyers to come into the market to buy .
To me , what's funny about that ? and I think it's great , you want to get people to buy , if they can buy , but my thing with that is that that's going to create more inflation . Sure , because now you bring more buyers in , right , there's less homes , more buyers , prices go up . I don't think they're thinking of that when they talk about these programs .
Yeah , isn't that amazing ? Yeah , once again , keep government out of it . Out of it , absolutely . I agree with the 100% . All right . So what's your outlook for the next five years ? Right here , you want this . Do you want to use this ? You might need this for that question .
I think we had this conversation before also . Is I sort of keep one foot on the ground and reach for the stars ?
Yeah .
Good for you . I don't know how else to do it . I mean , I've got a big , big company with 250 employees .
I was worried about what you were going to say there for a second .
I've got to feed them . So we , cautiously , are not growing exploding . You know , i feel like I'm hiring three people every week .
That's awesome .
It's crazy , from architects to engineers , to everybody .
Yeah , was this in your vision ?
I had a vision . It was cloudy , so I can't say it was exactly what it was , but I knew I had to be here at some point in time .
Yeah , i knew I would be .
That's why you're here , you know that , right So you know , for the next five years we played on building a thousand Wow , a thousand apartments a year . For that , at least the next five years , we own property from Pittsburgh to Delaware and I already own it .
That's great . It's already approved . That's great .
So you know we're going to keep going there and keep the economy going . That's great . We're built 300 homes and from Pittsburgh to Philly .
Yeah .
So I'm going .
Is there anything that you're trying , that you're finding out that you love more than the other ? now that you do management , development , building out of those , out of those children that you have in this business , in this company , which one is your favorite or that became your favorite ?
You want to guess ?
I'm going to say development , no , still the apartments . Oh my gosh , that's funny . It's what you started with . That's your first child .
That's right , it's my first baby Like , ah , that's so funny . You're either an operations person or you're not .
Yeah , i'm an operations person .
Yeah , like there could be a tenant issue and I'm like , tell me about it And they go . You know you have 4,000 apartments . Like I don't care .
I want to hear about that Yeah right , It's a disease I want to see if I can solve it .
Interesting Development is a really , really tough business .
Yeah .
I'm not just saying that It's like I could not go to these meetings . I would shoot people .
Yeah , No , I , I , I would just like it'd be , i just would .
I'm only kidding about shooting people in case . Yeah , that's right .
I think Jane Fonda said that at one point she got away with it .
It's a metaphor , but I could not do it . You've got to have a lot of patience and a lot of money to be involved .
Now I got you And it's , and it's late gratification to the extreme . Seriously , i mean , you said , like you said , iroquois , what's 18 years , 18 years .
I mean that's just incredible . And the really funny part about it is when it's built . Have you driven nearly ? I love it .
I drove through . Oh , i got to tell you this real quick . It is great , it looks awesome , dude , it looks really like what a great addition to that area . It really does look good . But here's the thing I got to tell you real quick to be for you And so I'm going , i go , i go to Gwynn there , what's that Soon ?
Yeah , we're 21 minutes longer than anybody else is on , um , but no , i'm kidding . So my son and I are driving around And I said , well , i'm going to go through here , and it says road closed , says do not come through . You know . I said he goes , dad , dad , i'm like I'm going through here .
He goes , yeah , it says no , you can't go in here , and there's nothing . It's like a roads there and the releasing thing is open right . So I go to you . I said , buddy , i know the owner , it's all good , he's like . You know the owner of this place . It was just funny , but he was all my god , was he nervous going in there ? He's a real follow .
He's a real follower . Yeah , i'm like no , buddy , it's fine , you just go in , you just go in we gotta , we gotta break him of that .
Yeah , exactly , i know you're not a rule follower , no , i'm a rebel dude .
Exactly , in and out , i'm a rebel , absolutely . It's one of those things and I think it makes us who we are right . You know , if I follow the rules and I don't , i don't break laws , right , but I don't follow rules . Yeah , rules are further . In fact , there's so many tells me what to do .
I was trying to find a way around that and go why you telling me to do that ? You ?
know what I mean . It's weird .
Exactly , was it me exactly .
I didn't vote for this rule .
I didn't vote for that rule . Oh My god , good time , man . Thanks so much for coming on the show again . Yeah , yeah , thank you so much . And I , you know I am asking people now when they come on the show What do you think about us changing the name of the show ? Hugh goes all for it , kevin's all for it .
I've been saying it for years , so we'll have to . Let's put a little little teaser out there right now . What would you think if we call it the Brad Weissman show ? I love it . You like that , love it . That might be happening .
Here you go . What do you think ? I think , so too , you think so too .
All right , that way we don't have to stick with real estate . You know me right exactly . We can talk about anything I said is you are a great interviewer .
I appreciate that branch out . my friend sounds good at your sights , hi .
I'm into a man , i'm into . All right , that's it . That was Kevin Timoshenko from Metropolitan companies . We had back on here again . This is so fun . All right , we'll see you again next Thursday at 7 pm . Thank you very much .
I'm not coming back unless I get two hours you go .