What's going on YouTube? It's Matt Faircloth. Thank you for watching this YouTube channel.
My name is Matt. My company is called the DeRosa Group, and I am grateful that you guys
are here watching us. I'm here at an event called Pod Max, which you can learn more about
at podmax.com. It's a podcast fest and I do some YouTube-ing at Pod Max here in my office
building in Trenton, New Jersey. I've got some awesome guests. I got Victor, I got Pavel.
Welcome. Welcome.
Thanks for having us.
Today's conversation, what these guys are going to talk to us about is how contractors,
construction companies can become real estate investors. You guys have a successful construction
company and you're also real estate investors, which I find that you guys ... When I think
about that, I think about you guys are sitting on both sides of the lane. A lot of times
as real estate investors, contractors are I don't want to say the enemy, but they're
a necessary evil. But you guys are that and so you're investing in real estate now. So
thank you so much for being here. Before we get into the construction side, what's the
name of your company? What type of construction do you guys do? Tell us about the construction
stuff and then we'll talk about how you transitioned to real estate investing.
Well, our journey started with a general contracting and then we gradually translated into a trades
business, which is a stretch ceiling business. It's an architectural covering for ceilings
and walls that create acoustic solutions, lighting solutions. We also cover that nasty
popcorn texture on the ceiling. Our name of the company is popcornceilingsolution.com.
I've seen some of the work that you guys do. You're acoustic contractors. You make things
quiet in spaces. You guys have done some podcast studios for us, which has been awesome. So
that's great, but you guys are a construction company, which means that ... Well let's look
at it this way. What a construction company does and in essence, is you're bidding work
to be done to a physical space and you're trying as best you can to get the best number
that you can to get ... You're trying to make money as a construction company. It's not
a hobby. You want to get the most money that you can to get the construction work done.
Like if I hired you for $15,000 to do a podcast studio for me, if you could get 16 for the
work, you would. Your goal as a contractor is to get paid the most that you can for the
work that you do. Am I wrong?
You're right.
Yes, I got it.
You got it right.
So here's the other side of it. As a real estate investor, my goal is to get the work
done for the least amount possible. If I can get a kitchen done from you, not that you
do kitchens, but if I get a kitchen done from you guys for $12,000 and this guy over here
is going to do it for 11, guess who's getting the job? You're in the same boat. What do
you think about that? It's almost like two opposing forces that on one side of the conversation,
you guys are trying to drive a profit and drive prices up. On the other side of the
conversation, you're trying to keep costs down. How do you mitigate those things?
Well, let me start from one point that you just mentioned. So you would like to get a
price lower. Our job is actually to sell that job for more money. So here's the caveat:
we are coming with a special value proposition with our product. Stretch ceiling system is
something that solves very specific problem for homeowners or the investors.
Got it.
As a homeowner, you're living in the apartment in a high rise building and you've got an
ugly popcorn ceiling. What do you do? Do you want to call a general contractor that will
start scraping it off and you have to move all your stuff out?
So what you're saying is you're not in a commodity based business where it's like you're installing
toilets.
Correct.
I'm going to go with the cheapest company that can install toilets. Okay. I get it.
So that's a good differentiator. Maybe that's why you're in stretch ceilings because it's
not something that's a commodity where knucklehead real estate investors like me are just going
to try and drive your price down no matter what. If you guys are installing doors for
me, I'm going to try and get the best deal that I can as you guys would. Let me change
gears. How did you guys get into real estate investing from construction?
Well, the real estate game kind of naturally to the equation, real estate was something
that we haven't thought about when we were general contractors because we were just too
busy. You're running around like chicken without head. You're trying to make a buck. You're
trying to please your customers. You're trying to make sure that the supplies are in place
for your crew to go in. Then investment became by accident. So we acquired our first two
unions in the city of Trenton because we just needed to invest money. We thought that, that
would be a great thing to do. Then gradually, we started understanding that we can actually
maintain our properties ourselves. We can fix the roof if needed, we can install the
kitchen, we can do all that stuff in house. That translates into savings of money because
you're not hiring someone, you're actually doing it on your own with your own people.
Later on, it became an understanding that we actually, doing it on a smaller budget
than as opposed to the investor that has to find someone like me and convince me to do
something for the money that I do for myself.
Got it. So Victor, that's an interesting conversation because you guys aren't just sitting around
at their homes, waiting for something to do. Your crew is busy. You guys are doing work
in the field. So how do you mitigate, I'm going to send a guy to Trenton to go and turn
a unit or to go and rehab that apartment? I'm talking to contractors that are right
now watching this video. The contractor is thinking like, "Well, I got ..." Contractors
are busy. We're in an up economy right now, but there's a lot of work. Most construction
companies I talked to are busy. I'm sure you guys are. How far out booked are you guys
right now for the popcorn ceiling business?
As of now, for what? Three, four months at the very least.
Yeah.
Okay. So you're booked out for three to four months. Here's the thing. A tenant vacates
here in Trenton or at one of your rentals. Three to four months away, like oh no, no.
I'll have to put that into the schedule at the end. How do you mitigate the real estate
businesses needs? Because I think a lot of people watching want to know that. How do
you handle the pipeline of business and customers that are ready to pay you guys money? Maybe
they've already paid deposits, so you're obligated to them. How do you mitigate that versus the
real estate business? Because you need the labor for the real estate business too.
Job variety, that's the thing, because we've got jobs with different deadlines. Some things
could be put on hold. Some things could be stretched out. We got to take into account
the manufacturer. But at the end of the day, the urgency pays more usually. So that's when
we have the flexibility of variety of kind of jobs, some jobs with a higher budget, higher
premium. Jobs that could be that we know are on a table that we have three months, four
months to do there anyway. We know that we're going to get to them, so we can bring the
guys, a couple of guys from the jobs where we have extras, and manage the flow because
of the variety of jobs. We're not stuck to particular, only one trade of one kind of
job, with one kind of customer that we [crosstalk 00:07:35]
So you've got versatility. You're still booked out.
We're still booked out, but we have flexibility. It's about flexibility, I think.
Got it.
And another thing I just wanted to add: scheduling. If you call me tomorrow and tell me, "Hey,
I got a unit that I need to turn and please go and paint that." As an investor, I know
that happens. [crosstalk 00:07:53]
This isn't me calling you. This is your property manager or whoever's managing your property
saying, "Hey, Sally Smith just moved out. Or God forbid we had an evictor or whatever,
or she skipped." Whatever it is, you now have a unit that needs to get painted. If you don't
paint it, you're not going to make any money as a landlord. Believe me, I know that world.
Correct.
So you said from a scheduling standpoint, that's how you handle it.
From a scheduling standpoint, that affects my schedule a lot. So if you call me and you
put a short notice on that, most likely I'll say no because that's the nature of it. If
I take your project and then I have to deny someone where the deposit was paid and the
schedule is already put in place, I'm not jeopardizing that relationship.
Got it.
I need to mitigate that. We somehow need to do the proper scheduling for that.
Got it. So do you guys also hire? Do you only use your guys?
We hire subcontractors as well.
You hire subs too, okay. Because again, now you're in my world. I'm always hiring subs.
I'm always like, I need this guy to put it in a toilet and I got to haggle ... this guy.
How much to put it in a light switch? Whatever it is. So do you find it more affordable to
use your guys? I get you guys were bringing guys down from New York City. You've told
me what it costs. I still remember what this man pays to hang up one piece of sheet rock,
which in Trenton, I pay 20 bucks to hang one piece of sheet rock for the labor. You pay
$100.
Right now it's 120 [inaudible 00:09:26]
The inflation, okay. So $120 to hang a piece of sheet rock. So do you find that given the
travel time and everything like that, it's still worth it, given the quality of labor
and the cost of labor, and the reliability of labor? Do you find that it's still worth
it to use your guys?
Sometimes it is worth it. If it's a specialty thing, if it's a carpentry work that requires
proper framing, where the load distribution of the beams have to be done properly, or
sometimes even plumbing. I find it more useful and actually better from a quality standpoint
to bring the person that I trust and know from up North.
One of your guys.
One of my guys, right, which is only an hour away travel. So don't forget one thing, when
you go to New York ...
Oh, I get it man.
It's an hour.
It's a lot of slap. There's a lot of slap shacks out there. The thing about it is, is
that you can push the button and tell this guy, "Listen." You got control because you're
giving them a lot of work. So you can say, "Listen, I need you to drop what you're doing
to go to Trenton for me to do a plumbing job." And that, and you've got control over that
and he's willing to do it. He's going to charge you, but he's willing to do it. It's probably
better than just hiring some plumber off the street, the guy that I have to hire to do
the work. You guys have control of more quality guys.
Correct. As of now, what I'm doing is I'm actually working on creating a network and
additional human resources locally, as opposed to bringing people that work in a different
area, in a different location. Quite frankly, I think it's more about creating a system
and the process, and creating the relationship with local people, then bringing them from
the North. Right now, it's more like an emergency type of thing that I have to deal with and
I do this. Creating a local community of labor force and labor pool that you can bring I
think is more valuable.
That leads me to, as we wind it down, maybe one of the last points and I'll ask you for
any other tips you may have. But I believe that contractors ... I mean, you guys just
work with other contractors and know how to negotiate with contractors likely better than
we do as real estate investors. Because we do work with contractors regularly, but you
guys work with them daily, work with labor daily. So you really know what things should
cost, you know how long it takes to get things done. I would suspect it'd be very hard for
a contractor to dupe another contractor. Do you find that it's easier to work with the
subs that you have to hire down here, given your background in construction?
It's easier to sift through unworthy contracts you don't want to spend time with.
Find the knuckleheads easier.
Exactly. There's a screen [inaudible 00:12:19]
Plenty of knuckleheads out there. I smell a knucklehead on this guy.
That's right. So we don't waste our time. We could really go through a lot of interview
very quickly and then get through the guys. But it also takes longer to find quality guys.
But once you find them ...
You hang onto them.
You hang on to them because you will see the jam and diamond in the rough. He may be running
around and he may be crazy, he may be busy, he doesn't know how to manage his schedule,
he's a guy [inaudible 00:12:45]
Most of them don't.
Right.
Most of the good ones don't know how to handle scheduling, billing, those other kinds of
stuff.
Right. Then you could maybe lend them a hand and say, "Here's what I can do for you, but
I really need your hands here. But I could manage maybe some other things for you and
cover some other things for you because you understand where the contractors are coming
from as well."
Got it. So let me summarize it. It sounds like there is a path for contractors to become
real estate investors. Sometimes there's an opportunity to use your own guys, but you've
got to mitigate keeping your business going and you scheduling tools, and also just understand
that maybe you don't need your framer every day, Monday through Friday. You might be able
to create a gap that your framework can go down, while somebody else is doing what they're
doing. So maybe you can work out schedule and to create gaps in there. It's okay to
build local relationships and have other subs. You're not only relying on your guys because
that seems like that could hinder your business. Your main core business is what it's all about.
Real estate investing is wealth building, but your core business is what keeps your
lights on for now.
Then I also heard that your construction company, your skills and construction allow you guys
... Just have given you guys some of the tools to negotiate with contractors and sniff out
to the ones you might not want to work with. So any other highlights you guys want to throw
out there? Because you got a lot of construction guys watching this or construction women watching
this right now that want to learn how to bring their construction company, the tools they
have for their construction company into real estate investing. Any other final tips?
Well, the main tip is to build your simple systems. Again, like scheduling, billing and
estimating to the point where you can estimate and analyze the jobs, and frankly deals so
much quicker. So when you have your knowledge and when you have your construction tools
in your toolbox, and you know how much things cost, it means that your assessment and your
analysis of the property should come a lot faster than for anybody else out there. So
this is your advantage. Use that to your advantage and then ...
Systems.
... place those systems in place so they can help you down the road.
That's great. The most successful contractors I know, a lot of them are great at what they
do. They're great with their hands. They're phenomenal plumbers, electricians, carpenters.
There's nothing better. But the ones that I see that are successful, are not the ones
that are the best at what they do. They're the ones that have the best systems, and processes,
and scheduling, and billing tools and things like that. They're the ones that are able
to work their way out of. I'm sure you guys read the [inaudible 00:15:15] but they're
the ones that are able to work their way out of being the technician and into being the
business owner. So Victor, final thoughts?
Stretch fabric ceilings is where it's at. I suggest every construction company should
get into it. You should talk to us, find out how to install stretch fabric ceilings.
And how do they get ahold of you?
Popcornceilingsolution.com.
Popcornceilingsolutions.com. Solution or solutions?
Solution.
Solution. That's popcornceilingsolution.com. Victor, Pavel, it's been an honor to have
you guys here. Guys, be sure to reach out to these guys if you want to hear more about
how a construction company can become successful real estate investing or if you want to hear
more about what they do in general. I appreciate you guys for watching. If you watched this
video this far, just go ahead and hit the subscribe button because you're going to hear
about all the cool stuff that we have going on, on our YouTube channel on a regular basis.
Check out a copy of my book, Raising Private Capital, which you can get on my website,
derosagroup.com. Thanks for watching guys, have a great profitable week.