486- Architect Developer with Victor Caban-Diaz - up 1

2:02PM Sep 5, 2023

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The clock starts ticking when they give you the quote, not when you sign the contract.

Hello and welcome back, architect Nation. I'm Enoch Sears. And this is the show where you'll discover tips, strategies and secrets for running and managing an architectural practice that lets you do your best work more often. Because you have a mission you have a purpose and if the business is getting in the way, that's just keeping you from getting your purpose out into the world. Now if you haven't already watched our 60 minute for motor masterclass highly encourage you go what are you waiting for? Go check that out. We've distilled over a decade plus of research on the ground experience into the 60 minute for motor masterclass about how you can use the Smart practice method, principles and frameworks in your small architectural practice. Today speaking of following your passion and your dreams, I'm just overjoyed and super excited to welcome back to the podcast, one of our guests that we had all the way back in May of 2016. So episode 157 was with Victor Galvan, Diaz. He is the owner and principal of building ingenuity, architecture and design. And he was originally on the podcast, because he had participated in a business competition architectural business competition, where he laid out his his vision of creating an architect led development company now at the time, he didn't have land, it was nothing more than a vision and a dream. So I'm going to let you know what he's done since then. So he just finished his first development project. So he's coming back here to report on it super glad he reached out. He's based in Fort Lauderdale, Florida, has been practicing since 2004, and has done very a variety of different projects, everything from residential, commercial to parking garage design. He's also an expert and does consulting in Building Information Modeling, and is providing those services since 2015. As I mentioned before, Victor is passionate about architect led real estate development, and recently finished his first development project, which we're here to talk about today. And he believes fervently that the architect led development business model opens up more opportunity to control for architects over their project and design outcomes. This is something that, you know, I was when I went to the AI conference thing was back in 2018. I was at the AI conference and one of the largest sessions there was the session by Jonathan Segal, who is the San Diego based architect developer, all the architects were just loving it. They all wanted to know how they could fire the clients, no disrespect to our clients, or maybe just a little bit of disrespect. But they wanted to figure out how they could be their own clients. So Victor's ahead of the wave, you know, he had this dream over as the time of this recording, it's over seven years ago that he first appeared on the podcast just over seven years ago. So Victor, Welcome to the Business of Architecture podcast.

Thanks for having me, you know. Well, let's take

it so beautiful. This interview is going to center around the development project that you just launched, we do have a video that you shared with us and so what I'm going to do is we're going to play this video that apologies to those who are listening on the podcast you'll have to head over to YouTube to actual see the video. But this will be for those of you who watch this podcast episode on video so let's cue that and here we go 123.

All right, so there's the project. And for those who weren't able to view it, because you're listening on the podcast, Victor, if you could just walk us through just talk about the project. What's the size of it, give us a description of it. So those who are listening can understand and get the visual picture in their mind since we are visual.

Before I answer that, I just wanted to you know, to give a shout out to Jonathan Segal. We actually just had him at AIA Fort Lauderdale, which is the AIA chat fair I'm part of and he presented his his work his best work and stuff for architecture fair week. And a lot of the principles I executed on this web based on his teachings you know, so I had the you know, the benefit to have dinner with him. So he's great guy and love his work.

Yeah, and on that. For listeners, go check out one of our very first interviews was with Jonathan Segal. So search for Jonathan Segal Business of Architecture podcast. And you can hear the incredible interview that he did on the podcast. Victor, back to you.

Yeah, so this project, you know, I bought a vacant lot back in 2016. With my parents, they were my silent business partners, we went 5050 on this. And I bought it in a neighborhood that was kind of, you know, it wasn't the best neighborhood. But it was transitioning. And it's near the art district in Fort Lauderdale, and only five minutes from downtown. And, you know, I did a lot of research on this on this property, I did a pro forma a market analysis, you know, and I kind of determined the type of renters because this is a for rent property that I would get in this building. Because the school district that it goes to is not the best school district, the school is not rated well. So I was like, you know, I'm not going to get families here. And I got two tenants now and exactly what I didn't get. I was thinking, you know, I'm gonna get more professionals that are young, you know, working downtown, you know, young couples, and that's pretty much what I got. So I, my research paid off, well, there, you know, and, you know, so I designed the duplex kind of to cater to that audience, even though you know, anybody could rent it, but I, because I figured that that's the target market that would rent it. It's a three bedroom, two and a half bath. Two units. So each unit has three bedrooms, sorry, three bedrooms, three and a half baths. And about 1700 square feet, no garage. And, and the reason I didn't know garage is because I kind of felt like the garage wastes a lot of space. And I didn't feel like it benefited much. And I could get more under air conditions, square footage by taking out the garage. So I just gave them a driveway and I gave them more back in the house. So that the the apartments actually feel larger than they actually are. It's not that big of a building. But because I took out the garage, I added like 200 square feet of actual living space.

How many square feet is each unit?

1700?

That's right, you said that 700 square feet? Yeah. And I'm curious with taking out the garage or not including a garage, did you do any other comparative market research on this, or maybe some research on renters and find out what they wanted? Or was it just a gut feel,

it was kind of a gut feel, it was more of an architect design decision, you know, I just felt like there was more value added taking the garage, because the thing is, is the code in Fort Lauderdale doesn't allow you to do a two car garage on each side, they have a they change your neighborhood codes, where they want more passive security. So they don't allow you to just do the whole facade parking garage, I mean, garage door, they want living room windows and the entrance to be upfront. So because of that, when you put a garage, you actually end up getting a long hallway. And you end up having a lot of corridor space. And when I designed this, I wanted to minimize walking spaces a very efficient compact design, almost all the walking space is part of a space. So you know, and that's how I made the the units feel bigger. So I just decided, You know what, I'm only gonna get one car and anyway, and I'm probably gonna get roommates, and they're gonna be fighting over the garage. So I just took it up, you know, I mean, so, and I figured couples, it's only going to fit one car. So you know what I took it out, gave them back more storage in form of closets. The second floor is to master mirroring master bedrooms, you know, so that's what's a little different. It's not one master bedroom and then subsidiary rooms. It's two mirroring master bedrooms on the second floor with walking closets, a nice shower with two showerheads, and each each bedroom has its own balcony which is sizable enough to put a coffee table and four and four chairs.

Beautiful great so now we understand kind of the size of it the stylistic the language of the describe the language of the actual architecture to us.

So if people are familiar with South Florida, the architecture town here it's either Mediterranean or it's very modern, it's very white. So I went with the more modern white feel. And I wanted to incorporate some landscape you know to get more curb appeal so actually built in some planters onto the facade and use that for lighting and to kind of frame the windows. But if you look at the duplex it's got a unique look because it almost looks like a face with angry teeth on each side. But you know that's how I see it. But uh, you know, and even though I valued engineered it severely because my original design would have probably made magazines with the I was gonna put artistic metal panels on it because I wanted to pay homage to the local art art district and I was an avid artist put metal panels on each unit that we're going to light up and it's just that you know, it just wasn't working for my first project. It just you really As an architect and developer, you have to keep it simple on your first property. And I learned that through design as I was starting to do the, the cost estimates. So I took out a lot of the fluff, but it still came out to be one of the nicest buildings on the block, even with the Value Engineering

absolutely, definitely increases the look at the neighborhood. So well, let's walk through the finances of the project. So you purchased the lot with your parents, and what was the what was the price that you paid for the lot?

So at the time, we actually got fleeced, you know, oh, wow, yeah. So it but looking hindsight with where the market is, now, we actually got a steal, you know, good, I waited, I got lucky I executed at the right time, I thought during the process, it was the worst time because I just saw things ballooning out of control, and I was getting, I was getting cost increases left and right from the contractor. And I'm just like, Oh my God. But what will help me out is that I did several appraisals during the process, which allowed me to then gauge the progress of the project, you know, so I ended up getting an appraisal that showed me towards the end, like, wow, you know, this worked out the price, the market value went just as high as the market increases in costs. So it worked out and I was able to get a construction loan pretty easily. But the lot costs us 120. At the time, it was a vacant lot. It probably was worth maybe 75k. At the time in 2016.

Did you know that at the time?

No, I actually did some after the fact research and I was like, oh, man, we overpaid. But now tell me about that. Tell me what, why'd you overpay did you not do the research upfront? I wasn't experienced enough to hide all that down. You know, I just, you know, and listen, it's still it still worked out. Because I was just like, this is a great neighborhood is one of the only vacant lots and I just thought it was a steal. So I we went we we paid cash, which was important. And, you know, hindsight now, if you buy the lot now it probably cost you like 250.

Yeah, it's a great. Okay. So and you said you weren't fit to fit with that with your with your parents? Correct. So your parents contributed about 60k? You're concerned about 60k? Correct. Cool. And if you don't mind me asking, Where do you come? Where'd you come up with the 60k for your, your portion.

So at the time, you know, I was I was, you know, single I was in my early 30s. I actually, you know, made a sacrifice. And I actually moved in with my parents for a year and just saved up my money. And I did that with the goal that I want to do my first like, I asked how passionate I was about this concept, like, you know, and when I submitted for the competition, I was already in the process, I was already living with my parents at that time, just saving up my money. And I had a pretty good career at that time, I was working for a firm and I was you know, I was making six figures already. You know, so a lot of money just went into the bank. You know, not a lot of people have that privilege to do that. But if you do, that's a way to do it, you know, and I did it. And it allowed me to save up enough money to at least go half with my parents.

Okay, beautiful. So you bought the land now the lands sitting there? How much time passed between that tells the process? So next step, you have the land is sitting there, what happened next?

Yeah, so you know, I mean, I just held onto the land because I wasn't ready, financially yet to move forward. And, and I was doing my research slowly, I was calling lenders is kind of getting a gauge of how much money I need to put down. And, you know, not every lender recognizes, you know, like, Jonathan Segal calls it Johnny bucks. Not every lender recognizes that they don't, they don't always recognize your design services as part of the down payment. So I had to call around to find a lender. And it was hard for me because I was a rookie developer. And I'll just tell you right now, no, they don't care that you're an architect, doesn't matter. If you haven't done development, you're a rookie, it doesn't matter if you've done CAA, they don't care. You know, I mean, so I thought that would make a difference. It didn't they, you know what they actually would value if you were a contractor, but I'm not a contractor. So, being an architect doesn't help. But if you call around and you and you do enough research, you will find lenders that will recognize the architectural services, and you can put a value to it, and then they will accept it, you know, so then you do get to use your Johnnie bucks, but not all of them do, which is weird, because if I hired another architect, they would recognize it. And if I paid the architect know, they like show the receipt. But the minute they say, Oh, I'm doing it myself, then they don't want to recognize me. Well, why? You know, so I just had to find the right lender that obviously I could talk sense into, and they understood that so, you know,

it was it was at a national bank. Was it a local bank, a local credit union, a private equity lender? Hard money.

It was it was a private lender. And believe it or not, it was a private lender out of California. Yeah, they're called Center Street lend Doing I could not get a local lender in Florida for life of me. And the reason why is because where I'm from South Florida, it is the capital of fraud. And they just are allergic to lending money for this kind of stuff just because of the amount of fraud that goes on. So I had to actually find a lender, not in Florida, that was willing to take a chance, you know, and obviously, I paid a high interest rate, my interest rate was a, I think as 10.5%. Starting, you know, on my construction loan, and with in, you know, and I had several delays, which we'll get into in the construction process, I had to ask for increases to the schedule and renewing the loan, which increased my interest rate all the way up to 12%. At one point, you know, so but, yeah, so

how did you find that that lender? Was a referral from someone? You found them on the internet? You talked to another developer? How did you find them?

Believe it or not Instagram? You know,

wow, tell me about that. How'd you find them on Instagram?

So no, no, Instagram found me. You know, I mean, because you know, how big brother's always listening to you. So, you know, obviously, my Facebook, I mean, my cell phone was listening on me saying, hey, I need a loan for constructions. All of a sudden Center Street lending showed up on Instagram, obviously, I didn't change my settings so that my phone is listening to my all my conversations, but advertisements for Center Street lending showed up, I was like, Oh, let me check them out. You know, I gave them a call. And I must have call at least 10 lenders. And they were the ones that gave me the best vibe. So I went with them.

Okay, beautiful. So let's see, how about how much time are we talking here from when you purchase the land to when you actually got this loan construction loan lined up?

So I purchased land in 2016. And I got the financing. And at the end of 2020, I started to design it, you know, I was kind of just doing things slowly on the side. I started to design and 2018 Chase design like three times. You know, I'm an architect. So you know, I did that. And finally when I landed on a design I was comfortable with. But I mean, one of the reasons why the design change was because city of Fort Lauderdale actually changed their code for small mixed mixed, I mean, small multifamily, you know, two to four units, they changed. They made a code specifically for duplexes, quad, plexes and, and triplexes. That changed as I was designing, so my first design then didn't meet the code. So then I had to change it to meet that code.

What was different in that first design? Oh, well,

you know, I guess, you know, a lot of developers were building duplexes with garages that basically took up the whole facade, and you would, you would come in from the side. And what that was doing was creating neighborhoods where there was no passive security, no eyeballs on the street, because the garages fronted the units. So the streets, the neighbors and the, you know, the citizens took, you know, went up to the city and say, Hey, we need to change the design, because nobody's looking at the street. And this is causing unsafe neighborhoods. So they changed the code. So that there's passive security, people who are living in the units can actually they, when they're in their living room, they can see out to the street, see who's walking around, and stuff. And that cause for the ability to put a two car garage and a duplex on a 50 foot. Lot, almost impossible. So which was one of the reasons why I took the garage out, you know, because I just didn't feel like unless it was a two car garage, it wasn't adding much value to the design. So I was just like, it's taking up too much space, and it's not allowing me to put more than one car. So I'm taking it out.

So you got you locked into lending in 2021? And 2020 was Did you get it?

At the end of 2020. I was, you know, working with contractors that, you know, I've worked with during my design experience. And I ended up going with a contractor FH construction, cash follows out as a buddy of mine. And I went with him because he was being very flexible with me and he was giving me cost estimates the cost estimate I would change the design and tweak it, you know, and he would continue to give me costs as me because he really one of the projects he was working with me and he must have gave me like five cost estimates. And that meant a lot to me, because that allowed me to get the project to where I was comfortable with the cost. And so I went with him. And and it was a good decision because he was very flexible with me worked with me, you know, there was some hiccups in the design and during the construction process, you know, and then you know market conditions hit because you know with COVID and everything happening the price of materials just skyrocketed. I ended up you know, the cost of the project initially was about 900 grand and it balloons to about 100 100k more. I got a $75,000 change order just on drywall. Mechanical and pay those three units, those three materials just went out of control. And I, when I saw that change order I and my heart just like, came out of my chest I was I was I had a 10% contingency, and that just blew my contingency out of the water. And Nevermind, I had some small things here and there from designers that I, you know, my contingency covered, but not that. So I had to me, you know, between me and my parents, we had to come out of our pocket, dip into savings a little more to cover that, you know, and listen to project, the project almost broke us financially, but we got there to the skin of our teeth, we were able to make it work. And, you know, is a lot more than I anticipated, but you know, ended up costing a little over a million to finish. You know, but without those market price increases, I'm happy to say that my contingency actually would have covered the air and minor errors I made on the project. But not with the market increases. Definitely I had to come out of pocket.

Hey, when COVID was happening, so Mutale into 2020. We were still in that we were deep in the mix with COVID. Did you have that? Did you find that the lenders that was influenced in the conversation making it more difficult? What was the impact of the whole COVID scenario on getting financing for the project?

I'm not really not that much. You know, I mean, obviously, everything was done virtually. So I was just talking on the phone, I never met my lender, my lender was out of California, you know, so everything was on the phone over the internet. So it didn't have much of an impact. And you know, I would say zero, I would say the only thing COVID impacted was the price increases, because you know, as when COVID shut everything down, that's when the cost of materials like steel and wood just skyrocketed because everything shut down. So because of COVID I got hit with that monstrous change order, you know. So I would say that was the impact of COVID just the cost increases on materials because of bottlenecks in the shipping and supplies. Let me mention the My contractor explain to me what happened was because of COVID and a surge of, you know, people wanting homes, because all of a sudden, the real estate industry has caught fire because people wanted to buy homes. What happened was the big cookie cutter developers, you know, like Linaro, and stuff they purchased in bulk, drywall, wood, and they just hoard it all for themselves so that they could have enough material to build and meet this demand. And what that caused was a lack of supply for small developers like me, because the big developers were getting priority. So they were actually the cause, you know, all the big developers just hoarded everything.

And I you know, honestly, I'm surprised it only cost 100 grand extra. I think it's not unseeable that it would have cost 200 grand extra knowing how much things were skyrocketing at the time.

I got lucky, definitely, you know, luck on your first project does play a part. So, you know, that's all I got to say on that one.

Well, let's talk about what are let's talk about the key lessons that you learned from doing this project. First of all, walk me through the timeline. So you closed on the contract on the financing. So this is a construction loan, which means that they're the ones who provide the funds for you to buy the materials from the from the project, pay the contractor, etc. And yeah, what was what was so you broke ground talks to like walk us through the project, how long it took mistakes that happened, lessons learned, give us the whole play by play.

Yeah, so the key thing here is when I was getting my, my financing, I didn't have to put any money down. Because they recognize the money I put on the lot of the money from my design fees, and I charged design fees, in this case, for my architecture for interior design. And for development. I put design fees in there as for myself as a developer doing due diligence and stuff like that. So I put in just in equity, sweat equity, I probably put in about 45 50k I can't remember exactly but of money, which was a good chunk of the because, you know, the downpayment was probably about a little like 230k So 50k of that 230 was sweat equity money from my designing, and then also, they recognize all the money I paid to my engineers, you know, I also did the plumbing and electrical myself, so I charged for that, you know, I wasn't comfortable doing the mechanical so I subbed that out, but um, you know, I had a civil landscape architects structural engineer, you know, paid all of them so that all counted, you know, and obviously there were some permitting fees and thrown in there so they recognize all that money that I spent, and that so then I didn't have to pay any more money. That was my down payment. So I got my loan and the loan. Oh, hold

on, bear with me. So the down payment ended up being how much about 200 30k Yeah, yeah. Do you say, okay, cool, and that you didn't have to come up with any money out of pocket to finance that that was? Did they count the land cost as part of that?

Yes, that was the majority of it. The ones Okay, so land

cost plus your, your architectural fees, so no, no money out of pocket. Beautiful.

Yeah, you know, the art, the architectural and engineering fees came out to about 80k, you know, 50, for myself, and then 30, for the consultants, you know, and then, and obviously, there were permitting fees and stuff like that. So, you know, then I and they finance 100% of the construction, which was great. So, at that time, the project appraised at 1.2. So that was what the construction loan was based off of. So we went from in that in that direction, construction started at the end of 2020. And I got ended up getting my permit right after that. And, you know, it was originally scheduled to be an EIGHT and a NINE month project. It was supposed to be done at the end of September, it didn't finish until May of this year. So it actually got delayed by more than six months. And that, I tell you that I probably paid an extra 40 to 50k in construction interest that I wasn't anticipating. And it was due to delays because of the city. I had big issues with the city. And it was due to a design error that my you know, my civil engineering made, that I was not aware of. And the thing is, is that because of COVID, the city was going through a lot of turnover. So the people who approved my project as a duplex were no longer employed there. So then the inspectors who were brand new people came in with a fresh set of eyes and then realized during construction, hey, you know what, this, this doesn't meet code to be a duplex. This is actually a two family dwelling. And I'm like, what, what are you talking about? And you know, my sewer infrastructure was already tied in everything. And it literally 75% Complete, they decided to throw that curveball at me. And it was crazy. Because, you know, my I had to be finished in like two months. My construction loan was expiring in two months. And they were telling me it's not a duplex. And I had to change everything. Because that was a big, that's a big deal because that affects the financing. Because, you know, I appraised the project as a duplex two units, separately sold two townhomes and I appraised it as a duplex, which is one building on one lot not separated. And the cost difference was a lot. So I'll tell you right now the project at the end of the project ended up appraising at 2.5 2,040,000. So it went from 1.2 to 2,040,000. As during construction, that's how much it increased in value. It was crazy. But that was as to townhomes as a single flat two family dwelling, it actually appraised at 1.55. So you see the cost and the interest of the difference in value just because of the lots being separated. No change in the design, very little changes designed just that little nuance because of comps, change the value by 500k. So what ended up happening because I wanted to fix the problem when they brought it to me and my contractor gave me a change order of 6k to fix the problem. I said great. I'm just going to drop the 6k fix the problem. However,

what did they pause for a second? What did what's the difference in their code language between a two family dwelling versus a duplex like what is the what made it a two family dwelling instead of a duplex?

A duplex is two separate units independently separated. So two townhomes on to lots. So you had to separate the lats, which I did. But the problem was my civil engineer when he came out with the sanitary he tied the sanitary together in the middle of the lot before it got to the public infrastructure. And to be a duplex each has to have its own tap, separate. And the thing is I have actually designed several duplexes in Fort Lauderdale. That way my civil engineers have done it that way in the city, let it go. But they just started policing that recently and I got caught in when they decided to start policing that so you know, I was one of the I was one of the first developers hit with the new rules. And you know if they had told me that during permitting I would have told my seven year let's fix it no problem. Yeah,

yep. So you I guess you didn't you didn't decide to dig it up what that was impossible to get up and retired in

No, I was ready to do it. But then when I went back to the city, the engineering department told me they needed six months to re review my project and give me the permit in order to approve it and I will say I don't have six months. I have my my construction loan ends in two months. Hindsight being 2020 they delayed my project because of this issue by almost seven months. I would have even taken the six months delay had I known that they were going to delay my project by seven months over this issue, you know, so, you know, and the thing is, is I considered, you know, going off to the seedy city legally and everything. And, you know, attorneys I spoke to said, I had a case, they they call it estoppel, or something like, I don't know, something, they had a technical term for it. But they said that, you know, I would have won this, but I would have been in court for years, fighting the city, and I just didn't have that money. So I just caved and I gave in. But I got lucky that the project appraised so much that even as a two family dwelling, I was able to get the financing the mortgage and cover everything. So it was luck. Because if if the project did it increase that much in value, I probably would have lost it, I probably it would have been a failed project for me.

Wow. So stressed that you were going as this was happening, man, what what how are you feeling? What was the stress or lack thereof? Or were you just like, I got this under control? No big deal. Were you sweating bullets? What was it like emotionally?

No, it was very stressful, because, you know, I mean, it wasn't until I got that appraisal, where I saw, Oh, my God, the value is increased so much more. But based on the last appraisal I got, I wasn't going to be able to get a mortgage to cover the costs. And I was going to be short, maybe like two 300k. And I didn't have that money. So I was like, this is not going to work, you know, so it was stressing me out a lot. Because, you know, I had not done an appraisal in a while. And I would say that's one of the lessons learned is you want to pay to do appraisals multiple times, just to kind of have a gauge of where your projects at because things change in a year. You know, so that last appraisal I did before I when I was trying to get my mortgage financing, to exit the construction loan was was the breadwinner for me, because I got it, I was like oh my god, my projects worth 2 million a million each unit went from 450 each unit to a million each unit. And, and the appraiser was like you design a product. And this is where being an architect paid off. Because the appraisers like you design a product that's like none other. And in this like I had to really reach to find and they put a lot of, you know, bonuses in the value because of what I did with the design because they're just like, there's nothing that compares to your project. It's a unique project. So being unique actually paid off for me. Because I did things that other developers won't do, I was trying to do something unique, because I'm an architect, like I don't want to do everything every Joe Schmo developers doing let me do something different. So I took a little risk there. And that risk actually paid off. And you know, that helped. But I still plan on repairing the issue. So I went to the city after I got my tenants and I sent them an email, I'm like, Look, after I get my CDL Can I repair this, you can tear up my driveways and repair the issue? They said, Yeah, you can. And then I said, and then I can qualify it as a duplex. They said, Yes, you can. So it's gonna cost me maybe like 80k to fix the problem after the fact. It would have been 6k. If I did it during construction, now it's gonna cost me 80k. Because I got to demolish the driveway, rip up the landscaping, put the plumbing in. And nevermind, I'm gonna have to not have tenants while I do it for about a month or so. You know, so, but the project appraised 500k More as two separate units. So it's worth it?

Yeah. Were you able to take out any cash when you did the mortgage? Or is that what you hope to do when you do that reappraisal and take out another mortgage? No,

I did, I did a cash out refinance. And, you know, I had to pay the contractor for all the change orders. So I was able to get enough cash, almost enough cash to basically pay the contractor on the extra cost that my construction loan didn't cover, because I owed the contractor like 120k More in money. And that had a lot to do with the fact that the city delayed my project so much, because I had to pay my construction lender, maybe another extra, like 50k in interest that I didn't need to pay had the project completed on time and that 50k would have went towards the extra money, I owe the contractor. So, you know, I really had to scrape funds at the end because of the city holding me up. And there was one point where the city didn't want to recognize the signatures of one of my engineers, and they held up the project for like, almost a month and a half, because they didn't believe that my engineer actually had signed the project and I had to submit over and over and over again, just to get them to say hey, it's a wet signature. It's not digital, you know, and it's just like, come on guys. You're costing me 10s of 1000s of dollars over something so and it was my last comment. It was my last comment to get my SEO so I was getting very frustrated with the city.

So the total amount you took out with the cash out refinance, how much did you end up taking out?

I got a mortgage of about 1,000,065 so that It was enough for me to basically pay off my contractor, and also pay my fees, because, you know, they obviously had to pay the lender for the mortgage to about 40k, you know, and close out fees and stuff. So that covered that too. So I didn't actually have to come out of pocket, but I ended up being short about 20k to the contractor, so I'm paying that off to the the contractor, you know, since we do work together, he agreed to, to do a payment plan with me. So I'm, I'm paying him per month until the end of the year to cover that 20k And then I'm good.

Man hustling. I love it. I love it. So the cash out. So what's your wish your mortgage payment now on this property?

So the mortgage payment is about 7600. Okay, well, my rents are 4650 each unit. So and you know, as crazy as that, you know, when I got my real estate agent to rent it out my project rented out literally in three days, I put on the market gone in three days. And that was because there's there's not enough supply right now. You know, so if you make a product, right now, if you made a product, it's selling, or it's renting, because there's just not enough people are still fighting over your product. And, and the reality was, my real estate agent said, You're not going to be able to rent these for more than 41 Each side 4100. And I said, Well, let's put them on the market for 4006 50. And let's see what happens. They rent it in three days at that price. And the reality is when I when I went to my mortgage lender, they said they appraised the project themselves. And they said we think you undercharged, we think each unit should have been over 5k. So I they actually they actually thanked me for that because my debt to service ratio didn't didn't work out. So they actually ended up charging me another 20k in fees to bring down the interest rate. And that's basically the 20k that I owe the contractor now, so and I hit me that was like, literally the day before I signed, I got hit with an extra another extra 20k in fees I wasn't expecting. So I was just like, Jesus, come on, you know. So.

Yeah. So those were those points that they added to bring down the interest rate you said? Got it. And they wanted to bring down the interest rate, why to bring down your payment

to make the debt service ratio work?

Yeah, yeah. Got it. So how does that how does that? How does that rent 4600 or 4650? How does that compare with other properties? Generally, that you're competing with in the area. So more is it less is about about the same?

You know, so no, it's about Yeah, it's about the same right now rents really high. And that neighborhood, it's I would say it's gentrifying right now, it's next to an art district that is also changing if you guys are familiar with an art district in Miami called Wynwood. That was a warehouse district that then turned into artsy fartsy lots of artists there and then became hit clubs. And then it was like the the place to go if you wanted to see like artwork from a local artist, and you know, also famous artists, you know, whenever they do Art Basel, it's done in that area. And then the developers swooped in. And now when Woods become this, like other downtown and all the artists are gone now because they can't afford the rent. So, you know, that's how it happened. So Fort Lauderdale has a little district that not as big as Miami's, but that was doing the same. And now just literally, in the last week, they tore down all the warehouses that had artists, and now big skyscrapers are going there, you know, but so, but I the thing is, is that when I bought the property, one of the things that I did research on was I looked at, were the city of Fort Lauderdale. What were they doing in the next five to 10 years, I want it to be in a neighborhood where it was close to some big ambitious developments that were coming. And then I heard about a development called Sears town that now just got approved. And it's like, three high rises, and it's gonna be a huge mall. It's literally two blocks away from my property. And I knew about that project years in advance. And I'm like, I want to be next to that, because that's going to change everything. And you know, and the thing is my project has appraised and valued before that has actually been built. So that's going to be done in the next couple of years. And, you know, who knows how much my prize is going to be worth because it's literally walking distance from the edge of downtown now. Downtown has crept closer and closer and closer to my neighborhood. So we're basically now the neighborhood where I bought in is the first neighborhood outside of one of the borders of downtown.

Well done. Well done. Yeah. So what are the lessons did you learn from doing this development project?

So okay, so one of the lessons I learned was it doesn't always pay to do your own. Buying materials and and Doing your own construction in the project. So to save money, I took some scope away from the contractor and I was like, you know, I'm gonna build my own vanities, my mill, I'm going to do the millwork. Myself, you know, and I thought I'll saving money, but it actually ended up becoming more of a headache for me. And then what happened was I had a lot of issues. And obviously, I took it out of the contractor scopes, the contract is not my problem. You know, I mean, so I was like, crap, you know, my problem, you know, so, and, you know, I don't do that stuff often. So, you know, it was it was brand new for me to deal with those issues. And then also, I ordered, let me tell you, working with Home Depot is a nightmare, I would recommend when you're doing your first development, go with some local suppliers, because they're going to be more receptive, they're going to be more catering to you and they will fix the issues that you have faster. with Home Depot, you buy something, and then you got to go through so much red tape, if it's I had to order my washer and dryer three times, my tenants moved in before I had a washer, a functioning washer and dryer, and I had ordered my wife, my washer and dryer two months ahead, before they moved in, and I still didn't get it in time, because Home Depot kept delivering me malfunctioning washer and dryers, and then dealing with their customer service was a nightmare. I was cursing at their customer service, I was so frustrated, you know. So that's one of the things I learned is you want to learn to work with more local suppliers because they'll they'll be more attentive to your concerns. And they'll work faster and you don't have to jump through hoops just to talk to somebody you know. And the mistakes were actually made by Home Depot's own salespeople, because the first time I ordered a washer dryer, my washer and dryers were actually working. But then the delivery person didn't want to deliver because the salesperson put my duplex as one unit rather than two separate units. And the delivery person is like I can't deliver you got two separate addresses in one order, I can't do this. So then I wouldn't I couldn't get my washer and dryer just because of that mistake that the salesperson made. And then trying to get another order. It was just it was weeks of hassle. You know, and I know that if I had worked with somebody more local, I wouldn't have to go through that. So and then I also got vanities that were were damaged. And through Home Depot, you know, they get damaged to delivery, you know, so it's not and then the vanities I ordered were low in stock too. So I actually ended up installing vanities with cracks. They weren't pristine, like I wanted them to be because by the time the tenants moved in, I couldn't find another replacement vanity of the same time because I bought something so unique that they had such a low stock. And that's another lesson learned is that you know what, when when I'm ordering stuff, I want to order something that has high stock, not something so unique, that it's going to be a problem for me to reorder it, you know, contractors know this, but I did it because I'm an architect, you know, I don't order stuff all the time. So, you know, those were some lessons learned. Some design lessons I learned. You know, and you know, and then I only learned this because I was developing my own projects I want to keep, you want to keep the plumbing away from where you do the millwork because, and this was also because I was installing my own millwork you know, I was screwing into the walls and there's pipes there and you know, either use a stud finder trying to find a pipe and make sure I didn't penetrate through the pipes. Had I just not put the pipes in the same wall where I had wall hung vanities or millwork. You know, I would have you know, avoided that stress. You know, I mean, so you know, there were things like that that I learned. But the biggest lessons learned, also with getting the financing. Here's a big lesson I learned when I got the construction financing. The clock starts ticking when they give you the quote, not when you sign the contract. So what happened was I got my quote, and I was still shopping around. So I sat on the quote for like a month and a half, not knowing that the clock was already taking on the construction schedule from there and from the lenders. And so then what I thought I had a year by the time I actually broke ground, I only had 10 months you know, because the clock was ticking when they gave me the loan rate not when I signed the contract and I didn't know that you know so that's something that's key because if you know that they start hitting you with the higher interests when you have to extend the construction schedule. So those were the key. You know, I would say lessons learned as a developer, you know as an architect is that it's not always best to do your own construction unless you have good experience and and listen, I did took some risk on some things being a first time developer and you know it It worked out, but I was very frustrated, I could tell you that. So I would say that that was definitely a lesson learned.

What's next for building ingenuity.

So, you know, my, my concept, you know, for building ingenuity always has been, you know, and this was pitched in the business plan competition was that this was going to be a, a concept where I develop, and I become more like a shark tank investor, and I'm going to teach other architects and then also mentor them through the process, hold them hand by hand in hand, and help them develop and become an investor with them. And, you know, I look at myself almost as a shark, because I know the business, kind of like the sharks, who, you know, they put in bids, they know their business, you know, so they, they put in bids, on businesses that they know about that they're, you know, like Mark Cuban and stuff, you know, they're like, I understand that business, I can help you out. So that's how I feel like, you know, I understand this, I'm an architect, I'm a developer, I can help other architects do that. So, you know, in the near term, I'm going to help other architects go through a kind of coach them, you know, kind of like the way Jonathan Segal does, except I'm going to be more hands on Jonathan Segal, he kind of has like a website, I'm going to actually be coaching them, and going to going with them to the properties and being one on one and being with them throughout the project. You know, that's, that's, that's where I'm going to be going. Short term. But long term, you know, I still plan on franchising this business concept.

Beautiful. And when do you plan to do your next development project?

So I am, right now I'm in the process of buying my own home. So that's going to be first. But then right after I closed on my own home, then I'm going to look for another property. So I would say within the next year or two, I'm probably going to buy another lot. And I'm going to develop and you know, and start again on the process. And you know, I'm probably going to start doing the coaching mentoring thing after two to three developments.

Do you think that you'll follow the same kind of thought process with the new lot you build? Are you are you going to take a different approach with the location, the size, etc?

No, definitely, I'm gonna tell you right now, biggest lesson I learned was I bit off a little more than I can chew. On my first project, I'm definitely going to try to, you know, do something a little smaller scale than my first project, actually, because, like I said, I only got through it with luck. And you, you don't always have luck on your side. So I want to control the outcome a little bit. So I'm probably going to go a little smaller scale. On the project, I want the construction cost to be more like six 700k versus a million, you know, because that that really, you know, took a toll on my finances, but I still made it out. And, you know, I may, I may be able to do the same project now, because now I'll be able to take it pull out equity for my first project to finance the second, right, so now I'm actually going to have a little bit more money, and, you know, be able to put a lot a little bit more skin down. So I may be able to do the same project and be able to be a little bit less risky this time around.

Beautiful. Well, Victor, thanks for coming on here to the Business of Architecture. Man, it's so amazing to hear the update of where you've been, and congratulations on doing this project. Getting through successfully, like you said, with a lot of grace on your side to make it through is beautiful. So where can people go to find out more about you website, you know about your consulting that you're going to be doing? Where can people follow you.

So my website is build ingenuity.com www buldingnuity.com as my website so you can see my work there. And I actually have a page focused on development where other architects could reach out to me and we can have a start a conversation. It is something I plan on helping out in the near future. And I plan on setting up a course very soon. I'm going to do actually, for AI for Lauderdale. I'm going to set up I'm going to be doing a a kind of case study on this project and talking a lot about what I talked to you in the podcast, but in person showing slides and showing the project and, you know, running through everybody just so they can understand what I went through as a first time developer, I have YouTube, a YouTube page for building ingenuity, you could look up building ingenuity, architectural design on YouTube, and you'll see videos of my projects, my customer testimonials, and you'll see my development project there. You know, you could follow me on Instagram at WWDC, I mean, not that at Build ingenuity. And, you know, I also have a Facebook page. So I'm on all the, you know, social media, me and my wife were business partners together. So you'll see a lot of our work that we do. We do a lot of residential and commercial. So that's what you'll find on our website.

All right. Victor, thanks for joining us on the podcast.

Thank you, Anna. It was a pleasure.

And that's a wrap. Oh yeah, one more thing. If you haven't already, head on over to iTunes and leave a review, we'd love to read your name out here on the show. This episode is sponsored by Smart practice, the world's leading step by step business training program that's helped more than 103 architecture firm owners structure their existing practice. So the complexity of business doesn't get in the way of their architecture. Because you see, it's not your architecture design skills that's holding you back. It's the complexity of running a business, managing projects and people dealing with clients, contractors and money. So if you're ready to simplify the running of your practice, go to business of architecture.com forward slash smart to discover the proven simple and easy to implement smart practice method for running a practice that doesn't get in the way of doing exceptional architecture. The views expressed on the show by my guests do not represent those of the hosts and I make no representation, promise guarantee, pledge, warranty, contract, bond or commitment, except to help you conquer the world. QRP DM