When Does the Business Case Start to Go To Building?

When does the business case become we should start building this stuff? Because everybody teaches it's cheaper to buy than build. So where did all this inventory come from?

So getting into development violates like one of the most important rules in real estate. It doesn't cash flow. And then it violates the next most important rule, buy below replacement cost. Can't build below replacement cost. Turns out it is the cost. So that's pretty bad. Right. So when do you get into it? You get into it after you have built a portfolio of buying assets below replacement costs. For those who don't understand why that's important, if I go buy a 10-plex for $1 million and it costs $1.5 million to build it, I can charge less rent than the people that are going to build the similar product. And so I can outcompete any new competition. No one can steal my tenant base unless my tenant base wants to pay more rent. In new development, I'm at whatever return works for me. Like, I can't really afford to drop down to the same price as everybody else. So I'm going to hold out a little longer. Someone else could go build the same 7-plex next to my 7 and steal my tenants. We're building it at the same cost. The reason we talk about buying below replacement cost is if you're going to violate some rules. So when do you get into it? When you can buy a project that has land already attached to where you can expand the property.

Okay.

That's where it's really going to make sense for your first few deals.