48: Putting the Work into Workforce with Scott Choppin

Welcome. This is Real Estate Investing Live from New York with James Nelson, the principal and head of Avis and Young's Tri State Investment Sales Group. In this program, you'll learn about the world of commercial real estate and find out why it is one of the largest investment opportunities in New York and around the world. Now here is your host, James Nelson.

Welcome to episode number 48 of Real Estate Investing Live from New York. This is your host, James Nelson. Got another great show lined up for you today. We have with us Scott Chopin, who is founder of the Urban Pacific Group of companies. I found out about Scott because he's been very active on the podcast network and he's got a great story and he loves mentoring younger people looking to get into the business and so thought this would be a great interview not only because of that, but also because of his experience in building workforce housing, which is a segment of the business that doesn't get a lot of attention. But he's got an incredible platform and he's delivered thousands of units on the west coast. So I know you all will get a lot out of this episode. We are coming up on our 50th show. We're getting so close to breaking 100,000 downloads. So thank you, thank you, thank you. Continue to tell your friends, continue to post your comments on itunes, Spotify, wherever you get your podcasts. I really, really appreciate it and make sure and if you ever have a question, find me on social media channels. It's great to link in with you. You can find me at James Nelson nyc. I look forward to being in touch. We're going to have a brief word from our sponsor and we'll be right back with that interview with.

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And now it's time for our investor spotlight. And with us today is Scott Chopin, who is founder of the Urban Pacific Group of companies. And Scott oversees all the operations of the Urban Pacific family of companies, including business development, capital acquisition, strategic planning. Over the last 20 years, they've amassed a portfolio, having developed over 3400 units with the total capitalization exiting at close to a billion dollars. Prior to forming Urban Pacific, Scott was director of land acquisitions for the multifamily development division of Irvine based Saras Regis Group. Prior to that, he's with Kauffman and Broad Multi Housing Group, where he spent time with the acquisition, entitlement and syndication of 1900 affordable units. So I've had a chance to hear Scott several times on some podcasts. I know he's a very active participant in the market. So, Scott, really appreciate you joining us today.

Yeah, great to be here, James. Thank you for the invite.

So, Scott, I know you're out on the west coast. Is that where you grew up?

I did, yeah. Actually, I live and our company's based in Long Beach, California and that's actually where I'm from going. In fact, my kids are fourth generation based here in Long Beach.

Awesome. Yeah. We were talking before the show and I've told you I've been to your airport a couple times. My kids play water polo and it's.

It's a good airport, right?

It's a great spot out there. Yes.

Cool little airport, in and out.

A lot better than lax, I will say.

Yeah.

So you grew up in a real estate family, right? So maybe talk about those early years while you were going to school. Were you helping out around the office? What was that like?

Yeah, so I grew up around. So my uncle Mike Choppin founded a company called IDM Corporation, which is predominantly known in the commercial office development world, though they did a lot of apartments. And then my dad, Carrie had a development company and worked in a joint venture capacity for probably 30 plus years. And so I got between those two, you know, I saw a lot. Yeah, I went on a job sites and was, you know, picking up trash, you know, in the morning before going to high school and, you know, did that kind of stuff. Although, you know, as a lot of kids, you know, do for a period of time, it's sort of like you don't want to do what your parents did. Right. Like you want to do something else. But a couple like summer events happened for me. So out of high school, I worked actually in the construction trades for a couple years doing electrical work on apartment Buildings, as a matter of fact, in fact, on some of our apartment buildings, just for something to do. Wasn't necessarily prepared to go to college. Didn't have necessarily a good plan of action. I wasn't seeking to be in the family business or be a real estate developer, but being on job sites taught me about construction, like, everything I would ever need to know really for the future. But what it did teach me is that I didn't want to do that. Clearly, working in construction and working in the trades is that, you know, it's an honorable business, nothing wrong with it, but, you know, your body wears out and you're never really going to make the sort of income to produce, you know, real wealth to take care of your family. Right. If that's one of your ambitions, that certainly is mine. So that sort of taught me what not to do. Also, when I worked on job sites, I'd see the developer roll up, you know, to the job site and one day I go, ah, I get it. I gotta, I wanna be that guy, right? And it sort of dawned on me, oh, this is, you know, what my, my dad and my Uncle Mike do like, like meaningfully for me, right? Like I could say, okay, this is. I knew I didn't want to do this and I wanted to do that. And then the other event that really helped me was, you know, I read a series of books that's just like I'm a, I'm a heavy reader. And I read one of those, you know, how to make million dollars investing in, you know, real estate on the weekends type books. And I don't even remember the name exactly or the author, but that book really enlightened me to deal making. I go, oh, finally. See, you know, because for me being in the, around my family, I sort of saw the back end of it and some public stuff. I knew about the projects, but, you know, the inside workings of the deals, I didn't necessarily have know, like I didn't work like literally in the financial part of, of the family operations. And so that book taught me, like, what's deal making? You know, find a distressed asset, find it undervalued, do something to improve the value and sell it right at a profit. And that was sort of. Those two things really sort of coalesced for me. I go, okay, now I see why my Uncle Mike and my dad chose this business as a career. It can be very viable. It's obviously got a lot of risk, right? Being a real estate developer is not for the faint of heart. So that got me to the point where I go, okay, now I got a plan. I figured out where I needed to go to college. You know, I started networking and meeting people in the business so I could, like, identify and acquire the right first job. In fact, that's how I met Mike Costa, who ran Kauffman and Broad Multi Housing Group, was through those efforts and, you know, through, you know, my family's networks. So from that period of time, you know, 18, 19 years old, like, I had the plan. And the plan was to go get educated, work professionally for others, and ultimately go out on my own as a real estate developer, which I did, you know, now 20 years ago this year.

That's awesome. I'm really glad that you spoke about understanding the underlying principles of that deal making and how excited that that that made you about the business. And for our listeners, if you haven't heard, go back to some of those early episodes that we did. And I think on show number maybe even two and three, we had Doug Marshall, who wrote a book on real estate investing, and he talked about what you said about, you know, finding those distressed opportunities and finding things off market. And, you know, that's what makes real estate exciting, is that it's not a liquid market where you can go to the Wall Street Journal and you can see where the price is that day. I mean, you can go in and you can find opportunity and you create opportunities. That's really great. Discover that on your own. So, you know, this is a great question, especially for those who are already in a real estate family. And so, you know, interesting that you said, or that you knew that you wanted to go out and, you know, work for another shop. I mean, I'm sure it was discussed at, you know, at the Thanksgiving dinner table. You know, hey, Scott, why don't you just come right out of school? You know, we got plenty of projects. We need help. You know, was that. It sounds like that was a conscientious decision on your part just to get some experience elsewhere.

You know, I think it can. It's a great question. You're first to ask it that that way. So I appreciate that. I think from my standpoint, one, it wasn't never an insistence that I be in that industry for my family. One, it was an insistence that I, that I, like, take over the operations. And I don't, like, say that's good or bad. That just was, you know, how my family particularly, you know, my family's, like, historically from Britain and Ireland. And so I think there's a certain, you know, like, Cultural narrative about, you know, just, we don't talk about these kind of things. It wasn't really hardcore, like, I don't want to make it sound freakish, but it was sort of expected that you would go make your own way. And I, because I think I grew up in that narrative. It wasn't even like I expected it, like, oh, I'm gonna have this. And, you know, so I was in this narrative about I gotta go out and make my own way. I gotta learn how to do it. Now. I will say this now, like, I'm teaching my kids. So there's two extremes. You can be, you know, in a nepotism sort of structure where, like, you're absolutely gonna get the thing and, you know, there's. There's no choice about it and, you know, you don't have to necessarily go out and learn. And there's the way I did it, which is, you know, thrown into the frying pan and go figure it out, right? And I got some, some networks and certainly lots of advice in my career, early career, but it wasn't a given that this would be available for me. So for my kids, I'm like, you gotta go learn. You gotta get your knowledge. You gotta learn how to be a developer if that's what you're gonna choose. But also, let me let our family, let my wife and myself help you kids launch more successfully. Because I think I spent a lot of time not ignoring what my family had accomplished, but not utilizing it in the powerful way that I now recognize that could have been, was available. I mean, I've never said no, but like, I was going to go be, you know, do it on my own, like sort of a maverick, right? Lone wolf. And I, you know, where I'm at, my career, I'm like all networks, people, you know, people you can learn from, look at others mistakes, you know, don't do what they did, you know, learn from that and you don't have to, you know, get that education yourself. And I've had plenty of, like, my own education in the business, but I think that, you know, there's a balanced approach to it. So hopefully that answers your question. I think it's just, you know, it's like every family is going to be different, right? And I don't think there's a right or wrong way, but I do say there's a powerful way, like effective and strategic way to build your career and learn. And why recreate the lessons and all the, you know, the education experience. If you can advantage yourself from somebody Else, maybe it's a mentorship. Maybe it's somebody you work for at a company. Like, you know, I. When I worked at Kaufman Abroad, I worked for a guy named Mo Mahona, another guy named Tom Erickson, and those poor guys, man, I like, I just. Every question you could think of, James, like, hey, what do you do this? How do you do? In fact, Mo and I carpool back and forth from Long beach to west la, and if everybody knows that, it's like a super long commute, hour and a half each way. And Mo was, like, just inundated by me. In fact, we still laugh about it. He's like, dude, you were like, there's no question. That was, like, not asked. And poor guy would fall asleep and I'm driving, he'd wake back up and he goes, like, the questions just ended when I fell asleep and started back.

Up when I woke up.

But I think it really, that is, you know, I would advise anybody to do that. In your early career, I mean, use the. Not use. Benefit.

Yeah. From those around you.

Benefit, right, yeah, benefit and, you know, like, educate and gain knowledge from those around you that. That is, like, way more valuable than the lessons you learn yourself. I mean, you need to do both, right? But, you know, those lessons you learn from others are way less expensive and way less costly and time and energy. So my speech to my kids is like, look, you know, you're going to learn a lot of the same lessons I did. I have all this knowledge. Let me give it to you, you know, to the extent. To the extent that they want to accept it. But let me, you know, don't take so long to learn lessons that I learned. I mean, I'm still learning lessons. I'm, you know, be 53, turn 53 this year. I go learn all those, you know, when you're 20 and 30, you know as much as you can and want to. Right. Of course, the person that, you know, kids or the people who are, you know, you're teaching, have to be motivated to accept the knowledge. But, you know, super valuable.

Yeah. No, I really appreciate your sharing that personal perspective. And I can say as a parent, and my oldest is 15, and he's already asking me, he's saying, you know, hey, dad, I'm going to be able to work with you when I grow up. Right? And, you know, he's. He's nervous and he wants to, you know, be successful. And I guess, you know, there's that kind of notion where, okay, I've got this safety net and I can you know, it's going to be okay, and I've got a spot. And I said, you know, first of all, you know, Luke, you got plenty of time, you know, don't, don't be thinking about, you know, what you're doing in your career. Focus on, you know, school and everything you're doing, but also to instill in him that, you know, look, you can succeed on your own, right? And you're going to figure out something and you got to do what makes you happy. And so you. But there is that interesting balance because he comes back and he says, what do you mean, dad? You mean I can't come work for you? So it's, you know, I appreciate what you're saying and, you know, talking about that time, you know, you spent with Mo in the car, thinking about how I began in the business 20 years ago, and I learned by listening to those around me. And, you know, I started my career with Bob Nacol, who's, you know, to this day still one of the top real estate brokers in New York. And just listening, you know, the privilege of being able to sit five feet from him in a cubicle and listen to what he had to say was better than an mba.

So, yeah, right.

So you spent a lot of time. So I want to go back to, you know, that, that time when you started off doing land acquisition because that's, you know, we have a big, you know, New York contingency listening. But we also, you know, we get people who, who listen in from all over the world and, you know, for those certainly on the west coast or thinking about land, you know, I've been just from my own personal experience, I mean, there is, it's a high risk business to your point, you know, finding the right piece of land, you know, if it's the zoning's not as of. Right. How do you get entitled? So, like, what lessons did you learn by, you know, driving around looking for sites? I mean, I'm sure you got some stories about uncovering some, you know, pretty interesting opportunities.

Yeah.

California, Colorado, Arizona.

Yeah, so lots. And I'll try to pick some good ones. So I did Lanac both for working for Mike Costa at Kauffman Abroad. And then actually that became my sole focus when I worked at Sarris Regis. But when I worked for Mike and Kauffman Abroad, Mike always had this great philosophy that project managers really manage their projects from the beginning to the end of the project. It's cradled the grave, people might call it. And so we weren't expected like it wasn't incumbent upon us to generate deals, but if you wanted to do that, then it was welcomed and encouraged and they would work with me and other people who were ambitious to do that. And so the great thing I got in an education working with Mike in that way is I learned every facet of the entirety of the development process. And I'm. I didn't know that going into that role that that was going to be how. And I didn't even know like, that that was a thing to think about. But if you look at some of the home building companies or some of the big developers, hey, you're land act, you're for planning, you're the construction guy, you're the leasing agent, and those are silos, man. You don't like. Maybe you get the project handed off. But the leasing agents never expected to think about land acquisition or vice versa, right? To give extremes on either end. So lessons I learned were, one of them that I use today is that when I was a young project manager, there was no deal that I couldn't do that laharious deal. The toughest entitlement issues, whatever, right? All the stuff that any seasoned listener is going, oh, yeah, I got a leaking tank, I got a tough entitlement process, I got a difficult city council, you know, it's a bad neighborhood versus a better neighborhood, whatever. And I really thought, you know, in the early days that, you know, all problems could be solved. I'm a great problem solver. I mean, you have to be to be, you know, good in the development business. But I think now the lesson is that dismiss or decline or quit all the toughest problems. I mean, you can't eliminate all risk in development because if you did, then there would be no profitability, no profit to generate. But I'm all about reduction of complexity. In fact, my saying is complexity is the enemy of profits and real estate development. So if you choose to take on a really complex deal, you should understand what the profitability difference will be and underwrite accordingly, right? So if you're related and you're taking on a big project in New York City and you're Hudson Yards, right? I'm going to, I'm going to deck over the train yards at Hudson Yards. Like, that's a complicated undertaking, right? And so obviously those guys know what they're doing. So maybe that's not the greatest example, but that's an example of complexity that if you could find a site that you built directly on grade, then you could at least remove that additional complexity and some People are good at taking on those complex deals and they make a lot of money, or hopefully they make a lot of money. But you certainly increase the likelihood of some breakdown or series of breakdowns in the development process. And particularly in our UTH or the townhouse model, we're really working to strip out all the extra complications. So as an example, we only buy sites that are zoned, or generally we do, where we can skip the whole entitlement process, rezone, general plan amendment. We do it, we've done it historically, we're doing a couple now that are, that are, you know, good land buys. That makes sense. But we basically take on 80, 90% of our land acquisitions are already buy right zone. So we go, we know how to do that, we know it's complex, we know it's ripe for breakdown and friction, I call it. So let's just not do that. I don't want to oversimplify it, but the reality is at every step of the process of land acquisition and design and the type of unit that we build and to serve specific undersupplied markets, we're always looking to take out that extra step, remove a sub, you know, if we can get one sub to do two trades instead of two trades, you know, two subs to do two trades, we'll do that. We'll use the same spec over and over again in our plans. And our product is a production oriented, multifamily townhouse. So it has by its inherent nature just a simplicity to it versus, you know, in urban areas. In LA or New York, you do your mid rise building with underground parking or high rise, right? And there's a, there's a place and there's people to do that. And in New York and other major metros, there's a logic to that. But we just say we don't do that. We do other stuff that's simpler and really just get a production cycle going. So that would be one big lesson I would learn and you could apply that to underwriting. When I was a young project manager, making edgy underwriting decisions seemed logical. Like, well, let's just push rents a little bit more. Gosh, we think we, we can get 900amonth for one bedroom in a market. And I'm just using random numbers here, but man, it's new, there's nothing else competing. Maybe we'd get that $1,000 and maybe that's logical, maybe it's not. But I go, if you make that sort of edgy decision in the 50 or 100 variables, in your pro forma that you need to make those decisions on that at some point those are going to go against you. And so I go do the opposite. If 900 is the market, then let's do 900, but do a better unit. And I'm still renting for competitive prices. If construction is X dollars a square foot and I can base it on historicals and I'll use those numbers, but I'm not going to say, oh, I can get a little bit cheaper than the next guy, right? And so therefore my deal needs cheaper construction than the marketplace to survive as a viable deal. Because at some point all those little acorns that you hide little conservative underwriting pieces in 100 places in your portfolio forma will start to get used up appropriately. But if you don't have the acorns, if you don't have the cushions, then you get backed up against the wall in your underwriting. At some point, I think it would just be choosing less complex deals and underwriting more conservatively. Now, as I say that, James, it sounds like, of course that's the most logical thing in the world, but anybody who's getting into the business, and particularly people who are young and people who have entrepreneurial tendencies, they aggressive people who are risk takers self select to be in businesses like this, right? And so their inherent tendency is to be aggressive and willing to take on risk. And nothing wrong with that. I'm that way still. It's just after a few years of doing that and getting near getting punched in the face a few times and recessions or deals, you go, yeah, let's not do that anymore. Let's be simpler, less complexity, more conservative. And I'm enjoying that right now. I love when project comes in on budget and I go, oh, that's great. We move money around on the budgets and cool. Nothing better than that feeling.

You said so many great things there and I love how you started about kind of de risking opportunities. And we've spent a lot of time on the show talking about risk and Francis Greenberger actually wrote a book called Risk Gain and talking about how he weighs that. But it's interesting because we have an award and I'm sure a lot of it probably have the same kind of thing out in California, but the real estate board in New York has the most ingenious deal of the year award and it's like celebrated. The more complicated, the more creative, the better. And sometimes it's like, you know, we make these deals overly complicated just for the sake of, you know, I Don't know, maybe it's the mental.

James, I have a saying. I go, I don't want to win any awards in my deals. No architectural awards, no, you know, Real Estate Board of New York awards. Like, you know, like you want like, you know, boring deals that some people look at and they go, gosh, that's boring. I go, great, that makes money. I definitely executes cleanly. It de risks. I like the way you speak that.

I would also think because. And I want to talk about workforce housing because we haven't talked about it on the show and there's definitely the social good aspect to it, which this is, and I'm sure you'll tell us, is a massive, massive issue across our country, especially now during these challenging times. So if you are looking to do volume, doing incredibly complicated deals, they take time too, right? So if it's more, and I don't want to call it cookie cutter, but like, if you have kind of a program and it's programmatic, I would imagine that you could develop a lot more housing. So talk about, you know, again, first of all, how do you define workforce housing? How great is the need? And then how are you going about solving for this?

Yeah, thank you for that. So, you know, workforce housing is a term that is being thrown around a lot in the marketplace. I mean, you read it in every magazine, Globe street, and you know, all the major real estate magazines are writing articles about workforce. Like it's the, you know, subject is your. But if you ask anybody the definition of it, you're going to get a, you know, everybody's going to have a different answer. So the way we define it is call it moderate income housing, workforce housing. But simplistically, we're building housing for working people, for working families. First off, like high level for us in California, that means families that fall in income category of 80 to 120. Now I know in New York that the middle income programs get up in the 140, 160 income categories. That's like median, you know, what percentage of median area income the family makes and the rent levels that go along with that. So middle income will adjust depending on the geographic area that you're in. And for us, we developed a product called Urban Townhouse or uth. And that's a workforce rental housing product. And what's unique about that is we build 5 bedroom, 4 bath, 3 story townhouse rental units. So there's a new trend called built to rent, which is basically lower density or even detached houses that are built specifically to rent where those traditionally wouldn't have been rented. So even your single family subdivisions are starting to be rented. Right. As a practical business plan from day one. So that answers the question about what is workforce housing. Remind me on the other two questions. Sorry. Yeah.

So how great is the need? I mean it's interesting that you said five bedrooms because most developers certainly if they're going high rise, it's a mix of studios, ones, twos and maybe a third, three. But yeah, you know, this, this five bedroom, I gotta imagine there's not a lot of it that exists or you know, are there other, maybe there are other developers who are trying to.

Yeah, it's very, it's, it's a very, you know, there's almost, it's almost completely uncontested marketplace and that's by design for us. So when I work for Mike Costa and Cochrane Broad, our product at that division of what was now KB Home, big public home builder, we developed affordable housing like true affordable, government subsidized affordable housing. And working in that world, that really taught me that families were the biggest, you know, they had the most demand for housing and they had the least supply. Right. If you're going to look at the highest imbalance between supply and demand, to me it was in the, in the large family housing space. And if you think about it, even you mentioned it, right, Those mid rise, podium and high rise projects in any urban area, it's predominantly studio and one bedrooms and that's appropriate because most of those today and new housing, if you look at luxury, a product is going to go towards a younger population. Think Gen Z, Millennial. Somebody wants to live in it, sort of super urban environment. Maybe New York would be different because New York is New York, but like let's say California, I'm going to live in downtown LA versus I'm going to live in some suburban part of Southern California. It's still urbanized Los Angeles. Right. But it's not like central business district type thing. And so what you find is there's these family groups that are working families. Think of them blue collar working families. In fact we describe them as multi earner households. Right. So these are families of four to 10 people. They live an economic sharing lifestyle. So they're sharing incomes and expenses across the family group and the earners in the family. Naturally they live multi generationally, right. So grandma lives with them. Adult kids tend to stay longer or remain with their families permanently. But what this does, that brings those multi earners together in one household and then all of a sudden each person's making 20 or 30 or $40,000 a year, which if you look at statistically is not enough to afford new housing. Right. You know, you see the stats where, oh, it takes $37 an hour wages to afford an average rental unit in Los Angeles county, right? Well, I go, that's true if you're a single earner, but if you have a wife and a husband and an adult child and mother in law that all generate incomes, well, all of a sudden those families are making 120,000 a year. Right. You know, for some people they go, gosh, $120,000 is not much. Right. If specific specifically or particularly if you have high rent. But if you think about how these families are able to survive, this economic sharing is what produces their success. In fact, it allows them to afford better housing than they would otherwise. So we serve that family group, we serve that multi earner family group and we serve them in a marketplace. You know, the development industry is not serving family renters. Right. In any way at all. I mean there's a few people like us in different markets that are building their capacity to deliver this sort of middle income housing. But it's really under supplied and huge demand. And part of the reason it's huge demand is because these are middle income families that if they had the choice they would upgrade in housing if they had it available. But if you're a family of six, you can't find anything new. There's, you know, the new stuff is the studio in downtown LA or Irvine. Right. And of course that's not even, they don't even think of it. Right. It's just not even a fit. And so usually they would go to, you know, usually what we do is we'll pull in families out of two units. They may be living in one unit, next door is the rest of the family or they live in this unit and a block down. The rest of family lives in the other unit. There's still economic sharing, they're still sharing the incomes and expenses across the group, the family group. All we do is pull them out of those two units and we put them into this five bedroom, four bath townhouse unit.

And are you getting government subsidy to build and are the tenants getting subsidy?

This is part of the uniqueness of UTH is that we're building a middle income, moderate income workforce housing model and we only use private capital. So any normal equity, debt and equity structures that you would see in any market. Right. Deal. We're using the same logic, the same capital stack the Same mix of debt and equity and producing competitive returns to the equity investors. But we're doing it in this middle income space and we're not using subsidy. Now the only caveat I'll say is that in California, sometimes we'll give away 10 or 15% of the units as inclusionary. We'll make them a covenant affordable housing unit and we trade that for getting better zoning. So let's say the setback is 30ft in the front yard and we think we can get an extra unit if we can reduce that. So we'll go, hey, we'll give you 10% of the units is affordable. Give me that smaller setback, give me less parking requirements, give me less open space. I mean, we still want to build a good price product. But some cities have these really crazy, you know, parking standards. Particularly think about it for a five bedroom unit. A lot of cities are like, yeah, you know, one per bedroom and plus two and you know, all enclosed. And you know, some cities have these really like aggressive, you know, aggressively high parking standards. So we can reduce that by giving this inclusionary. So, but it's not, the deals are not incumbent upon that. We just do that as a move to make the deal better. We do accept Section 8 tenants in those affordable housing units. So that's another move we can make that we can actually have the affordable unit and put a Section 8 tenant in there. So we actually sort of doing, you know, double duty. You know, we will, I think in the future probably have some projects that will have subsidy, but again, only for that inclusionary. So hey, like we've got an 85 unit project, El Monte. They're not requiring affordable. But if we were, we'd say, hey, we'll give you 10%. Let's say we give you nine or 10 units of affordable and we want these zoning standard reductions like we normally get. But I might approach the city and say, hey, look, I'll even more deeply restrict the rent, but I need money from you for these units specifically. But it's only on that 9 or 10 units versus the whole 85 as an example.

Yes, that all makes a lot of sense. I would imagine to make these projects feasible, that you also have to really be able to control construction costs. So have you, you know, I don't know if you're vertically integrated or how you've been able to, you know, develop, deliver this type of construction at a certain cost. I mean, are you looking at, you know, there's a lot of momentum behind modular housing. Are you thinking about how to Deliver more volume and you know.

Yeah, all the above. Yeah, so you're exactly right. So remember before I described the reduction of complexity, Right. Like if you look at complexity theory and you know, look at the things the way that you mitigate or reduce complexity. So the UTH program really benefits from a feasibility and yield production through multiple different moves that we make. So one is we buy less expensive land because we're going into working class neighborhoods where land is less expensive and not highly competed for. Right. We're eliminating the entitlement phase so we can compress the timeline of time it takes to get from, you know, my escrow to my, to my, you know, permit issuance. I can shrink that time by like in some cases, years. Right. We build a specific type of unit, five bedroom, four bath, with the garage on the ground floor. And we do that unit over and over and over again. I mean, you said cookie cutter before. I don't, I don't have any issue with that terminology. We call it production housing. But it's like the home builders would, right? They got plan A, B and C and that's all they build. And I know today sometimes people are doing mass customization, but in the old school home building model, it's like, hey, I got one plan, right? You know, Henry Ford, you can have any color you want as long as it's black. You know, that kind of thinking. But also there's other things. So the five bedroom, four bath model itself produces a rent level that basically produces more income per unit than you would in a standard unit, but at a lower cost of delivery. Right. If you think about bedroom space and construction and development, your hallways and your bedrooms are your cheapest space to build. So we have five bedrooms, four baths with one kitchen. Right. And yeah, we have four bathrooms, but we make moves to reduce that. But we're using the same spec over and over again. So. So there's that. We are vertically integrated. So we have all of our construction operations are in house and we are structured like a home builder is. So home builders don't use third party GCs or traditionally they don't. At least the big publics don't. They're gonna go direct to the subcontract markets. They're gonna be their, you know, Kauffman Broad or Beezer Toll or Lennar. It's their superintendent, their project manager. They're directly contracting with the subs. Right. So they go direct to the subcontract markets to buy. That's exactly what we do. Of course, not at that Scale, but we cut out the middleman. So we don't have a GC that charges overhead and profit on our deals. We do have costs built into our construction budgets to cover field staff, project managers and super tenants, but that's just a cost. There's no profit center there. But the biggest thing really is that we have such direct control and access with the subcontracts that we really are able to really squeeze out every possible efficiency in that contractual chain. So we're using the same spec over and over again. Right. So there's never any doubt when that framer or that foundation guy or the, you know, the appliance installer or, you know, cabinet guy, Right. It's the same spec over and over again. You know, it's a nice spec, it's a good apartment grade spec. Right. It's certainly competitive with, you know, most of your, you know, newer, not luxury, but you know, if you had a minus new product, we would be competitive with that as far as finishes are concerned. But it's the practices and the systems inside that where we never have any doubt what mechanical system are we speccing on all future projects. And it's of course researched and you know, the most effective for California codes, which, you know, California's crazy codes, you know, a lot of built in cost into the systems that we have to install, but we work within that. So the bottom line answer is that it's all these things together. But I would really put the main thing is it's this rent production as a function of the unit size. So our units on average rent between 3,500 and 3,800 today, depending on what city you're in. And we're basically able to do that at a very cost effective rate on a per unit or per square foot basis. And that goes directly to the bottom line, right? So that flows into we're getting high whole dollar rents on a per unit basis. And the per unit basis of cost is less than you might have. And the same, I mean, think about it, if you build a studio or one bedroom, you got the same kitchen we do, and you're generating maybe one third the rent. Right. And that, you know, that's not the only factor inside that formula. But if you can think about, in fact, so a colleague of mine, a guy named Richard Green, he's the executive director of the USC Lust center, he and I talked about this and he had an interesting observation. He goes, you're not doing density in units, you're doing density in bedrooms, so you have less units on a dwelling unit per acre, but you're getting a lot of bedrooms and therefore occupancy and rent generation inside of that unit. And when he said that, I was like, that's exactly right. That was actually really smart observation of his. So we're densifying in a different way.

Amazing. So, Scott, this has been incredible. I mean, you really have locked into something with a tremendous need and you figured out a way to really answer it and really perfected the business. So we really appreciate your sharing your story. We only have a couple minutes left. So for my parting question and usually ask, what advice would you give to the aspiring investor? But I'll tell you, I've been speaking to a lot of college students lately who are getting really nervous, especially the seniors. And look, it's glitzy. Everyone wants to go to New York or LA and they want to work in one of the big firms. And guess what? Most of them aren't hiring. And so they're saying, james, what do I do? What advice? And so if you cover a lot of geography. So if I was a college student, a senior, and let's say you like my resume, what I've done, and I said, you know, Scott, I'm willing to come to your office. I've got a car, I'll drive anywhere you want me to. Just go stake out sites and I will work tirelessly around the clock to bring you opportunities. I just want to learn. I just want an opportunity. What would you say to that?

I would say yes. In fact, I do, all the time. And you know, not to be cute about it, but a couple, couple different answers. One is if people go to my LinkedIn profile. So just go on to LinkedIn and look for Scott Choppin. C H O P P I N in the. There's a series of articles that I wrote that are listed on my profile, and one of them is six ways to build your real estate development career. I would encourage those people you just described go look at that. And you know, there's several things inside there, but one of them is get a mentor. Learn from the people that you work with. Right. Which we talked about before. But basically one of them is, you know, is create an internship. You know, and I say get an internship, but you are like saying it the right way, which is you have to create the opportunity. So, you know, I go, hey, even if you have to go get the internship and work for free, do it. And I'll give you a couple examples that like how this pays off. So I've had Two people that have worked for me in different internship capacities. One guy's a guy named Mike Lanza. And he ended up being with me for about a year, unpaid. When it came time for him to make his next career move, we didn't have any openings that were fit for him. And so he went off and did a few other things. But he and I spoke about a month ago, and he's actually used what he learned with us to leverage himself into. He's now in the master's degree program for urban planning at USC at their Price School, which is where the urban planning and real estate development live. And then he just got a job at a nonprofit affordable housing developer. And we talked about it, and he said to me, he goes, scott, you know, I didn't know it at the time, but what all you taught me, working for free, which was sort of a difficult proposition at the time for income generation, he goes, that's paid off so much. In fact, he goes. He said, scott, I think you should go create a program to, like, teach people this, like, as a. Whatever, a side business. And we may do that. But he said the value he got out of that was huge. And that's not me to say, pat myself on the back, but that's to encourage people who would look at working for free as a very difficult prospect. Right. To undertake. And as long as you do the right research and make the right offer to the right person who has a willingness to transact right for free time and knowledge acquisition, it will pay off way more than you can ever know, and probably in ways that you can't anticipate or. Or know when you're doing it. Right. If you don't know anything about the real estate development business, the stuff I would teach you, you go, oh, good, follow up. You know, use our project management system. Take good notes, follow up like crazy. Like, drive people insane on follow up. And then they go, do it. And they go, oh, man, that was like, so good. I didn't even think to do that. Right. It's. It's beyond real estate development. As you know, in real estate is something that's very difficult. In fact, it's practically impossible to learn in a classroom environment, to learn at a school. And, you know, there's lots of good schools. You know, I'm involved heavily with USC in the real estate development program. But, you know, like, true, you know, in the field, learning and going through the hard stuff, where it's like, man, that's a pain in the butt. I gotta call that guy an Eight time like that sucks, man. I go, yeah, it does. But I believe me, if you do it and you're successfully drive that thing forward, one, I'm gonna love you because I need that stuff done. But two, you're gonna learn what it really takes in the real world. Like when, you know, I tell people, when you go be a real estate developer on your own, these things that we're teaching you, maybe it won't show up now, but you're going to look back and you go, wow, that was great that we were able to learn that. And I said, I know this because people taught me. I learned it and I'm using it today. Right? You know, Mike Costa and those guys that I mentioned at kb. And then the other one is actually a guy named Francis Moreno who came, you know, approached me through Biggerpockets, actually reached out to me through Biggerpockets and made an offer and he actually had a deal that he had put together amazingly, got a whole development deal done with no background in development, general plan, amendment, rezone, heavy lift, entitlements, found the money, knew nothing about real estate development. So he brought the deal to me and we're now in a joint venture together. But also I said, hey, part of the joint venture is you can work with us on your own deal and other deals. And he's basically working on a stipend and he basically has worked his way into here very soon a full time position with us and also the ability to participate in deals that we put together, not even deals that he found, but he's like, hey, I raised 100k from other people, I want to put that money into this next deal. I go, great, do that. You know, natural entrepreneur, was out executing on his own, had really no mentor. And then we were able to come together and I basically have been able to amplify what he knows and he's not done. He's got probably a handful of more years of project management to do. But even the last year, year and a half that he's been with us, he's learned a ton. In fact, to the point where at the beginning of one of our jobs, he was meeting with the building inspector. That was part of his job to go out in the field and make sure that subs are doing their stuff and, you know, getting their inspections done. And a year later, that same inspector, we're finishing a deal and he commented to Francis, he goes, hey dude, you've really learned a lot, right? You're not the same guy who was the greenhorn at the very beginning of it. And that showed up for Francis and that was noteworthy for me because that's the learning that you do in real estate development and in the field is so natural, but a pain in the ass by the way too, that you don't realize necessarily that you even carry that with you, that you embody that knowledge until like comes time to do something, then you go, oh, now I know how to do it. Like, I don't have to ask Scott how to do this or ask the, you know, the head project manager, you know, to do that kind of stuff or you know, whoever that you might ask. So I would encourage people to do that. There's a lot of learning. You can do both for free, but also like if you are willing to trade your time, your time at no cost to the developer. I mean I even in the article I go, hey, go search for real estate developers in your local town. You don't have to go to the big city. In fact, I had a guy who approached me, he was based in Ohio and he said, should I move to Cincinnati or Cleveland to go find the big development? I go, no, find your, you know, look for somebody in the, you know, 10 miles around where you live and make them an offer. I don't think I ever heard back from that guy. But you don't need to work for the biggest shop. In fact, I'll say all in with this. I think the smaller company you work for, the better education you're going to get because there's less hands, less layers, less bureaucracy. If you can work for the principal directly like Mike and Francis have done with me, that's going to be, you want to be learning from the most seasoned guy on the team, you know, if you can make the right offer to them.

Scott, this was awesome, incredible advice and I really appreciate especially those two specific examples. I mean you got really specific, which is super helpful for our listeners. So thank you again so much for joining us today.

All right, James, thanks for the invite. Glad to be here.

Absolutely. This is James Nelson, your host of Real Estate Investing Live from New York.

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Thank you for tuning in this week to Real Estate Investing Live from New York. Please join your host, James Nelson for another program next Tuesday at 7pm in New York, 4pm Pacific Time on the Voice America Business Channel. All shows are rebroadcast Wednesday mornings at 7:00am Eastern Time, 4:00pm Pacific Time, as well as all always on Demand. We'll talk again next week.