JF2534: Finding Your Niche for Better Financing with Jason Javer
After stumbling upon new construction, Jason Javer quickly realized it aligned with his skill set and goals and decided to focus his efforts there. Today, we’re talking to Jason in detail about how finding your niche ultimately brings in better financing, gains the trust of your investors, and potentially gives you a larger cut of the deal.
Jason Javer Real Estate Background:
- Managing Partner at Vista Homes
- 8 years of real estate experience
- Portfolio consists of 100 units in production, 30-unit rental portfolio, wholesaling, and flips
- Based in Charlotte, NC
- Say hi to him at: www.vistahomesclt.com
- Best Ever Book: The One Thing
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Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks, and today we’ll be speaking with Jason Javer.
Jason, how are you doing today?
Jason Javer: I’m doing great. Thanks for having me, Theo. I appreciate it.
Theo Hicks: No problem. Thank you for joining us. Looking forward our conversation. A little bit about Jason—he is the Managing Partner at Vista Homes and has eight years of real estate experience. He currently has 100 units in production. He has a 30 unit rental portfolio and has experience with wholesaling and flips as well. He is based in Charlotte, North Carolina, and his website is https://vistahomesclt.com/.
So Jason, do you mind telling us some more about your background and what your focus is today?
Jason Javer: Yeah, definitely. I think I’ll start with, I moved down to Charlotte and wanted to get started in real estate full-time, on the residential side. And I was around 23-24 years old at the time, and I quickly realized that it was a little bit more difficult than just reading the blogs and the podcasts that I had been following. So at that point, I realized I kind of needed some steady income as well, so I got a full-time job as a financial analyst at a company here, and then also kept working on the real estate nights and weekends, and eventually met my current business partner. We just kind of started working together and kind of just taking it a little step by step, until eventually we each kind of had saved up enough money to feel like this was like a now or never time and to kind of go into it full steam ahead, full-time. So at that point, I quit the job and I just kept pursuing Vista little by little, and today, like you mentioned, we do roughly $15 million to $20 million in sales. We have a team of eight other people.
We specialize in infill new construction in Charlotte, North Carolina. So really what we’re doing is we’re finding property that’s within a few miles of uptown, and either it’s vacant land or maybe an existing rundown building, and then we’re looking to add density through new construction. And then we really specialize in single-family homes, townhomes and duplexes. Generally, our sites are anywhere from 2-15 units, so it allows us to be larger than a mom-and-pop builder, but smaller than your national builders. So we’ve been able to carve our niche in the market and really try to hone in on our core client, core product, and that’s a lot of what we focus on today.
Theo Hicks: When you transitioned from your full-time job in the financial sector to full-time real estate, had you done deals yet, or was it just you had enough money to start doing deals?
Jason Javer: We had done deals. We were doing deals throughout that time. In the beginning, we were doing a little bit of wholesaling, a little bit of renovations, and picked up some rentals… So we were definitely doing deals throughout. And then we just kept kind of morphing the business and growing it. And then eventually, we felt like we had enough saved up and then also enough of a foundation of stuff in the pipeline to move on, but definitely had the full-time income that I was able to at least pay all my bills and have a little bit leftover, so that way everything I made in real estate, I was saving and reinvesting, saving and reinvesting along the way.
Theo Hicks: How did you find your business partner?
Jason Javer: We met at a networking event; probably a little bit of luck, serendipity. We met—at the time, he was a commercial pilot, so he had a little bit of an irregular schedule, whereas my schedule was more of a typical 9-5. And I just realized that it was going to be pretty hard to hit all my goals and to grow while also having a 9-5, and that I kind of needed a partner. And then I think we just got lucky that I tend to be the more analytical one in the business and he’s just like better at kind of sales and construction and design. So we’re kind of fortunate that we didn’t have the exact same traits and qualities. I definitely can’t say that I interviewed 100 people and really found the perfect fit. I think we just got kind of lucky that our goals aligned and the things that we do. There was a nice Venn diagram approach there where the things that I was really good at and vice versa, he was able to pick me up on things I’m not as good at.
Theo Hicks: When you and him met and decided to become partners, had you already decided that the focus was going to be on the infill new construction, or did that come later?
Jason Javer: That came later. So I got first deal that we did together was like a $50,000 condo that we put like $15,000 into it and sold it for like $95,000. And basically throughout, we just kind of kept growing and kept evolving. So from there, we started doing a little bit larger renovations… And then we really stumbled upon our first new construction opportunity and we kind of got lucky on that as well. And then we just kind of learned over time that for our skill set and our business and our goals that new construction was going to be the way to go. So fortunately, we aligned in that sense, but then also it fit what we were looking to do as well.
Theo Hicks: Let’s talk about you stumbling across new construction. What’s the story behind that?
Jason Javer: Yes. So at the time, we were basically converting two-bedroom, one-bath homes into like three-bedroom, two-bath homes and adding 1,000 square feet, and that was our business model. We came across this property and got a great deal on it, and we were all set to add some square footage. And at that point, we didn’t have the contractor’s license in-house like we do now, so we were hiring out for the renovations and all the work that we were getting done…
So we kind of went to this builder and we said like, “Here’s our renovation plan, what do you think?” And he said, “Hey, have you looked into subdividing this lot and building a new home?” And we didn’t know anything about that concept at the time. We were like, “That’s really interesting”, and we did more homework and it wound up being that that lot was able to be subdivided. And then from there, we did that project and we kept doing renovations. And we just, over time, found that the new construction was just like a better fit for us.
But the crazy thing is like who knows when we would have stumbled upon it if not for that random opportunity and that random conversation a little bit. So it kind of shows that you’ve got to kind of be in the game and be tweaking and be taking massive action, and hopefully, over time, you get some good breaks along the way as well.
Theo Hicks: How are you funding your deals? Are you guys raising capital from investors?
Jason Javer: Sorry, was that on finding deals or financing them?
Theo Hicks: Financing the deals.
Jason Javer: We kind of have a few different strategies on the financing side. So we do have relationships with local lenders and we’ll use some investors as well to help on those kinds of projects. We also have done a bunch of partnerships as well. So you guys and your listeners probably know, I think that there’s all different parts where you can add value in the transaction, and finding the deal and putting the deal together is a very valuable piece. So if you’re able to do that, you can bring in a little bit of the financial side if you need it to get a deal done and still make it very profitable for everyone.
So partnerships has definitely been a big piece of our growth. As we grow, we’re looking to have more and more retained earnings, continue to grow our financial base and do more things just kind of spec in-house with local lenders. And then usually, they want to see certain presale requirements, so we have like a really focused eye on presales and what specs we have and then what reserves, and the debt levels, and then trying to build relationships and get clarity from lenders… Because sometimes getting clarity from lenders is a little bit tricky. So you need to try to like get clarity in terms of like, what do you need to see in order for us to continue to do more business together? Because right now, like our goal is to do 30-40 units a year and do $15 million to $20 million, and we’re trying to get really good at that and get as profitable as possible, and one way to do that is to build some lending relationships.
Theo Hicks: So out of the deals you’ve done so far, what portion have been the local lenders plus investors, and what percentages have been the partnerships?
Jason Javer: I would say, up to this point, we’re maybe like 50/50.
Theo Hicks: Okay.
Jason Javer: And I think moving forward, we want to get to 80/20 or 90/20 even, because the more that you can take on, the more profitable it can be, and then you’re able to do less deals, but make the same amount of money. And what we see is, when you’re building a team, especially, you have to really put everyone in the right place to succeed. So if you’re doing too many deals at too low a margin and you have employees, then it becomes really hard to kind of keep morale up and culture and everyone kind of jiving on the same page.
Theo Hicks: Sure.
Jason Javer: Last year we did a bunch of partnership projects, so we were probably in that 50/50 range. And that this year we’re probably trending closer to 75/25, and I think that a year from now, we want to be like 90/10 even, just because of everything kind of—getting everything to gel and be as profitable as possible.
Theo Hicks: How do you structure these deals with investors? Let’s say you’re working with a local lender, you’re raising the capital for the remainder of the project costs… As an investor, how am I getting paid?
Jason Javer: So the simplest way to get started could be like a 50/50 split. So 50/50 in terms of, you’re bringing the deal and you’re going to do all the work, then the other partner is going to bring all the financial responsibility, bring all the equity, all the debt, and receive 50% of the profit.
Another way that we do it, though, is instead of that, we eventually morph to us keeping two-thirds of the deal, and bringing maybe 10% of the equity, but then the financial partner still signs on the debt.
So I think it becomes a function of what you could command; it’s all supply and demand and market-driven. So if you haven’t proven yourself in the beginning, you may have to do a deal and only take 40%, or you might be able to take 60%. It becomes a negotiation and a supply-demand type of scenario, but that’s kind of where we’re at currently.
Theo Hicks: What about the passive investors though? I can understand that you have partnership, you split it 50/50, or you guys take a bit more than you bring on to the equity, but the people who are actually the equity investors, how are you structuring with them?
Jason Javer: A lot of times, it’s people that we’ve done a lot of work with that trust us. And I say that because I think in order to achieve this type of structure, you need to have trust. But we generally just offer a 12% preferred equity return and there’s no personal guarantees involved. So it’s really they trust us, it’s not a deed of trust either. But I do think that those are the types of the negotiation that you have to have with someone. Because I know that if I was getting started with someone and I didn’t really know them well or they were just getting started, I’d maybe want to have a little bit more security than what we have to give people now, since we’ve been doing it successfully for the last eight years, and we’ve been very fortunate to never miss a payment to anybody and never lose anybody’s capital. So we’ve earned that trust over time, so it’s almost like the partnerships, like you have to kind of give and take and negotiate a little bit.
And then I think the goal and what we’ve seen is that you’re always just trying to get a little bit better. So what you did last year, if you were giving away 50% of the deal, then in the future, can you only give away 40%? Can you only give away 30%? I think that’s the biggest thing with real estate, is you’re always just trying to tweak and improve, and it’s a slow process. But you find that over time if you really kind of stick to what you’re doing and continue to reinvest and do things the right way, that they continue to get better if you’re doing things the right way.
Theo Hicks: For that 12% preferred return, what period of time is that over? How long are these holds usually? Like if I invest $100,000, when would I expect to get my 100 grand plus whatever return I get?
Jason Javer: On our projects, it’s going to be a range of 12-24 months depending on the project.
Theo Hicks: Okay.
Jason Javer: Yeah, so it’s not too long. We’re lucky that a lot of what we do is by-right development here. So we’re able to kind of get in, knock a house down and turn it around in 12 months. If it’s a little bit of a larger project, it could be closer to the 24-month range. But our sweet spot project is going to be in that 12-18 months.
Theo Hicks: And on the flip side with the local lenders, what type of financing are you able to secure on these deals? What’s the interest rate, and the down payments, and the loan terms, and things like that? I’m just curious.
Jason Javer: They vary. And that’s another thing, where it’s like where you start, you want to kind of keep improving, keep getting better and better. So we have some lenders that will go up to 90% loan to cost, and it’ll be like a one-point origination and a 5.5-6 percent interest rate. Some of them do fix, some of them will do floating. Obviously, those are really good terms, I think. But I think when you start out — we had a lot of people that started out at 75% loan to cost.
So again, that’s like making sure that you’re always improving your balance sheet, that you’re building relationships, that you have multiple lenders that you can talk to… And it’s almost like finding a deal with finding lenders, you’re going to maybe talk to 20 different people and one or two of them are going to work out and be a good fit. And then over time, maybe that bank merges, or that banker moves on, and that bank’s no longer a resource for you. So you don’t want to also put all your eggs in one basket. So that’s kind of how we approach the financing side.
Jason Javer: Alright, Jason, what is your best real estate investing advice ever?
Theo Hicks: I think my best advice that I can give anyone getting started is make sure you find your niche and you specialize in it, and you become great at it. Because I think that it’s so easy in this industry to see a shiny object and bounce around and just think that you can do all these different things. But really, the most success you’re going to have is, be the guy in that specific field where they know they can come to you.
So for us, we’re a few miles outside of uptown, we know the product we want, we know what houses we want to build, and that’s us. If you want to be the office guy, figure out exactly what niche you’re going to play, tweak it, work on it, but make sure that you’re not trying to be a little bit of to everybody, but you’re just being great at your one thing and what you can specialize in.
Theo Hicks: Alright, Jason, are you ready for the Best Ever Lightning Round?
Jason Javer: I’m ready.
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Okay, Jason, what is the best ever book you’ve recently read?
Jason Javer: So the best ever book – this kind of comes back to the advice that I just gave, but The One Thing by Gary Keller, that was a game-changer for me; it really helped me through a lot of tough times. And really the premise of it is find that one thing that if you do that well every single day, it will pretty much take care of all your other issues.
And for me it was finding deals that kind of fit within what Vista Homes wants to be and what we’re going to do to put everyone in the best place to succeed. So I know there could be issues with a contractor, there could be issues with an employee, there could be issues with a customer… But I feel like if I’m able to do that consistently, every single day, and put everyone in the right place to succeed, that nine times out of 10 we’re really going to get to where we need to be.
Theo Hicks: If your business were to collapse today, what would you do next?
Jason Javer: So I think again — and it’s now starting to get a little redundant, but for me, it would just be find a new niche, try to really find something and make sure that you’re adding value. Because I think that real estate – you get rewarded for the amount of value that you add. The more value that you add, the more you’re going to get compensated.
So if my business collapsed, today, I would look at the landscape… And I do love real estate, and I love the analytical side, so I’d probably say, “Where’s the next niche? Where can I get in? Where can I take the skills and stuff that I’ve learned in the past and try to have success in another area of real estate?”
Theo Hicks: Tell us about a time you lost money on a deal, how much money you lost and what lessons you learned.
Jason Javer: Definitely. So we had one new construction project and we lost around $40,000 to $50,000 on it; we built the wrong house in the wrong place, with the wrong size. So we did a modern new construction home, which — whenever you change anything, it’s challenging. So that’s not really our standard style, so we obviously had cost overruns there. It was like a double yellow line road, it was a little bit busier, it wasn’t like tucked in a neighborhood like we would have liked to be… So we missed on cost, we missed on value.
So I think the biggest thing for me that I took away from that is I like to stay away from the double yellow lines as much as possible, so that would signal like a busier road; and then also just kind of stay within that niche and stay within what we do well and continue to just do that over and over again, and we’re going to continue to have success.
Theo Hicks: And then what about the best ever deal you’ve done?
Jason Javer: The best ever deal has to be the one we talked about earlier today; it was on a street called Ever Place, and I just stumbled upon the opportunity to subdivide and build our first two new construction homes. And from there, it was, quite frankly, a life-changer for us. And actually, on that exact street, we’ve done 10 other homes in a similar understanding of the zoning and the new construction. So that deal and that neighborhood will always have a special place in our heart, and it really changed everything for us.
Theo Hicks: What is the best ever way you like to give back?
Jason Javer: For giving back, I love to help people that are looking to get into real estate. You know, I had a buddy the other day that wants to get into rental property and just kind of asked me a few questions. And I feel like my doors are always open to those people like, I really enjoy it. I enjoy teaching people and at least sharing what I know and my experiences, and that’s kind of like how I like to give back at this point.
Theo Hicks: And then lastly, what’s the best ever place to reach you?
Jason Javer: I’m probably most active on Facebook and LinkedIn, so you can search me and look me up. And then also my business, like we talked about earlier, is Vista Homes. And we’re located in Charlotte, North Carolina. You can find us on Instagram and on social media. And our website is https://vistahomesclt.com/.
Theo Hicks: Perfect, Jason. Thank you so much for joining us today and providing us with your best ever advice, which was to find your niche, specialize in it and become great at it. I really appreciate the way you answered my questions when I asked you about financing deals and structuring deals, investors and partners and financing. You didn’t just give us the “what”, but you also gave us the “why,” as well as the fact that for a lot of these types of structures, it’s going to depend on your track record and your experience.
You kind of start off, maybe on the less favorable end to you, and then as you get more and more experience, do more and more deals, you’ll get a larger cutler deal, you’ll gain more trust from your investors, you’ll be able to get better financing from lenders… That all kind of comes back and is incorporated into if you find that one niche and get really, really good at it, you’ll be able to benefit from more favorable structure.
So Jason, again, thank you so much for joining us today. I really enjoyed this conversation. Best Ever listeners, as always, thank you for listening, have a best ever day and we’ll talk to you tomorrow.
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