Building New Homes in Houston
I went to visit my buddy Jacob Harris to see how he's building new subdivision homes in Houston, Texas. Homes are a fraction of the prices as compared to Toronto, and is the 4th largest city in the United States, creeping up to the 3rd place.
Transcript**
Kenneth Yim 0:01
So we're going down to Texas to see my buddy Jacob Harris, who is creating subdivisions under the company, high investments as passive income. And they are doing a big Well, everything's big down there except for the prices. So let's go take a look and see what he's up to all right.
Jacob Harris 0:28
we're off to go look at some developments in 5g is going to go right now. So right now in Houston, we have 13 residential projects, and for apartment complexes, and then some other you know, a couple of build outs. But as far as the ground up stuff, 13, residential for apartment complexes, it's a total of a little over 200 homes, over 12 doors, two of them, I think we will just stabilize themselves. And then the other two will most likely be long term.
Kenneth Yim 1:02
I purpose built rental.
Jacob Harris 1:05
I know we're the fourth largest city and we're closing in on Chicago quickly.
Kenneth Yim 1:10
Since the fourth largest city, New York. Chicago and then number four. Wow, that's pretty big.
Jacob Harris 1:20
Number three, there pretty soon, the next five years, Yeah, cuz
Kenneth Yim 1:24
everyone's immigrating here, right, because it's cheaper
Jacob Harris 1:29
houses and everybody's moving him.
Jacob Harris 1:35
because this one's not us this one, this one. And this is our business model. Honestly, as we love to be right across from some of these other guys not not to say anything bad about them. But feel like we build a a better product. So let them spend all the money on marketing, let them bring the traffic. And we'll sell houses off of it. And so we've actually sold all of these except for one, we only have one unit left. And as you can see, we're not even close to being finished. But they're all under contract 1820 in the middle. And then the other building is two units. 1400 square feet each set goes 3232 can't really get a lawn mower back there. So we spoke with the homeowners on domestic sales. Yeah, I mean, we have had some pushback from a few people with dogs. Honestly, we can't build them fast enough. I mean, they're selling I'm not even really putting any effort in the marketing to be honest. Because there's no need I mean, we're getting full price offers two or three days from putting them on the market without me doing anything beyond that. On this one. The bank wanted us to do Phase One was all of the site work the driveways, all that stuff. So this is about 300,000 Just to prep everything and then we did five houses so that was phase one, and phase two was 10 houses and then this will be the last phase now that's to her proofing waterproofing soundproofing altogether so we spray that in which that's something that most builders don't
Jacob Harris 3:16
eight foot doors just about everywhere like as well every day. Oh yeah, that little 14,000 square foot house that you saw was gonna run for 2100 or 2200 a month. Amazing cap rate, but it's not. On order to get 2100 We need what 600,000 To get Canadian dollars. And then there's HOA fees.
Jacob Harris 3:58
Yes, that one that one has an HOA but it's only 670 $5 a year. Because really all it does is a water bill. And then just a little bit of warming. It's in the front of the property. We tried to keep it as cheap as possible. So make sure it wasn't a detour every first time homebuyers for sure. So it's outside of those types of places around what it's like not quite suburbs. So that's what we're able to get away with. No backyard tiny lots. And we were a little bit farther west. I wouldn't have that backyards are like a true single family. Sure. So we're kind of on the edge of the high density versus the one family area. So still in demand though. Definitely. It's nice.
Kenneth Yim 4:47
Yeah. So what do you what do you need right now you need more capital, you need more? more land, more deals more buyers? What do you need me?
Jacob Harris 4:55
So honestly, right now, I wouldn't say that we need more capital but We're always looking for good long term partners. So we're looking for relationships with investors, because we're really we are trying to scale up and some bigger projects, move into some other states, we want to be selective with who we're working with what we do, you know, we always want to talk to good people,
Kenneth Yim 5:16
what do you do first to get the capital first you get the project. First.
Jacob Harris 5:19
It can be it can be a mix, but usually the most comfortable way is to have a pretty good idea of what the investors are looking for first. And that's both in terms of how much equity are they comfortable bringing, as well as, you know, the overall size of the project, if they want to be at a particular price point, all that kind of stuff. So we try to figure that out first. And then we go find a project that matches after we have a commitment.
Kenneth Yim 5:49
Alright, and what's the average capital size you're looking for.
Jacob Harris 5:52
So the capital raise can be anywhere from 400 to 1.5 million most of the time. For some of our some of our larger projects, we've raised as much as 5 million on the equity. And then we were obviously going to get a construction loan or a land loan as well. So project sizes can vary, but usually 400,000 to 1.5 is pretty good range. Anywhere from from 12 to 2526 months, depending on the size of the project, I guess average is probably about 16 to 18 months. There are a lot of variables in play.
Kenneth Yim 6:51
Finally, at the destination, it's been a long ride from Toronto to Houston to Dallas, but it was well worth it. It was nice to see my buddy Jacob and see what he's up to. Up until today. He's all been talking about the project and have actually seen the sights myself and it was nice to actually walk the site. It's beautiful product that he's creating might actually invest into it because he's got all the supply and there's so much demand all in fact, all the projects complete sold out, like all the projects he has. So maybe it's not a bad idea. It was mind boggling to find out that there's no zoning laws in Texas or at least where he's at. It's kind of crazy to me, you can pretty much build whatever you want with as much density as you want to go through the crazy zoning policies that we have to go through. takes him six months to get a project off the ground. Wow, it's pretty amazing. And Houston is the fourth largest city in America right behind New York LA and Chicago is creeping up in Chicago. I don't know the 6 million people they're kind of like the size of Toronto except there might be a little more I don't know what the geographic size which is bigger and which is not Houston versus Toronto. There's it doesn't seem as dense as Toronto is but it seems like there's a lot of opportunity so might be worth it. And especially with COVID Everybody immigrating to Houston to Texas I don't know I might take a look into it. So anyway, thanks for watching catch in the next one.