Cottage Clusters & Creative Real Estate with Developer Kelsey LPJ

Cottage clusters are just, it's a really decent niche to be in right now because of how quickly you can get through the permitting process and how many units you can get. I was just talking to an investor in Kaiser and he has a whole nother restriction compared to my city. So you have to look at all of that before you start looking for land. Mm-hmm. Don't be afraid to take on like a land use partner cuz they could take a lot of burden off of you from the beginning. You don't have to learn everything. You just have to be able to afford to pay the person that's already learned it.

Welcome to the She's Got Assets Real Estate Investing Podcast. I'm the host, Shona Leppis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience. From how to find off-market deals to creative financing to long-term and midterm rentals, we aim to educate and inspire others to gain financial freedom and generational wealth through real estate. And as always, please subscribe so you never miss an episode. We really appreciate reviews. It helps others find us. And it just helps us get found. Welcome to She's Got Assets. It's a livestream and a podcast. It's like everything. I have a really special guest on, Kelsey L. PJ. We met at an REI event in Salem and we just connected. She had a great story. And so Kelsey, thank you for taking the time. If you wanna do a short intro and then we'll dive into the topic. We're talking cottage clusters. So really fun topic.

Hi everyone. I'm Kelsey L. PJ. I'm located in Salem. I got started when I was really a kid with my parents doing their investing thing during the 2008 crash. But for myself, I've been an investor since I was 19. I did a one-bedroom remodel in a shell of a commercial building, a partner with my wonderful parents, with another partner as well. And I held that as a long-term rental for a contract amount of years. Now I am working on a 15-unit cottage cluster out in Monmouth and pretty excited to be here. So thank you for having me.

Yeah. Thanks for coming on. I love that backstory. I think it's helpful when your parents are in the industry. Mine were too, and it's kind of in our blood a little bit, right? For a lot of people and they haven't done that. So it's helpful. Okay.

Yeah.

I, I love that you're working on a cottage cluster. I don't know a lot about it. I feel like it's the latest trendiest thing and I know there's a lot that goes into it. So I'd love to hear maybe the origin story, if we can say that, of if this was always a goal or how you— was it the best use of the property? All that good stuff.

It doesn't start out with cottage cluster, actually. It started out with a property that was too good to pass up. It was almost half an acre, two blocks from Western Oregon University, and that had an older 1890s home on it. So that was really the origin. I walked the property, it looked like squatters had been there. It was full of about 3 truckloads of just housing material that needed to go to the dump. And I was like, absolutely, I'm not gonna buy this. But it became too much of a good deal and I couldn't make the numbers not work. So I talked to a private money lender and my intention was to do a duplex out of the house and put a fourplex in the back. After about a year of doing the entitlement process and many different processes that happened throughout living in the house as well at that time, I realized there wasn't really very much value left to it. There was a, the living room, I used to call it a trampoline when you walked through it, the whole living room would bounce and it was very windy cuz it was balloon framing from 1890 and wasn't insulated at all. It— that's the true origin behind it. And then after some time entitling it and then not penciling and going through the struggles of a new developer, getting my legs under me, Cottage Cluster was then— that the land use became available basically for my area. And so Monmouth, in April of '24, That's correct. It might have been '23. They started to allow a cottage cluster designation, and that basically meant that I could get up to 22 units based on how many— the 0.45 square— 0.45 of an acre that my lot was would allow up to 22 units if I could make that work with parking. So that's the shorter but long version of its origin from what was gonna be a duplex to now 15 units.

That's quite a process. I, and I think sometimes you have to sit with a prob— at least when I'm doing a rehab, I have to sit with it and it, the things come to light. So I, it's different. But yeah, sometimes we don't. And I think underscoring that you, the numbers made sense. So whatever direction, I think you, I'm sure it sounds like you were very strategic in knowing there was something there, even though it evolved.

Absolutely. Yeah. I had a lot of amazing people guiding me along the way. My original hard money broker, Bob Harris was his name. He's passed away a couple of August ago. He was like, why wouldn't you just tear the house down and build another fourplex? And I was just like, my parents have a love for old homes. I think I would break their heart. There was part of that. And to me that was terrifying, but also exciting. So that's when I started the process of, let me check out land use and what I'm allowed to do here. It's residential high, which was another reason I purchased it. I could put more units on that lot than I could a block away. So it was a long process of lots of people teaching me things that I didn't know I needed until cottage cluster became the highest and best use option because I had all this information prepared already and it made the most sense.

Yeah. I had a coach and he was really, I mean, I think knowing the zoning and sometimes it's not obvious, right? You look at it and you see a lot and, but it's so important to understand that. Was that intimidating to figure out or you just go to the county and march in there and say, I've got this land or how did you, that's a lot to untangle or sounds like you knew what you were doing, but.

I have had some experience with the city already with my one bedroom. I, that's in located in Monmouth as well, but a lot of that was my dad helping me through that process. So this was just solely on my own. I did a lot of Googling and calling the city inspector or the building official and being like, help me, guide me. What question do I need to ask? What questions am I not asking that I should be asking? I would always ask that. Because they would always be like, I think you've asked all of them, but here's some extra advice. And I'm like, perfect, learn something new. The city public works, David Carr, he, I think, I don't think I could have done the whole project without him because any question I ever had, even if it was a very silly, just go look on your city code, he would answer it rather than telling me to go to the code and spending an hour and figuring all of that out. So he was really helpful and I'm very thankful for that. I just, it really was one of those things where the land almost knew what it wanted to be and I just needed to learn the process or wait for a cottage cluster to be approved because every step along the way really was leading me to this.

And I think that's true for a lot of projects, right? Because sometimes you have to get in there to figure out the best use of it and that There's, and having multiple exits, right? That's always the goal, I think, with any kind of real estate, right? Is flip, buy and hold. Like, because sometimes they don't work out. Yeah. Sure. I love that you asked all those questions. Would you tell someone like, hey, just ask the questions and just keep asking? Because I think that sometimes people are afraid to ask the dumb question, but if you don't ask.

Yeah. That's the absolute best thing that's ever worked for me in college, in development so far. I'm not afraid to ask a thousand questions and/or ask as many as it takes until I get the answer I'm looking for and/or the direction I need to go in. Suzanne Duffner, who was a city planner and now she's in a different position. I think she's the city manager. She was also extremely helpful. She helped me through the whole process of The code is very specific and sometimes logic doesn't always make sense, and it's always up to how the city itself interprets the code rather than what it actually says. And so there was a point where I was like, oh, I'm only going to get 11 units. That doesn't really make sense. I might as well have a different configuration. But she was like, actually, this is how we interpret the code in the city during a pre-application meeting. And I was like, oh, interesting. Okay. So it's not a unit has to be so many feet away from the courtyard. It's actually if a unit is that many feet away from a courtyard, it has to be facing it. So that made it so I could get my 4 more units and have 15 total, which I think helps pencil the project overall.

Yeah, that's a game changer in any form. I imagine with cash flow and just underwriting it, that's, yeah. Okay, so you went through all of that. Like how— I feel like when I've heard about development, it just, it's a very long timeline. So is this like longer than you expected or is that typical? Are you on track with what's trad— I don't know a lot about development again, so I'm just kind of curious.

It's, it can be a very long process. It can be 6 months to 18 months to 24 months depending on the scale of the project. This one took took me, if you think of it overall, from when I purchased property to being actually permitted, it's a lot longer because I entitled it twice. I entitled it for 3 duplexes and single family. And then when that didn't pencil after construction spikes, um, materials got crazy expensive. That's when I went at the beginning of last year about this time and decided, okay, I had coffee with another investor. He was like, why didn't you just re-entitle it into something else? And I was like, I don't wanna spend all that money and time again. And I finally realized that there wasn't another option cuz materials aren't going down. This is just the way it's gonna be. And then that's when I started. So about a year to, I think that was technically 10 months to the beginning of the entitlement. Granted, some of the process was already done. Some of my SIBL was already predone. I just needed to redesign for a different use of 15 rather than 7. But I think it can take a lot longer. I expect my next development is going to take closer to the 18 to 24 months.

Okay. Yeah. That's quite a process. I, even the word entitlement sounds really, very complicated. Yeah. Nicole is asking, she's in Atlanta. If anyone has questions, like chime in. Okay. So you, so do you think looking back, like I will people can move on, but do you think that you're glad that it was this thorough of a process and that you're happier that you stuck with it and found the best solution for the land, or do you wish it would've been easier? If I can ask that.

I'm always, I'd always choose to suffer if that doesn't sound terrible, but I would rather learn something and struggle. And I'd always choose to struggle rather than the easy option because If it would've been easy and I would've got what I really wanted, which was my loan in '22 to do the construction for the 7 units, then I would be making half of my NOI. So ultimately this is highest and best use because I get the most units and the square footage is 500 square feet more than what I would've been building for 7 units. So ultimately it's a much better use. I had to struggle to get here and I had to finally admit that I needed to start the process over, but it was worth it.

That, yeah, I think a lot of things are like that. If you get through the hard and then it's just like the rainbows are there.

Yeah.

And they make the best stories when things are really difficult. Okay. But I, I also wanna emphasize, like, it sounds like you had really good mentors and guides and you just weren't afraid to ask questions, so. There's people, there's community forever in these situations. That's how we get through them. Okay. So I have to, we'll move on. When we're looking at land, like you said, we're always looking for exit strategies, highest and best use. If someone's interested in this model, is it like the size of the plot or what are like the key things that you look for when you're like running through what are my exits? What's the best use for it?

If I'm thinking highest and best use, I would be considering First of all, if there's a parking requirement in for the land. So where I'm at, there is a 1:1. So one unit needs to have one parking space. I could apply for a variance for that, but I didn't wanna waste the extra time potentially.

Hmm.

Um, so that would be the first thing I would wanna look at if I was considering specifically cottage cluster. I really think that 2-bedroom, 1-bath or 2-bedroom, 2-bath is the sweet spot for development because it appraises really well compared to a 3 or 4-bedroom or a 1-bedroom. And the square footage is a lot less than a 3 and 4-bedroom. That compared to, I guess that's not really answering the question, but that's what I would be considering. If I can get how many 2-bedrooms on this one lot. I am required to have a certain size of courtyard. That's different no matter where you are at. Mine's a 15-foot steps to steps between each unit is courtyard or bigger. And then also a certain number of square footage. So if I were to be looking for land to do another cottage cluster, I guess I'll change the question a little bit. Or to do this specific type of development, I would be trying to find piece of land with a home that's bringing the value of the land down because it's in such disrepair. So I can get the land cheaper and then I would do a burn to learn like I did. And I'd want at least 0.4 or larger of a lot. And then within walking distance or close, it has to be close enough to either a bus line, a school, a hospital, something of that adding value, just like you would look for a midterm. More. So did I answer the question enough?

Yeah, totally. That, I think just knowing, and I imagine you knew that you're like knowing if there's like housing is an issue, right? Obviously this is, would you, is this considered affordable housing or where does this fall on the spectrum? The city's encouraging it, right? Because housing is such an issue. It's very expensive, all that stuff.

The city is excited that the residential high lot will be at the highest use, like the most units we can fit. On that lot because it is 2 blocks from the college. So it's 2 blocks from Western Oregon University's like starting of their college. And then that whole college is, I don't know, half mile in diameter or something like that. But they're excited that it's not gonna be 2 duplexes or something of that nature. 'Cause we do have a reduction in available housing out there. So it is at market. It is what my appraisal said I should. What I will be renting for is what the appraisal said I should be renting for, which is market rather than more of the affordable side.

Okay. And are you considering different, like long-term, midterm, or just straight up long-term? What's your—

So the city would require me if I do any short-term to do applications and that whole process. I've had to, they asked me along the way many times if I had been considering doing that and I have no intentions to. I do think that I will keep one unit to be a midterm because I'm right between Sanam and Salem Health. So it could be a really decent spot for travel nurses. Mm-hmm. And then some of the units, I will have them furnished for international students. So we do get at the university, Western Oregon University, the university two blocks away, it's six-month visits from a university that's out east and then universities in Asia that they do an exchange program for a short period of time rather than a full year.

Okay. So when you're looking at those numbers, like the long-term versus the furnished option, which is more flexible, how much over are you like thinking? I'm just curious for reference.

Like per unit?

Yeah.

For the furnished, it would just be for the longer-term midterm, like the 6-month range, it would be about $200 more a month. I'm not trying to go too much.

Okay.

I'm not a midterm rental investor, so that might be more something you should give me advice on. But my intention is to try to keep them relatively realistic. So a couple hundred dollars more. And then for the The nurse specifically, that would be by contract. I would probably be listing them maybe $300 more.

Okay. Yeah, we can certainly talk about that. It's definitely a premium because it's furnished and utilities are included and all that stuff. But okay. So we talked about the development process. So yeah, I'm curious. You mentioned a couple of times the location of it, like who is your kind of, it sounds like it's market. It's not, it's not a low-income housing. So are you thinking about your end user or end tenant when you're developing this and designing it?

Yes. So one of my, the private money lender that initially lended on the property, and then again for my burn to learn, he recommended, he was actually the one that was like, keep in that 2-bedroom area cuz that's a good loanability as well as value later. But he was very adamant, you need to nail down your demographic, like who are you renting to so neatly so that you specifically know. That's easy to do in Monmouth because it's very much college town in that neighborhood. Professors, it's either students and at the very most random, maybe some young professionals. You might get a grandma or two in every other house or what have you, but my intention from the beginning when I bought it was student housing, but not student housing where it was like low income because I obviously, I could have gone the grant route and done grants for low income housing or what have you if I were going to do that. But there is a demand right now for new build, not right next to college. Cause there was some new builds about 5 years ago, but they're 3 stories, they're 5 bedrooms. They're right across the street from the college stadium. So it's loud. Hmm. And young professionals. I've already like somebody at the city who works at the front, she emailed me and was like, I'm interested in renting one. I need to know more. So young professionals need somewhere that they can live that doesn't feel like a frat house. Yeah. There's a huge demand for that cuz most things are built in the '60s or the '40s or as old as 1890, like my long-term rental that's around the corner.

So, so are you taking that into account, like with your finishes and stuff too? Or is it like builder grade? Cause I feel like a lot of builder stuff is vanilla. It's not that interest— it's not visually that interesting to me. It's Okay. Home typical stuff. Are you doing anything creative on that side of it? I have to ask.

Yes. Oh, mostly because I can't do builder grade. I think it's just, it's hard for me to envision that. And I do have a certain aesthetic that I wanted to go with. Um, it's very much that Scandinavian, Japanese-inspired minimalism. My, my intention was to have it very clean and minimal so that repairs later could be less. But also I do have a specific client that will be coming to per— to rent each of these. Each tenant will be a very specific expectation. It's not somebody like, oh, it's a little bit too expensive for me and have no taste in architecture to a certain extent. Obviously we're not going to turn somebody away, but we're also not going to be catering to somebody who's— there's a, I guess the best example is in Corvallis, which is 20 minutes away from Monmouth, 25, depending on which part of Corvallis you're going to. College town. There's this gigantic apartment complex that came out the same time I was doing the one-bedroom unit. And their rents were $200, $300 above market. And they were basically a bedroom with a common showers and common kitchen space. And it was just, they were appealing to this aesthetic of college kids having this party apartment complex basically.

Mm-hmm.

With the pool and the pool tables and all of these things. And they were able to do that successfully because they knew their clientele. And so that's What I'm trying to reencapsulate minus the party, more higher end without having to get too expensive, obviously. So yeah, solid surface. We'll have stainless steel appliances. The sink will be a little bit deeper.

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All right. Back to the show. It's not going to be one of those short 4-inch stainless steel cabinets. Will be a little bit more custom than builder grade.

Yeah, that's really, I think that stuff really does attract the higher caliber and people want to live in nice places. Like we're humans and I imagine it adds to the budget, but probably isn't as much as the Was that like a big decision, like going with a more thoughtful approach than the generic, like builder-grade stuff?

I, it was more of a natural decision. It wasn't something I really thought of. It was more just, this is happening. I didn't even consider budgeting out for the builder-grade only because I knew I wouldn't, like in my one-bedroom unit that I did back in 2014, I had a very specific expectation on It's going to be tile. It's not going to be linoleum. I want a shower door, not a shower curtain. There will be some things that I'm going to give up just for ease of use. Like instead of doing an entire tile shower, there will be a shower pan just because that's going to be longevity-wise, but there will be a custom vanity rather than a Home Depot vanity that So now we're going down the design rabbit hole.

I'm so curious. Do you— is every— is it like 15 of one vanity? Are you varying them up with a little bit of different flavor? I'm just like, design is my passion.

So now, now, yeah. And that's also part of it where I'm just— I get to geek out and do the fun shopping part of it.

Yeah.

I initially, when I first started with the 7-unit, I was going to have each of them be a little bit different. Like flooring would be different, vanities, countertops, all of that, even down to the faucets. Now it's gonna be like a mixture. They will look uniform to a certain extent on the outside. Mm-hmm. On the interior, there will be a countertop difference in the kitchens. The vanities will be the same. Most of the faucets and hardware and all of that will be all the same. The main difference will be flooring will be different. I'm gonna have dark flooring or light flooring depending on the unit. It's gonna be LVP though. And then upstairs in the bathroom, I think that there was, oh, there's a mirror difference. So some of them have the big mirror that's got the LED light shining from behind it. And some of them, like one circular and one square. So, okay, there'll be a slight difference. So somebody who likes the more traditional aesthetic might lean towards the ones that's more of the dark floor with the square based on the finish. If I really look at the look, it's not really a lookbook or a look sheet, that's a little bit leaning more towards traditional rather than the Scandinavian minimalistic that I'm doing in the Okay. Lighter flooring.

Are you like naming them like this model or is that more internal?

Just curious. No, for ease of, for speed, all of the units needed to be on the permit side identical.

Mm-hmm.

Because otherwise it would've made an already complicated process complicated. So they had to sit down and enter 15 permits all at once and we already had some issues with that process in a small city dealing with Xcel isn't always easy. And yeah, we just had some hiccups where there was some additional, like $40-some thousand of additional fees that got tacked on accident. So always check your permits no matter what it is you're doing, because sometimes there's an oops fee for $100 here or $79 there, or 100 of the $79 ones. So it's $7,900 on this one permit. Yeah. But they had to all be identical. They're just laid out on the property in a different way. So some of them are going north-south and some of them are going east-west.

That's so interesting. I never would've thought about that at scale, right? That many units. Yeah. That adds up. Okay. Quick question. Nicola is asking the square footage for the 2-1, right? That's the layout.

I have 13 2-bedroom, 1-baths and 2 1-bedroom, 1-baths. So they're about, like the rentable square footage ends up about just under 600, but total buildable square footage, um, is like 650. Okay.

So that's comfortable. Yeah. That's cozy. But I think design can make such a difference in a small space too, right?

Yeah.

I have to back up a little bit. I just wanted you to talk about your planned burn. I, we were skipping around a little bit, but I think that's a really cool story. So you had this land with this like house falling apart. How did you get rid of that house?

We had, it was an 1890 home on the lot and there was no value to it. And basically you can go to your local fire department and somebody had recommended it to me. I think it was I'm not entirely sure who, but it was somebody through the fire department because I was just like, I don't know what to do with this besides demo it. And so you go to them and they'll give you a packet and it's basically just like filling out any application. You go through the whole process. So you have to satisfy DEQ, make sure that you get your asbestos and lead testing. You have to abate any issues, do that whole process properly. And then after you're cleared for that, you need a letter to all of your neighbors, and then you also need a letter from your bank to the fire department saying that they have permission to burn. And then basically they burn the house down and use it as a training exercise. So it's called Burn to Learn because they use it in the— before May is usually what they hope to do ours. Ended up a little bit into May, but it was misty that day, so it was perfect. This helps so that you can train recruits who have never been in a fire situation, or I think a few people actually were able to get their final certification through the process because they happened to have so many burn experience, burn houses as experience. They spent, I wanna say it was, uh, And they did so many different sets. So they took the windows out, boarded them up, made sure it was safe for the whole community. We had a car that was parked in the front that was abandoned there, and we tried for months to get it to go away and we couldn't in time. So they had to wet a tarp and leave that over front of it. And it was like 15, 20 feet from the house during the burn. Nothing happened to it. It was perfect condition after. I think it ended up being like a stolen car or something crazy like that. But they put hay or straw in 8 different parts of the house, and then they would have— the chief would go in and he'd light it, and then they'd have the recruits go in. It was a learning exercise, but ultimately for me it was a write-off because I can have the house appraised and use that to write off on taxes or what have you. That's— I have my tax accountant do that. I don't know how that works, to be honest. It was just mentioned that we could do it. And then it also leaves us with about 5 to 20% of material left over compared to what we would be required to demolish and then take to the dump. So another advice I would give though is if it's an older home and I don't know the restrictions, there are people that will come out and disassemble and/or demo your house for you for a very cheap to almost seemingly free amount. So if I wouldn't have gone that route, I could have had a guy come out and he would've for $2,000 to $5,000 disassembled the entire house and just left me with probably about the same amount of debris that the fire department did. Mm-hmm. Because he takes all the lumber, the old lumber, and sells it afterwards. And that's a whole business model. He did that for me on a house in Independence. Where it was just basically borderline condemned from the city. And so we had to demo it. But now that I know, I should have done a burn to learn because it's a better opportunity for the city to have— I would much rather have my firefighters that are going to come and save my house or me have some experience. They spent 6 hours doing like 8 different set pieces of start the fire, put out the fire. And the burn went exactly as planned because he had intended for each section to burn a certain way and then have it go up to the top. And then there's ultimately like, if it gets into the roof vents and what have you, then they would just control the burn the rest of the way. So I think they missed out on 2 of the practice burns, but they got enough out of it and it worked out really well.

So that's super cool. I never would've thought about that, but it's really community, giving back a little better, that opportunity. Was it like a little nerve-wracking, like seeing it go up in flames?

I thought it'd be— so that was the house that I lived in when I brought my daughter home for the, from the hospital for my first baby. I was like, oh my gosh. And I don't know if I can watch, but because I was going through the process and I'm the property owner, they actually let me walk through the house before they did it, and it was just no emotion left. Like, it hadn't been our home for 2 years or something at that point, and it didn't feel— I was like, oh, she took her first steps here, or what. I didn't feel any of that. It was just exciting. And when I saw it finally being fully engulfed in flames, I— it was just like, wow, this is such a cool opportunity to see to be able to provide to the fire department. And also we're saving a decent amount of money, so this is really great.

Total win-win, right? Yeah. And the community piece of it, okay, that's just symbolic too, is like something new is coming out of the fire department.

Yeah, like Phoenix rising from the ashes, right?

Okay, so I have to— that made me think of like the community, like how are the neighbors, like how do they feel about cottage cluster? Is there, are they pro or were there concerns? Be just any kind of change I think can be difficult for people. So I'm curious what your feedback was.

So far, really quite good. Um, I think a lot of the neighbors are still unsure of what's going in there because right now it's just that messy foundation portion and we're getting to framing in the next week or so. But my one neighbor across the street, he was just like, oh, thank goodness it's not another apartment building. Like he— right next door we have these long rows built in the '60s that are two, two rows of 8-unit apartment buildings and a parking lot in between. And it's not really— there's not much of an aesthetic there, or it's just highest and best use in the '60s. So it's It is what you would expect to see, plain brick of a building. So he was saying how thankful he was that it was going to have a little bit more character because he does live kitty corner from the building and he gets to look at it every day. He is also a contractor, so he's used to being around construction, so he doesn't mind. But most of the people in the community have been very supportive through the whole process before it was going to be the 7-unit or Now when it's the 15-unit, I don't know that I've had anybody be negative about it. I think that we're all our own worst critic in our head sometimes. So what we're like, oh, or the city, they're gonna hate this and that. That's, I think that's probably worst case scenario.

Yeah. And the aesthetic bit, I guess my background, I love design and I feel like the aesthetic of walking by that feels more, I don't wanna say community oriented, but just I get this picture of this lovely little cottage. I know that's like crazy, but that's versus like in our neighborhood we have these new developments and they're just, one is this behemoth and there's no like definition. Another one is done a lot more elegantly and it's just so much more visually appealing. So I don't know if that's, I feel like it's just more of a neighborhood thing.

Yeah, in my mind I'm thinking there's always that first at spring break, because I went to school at Western Oregon University, where it's beautiful outside and then everyone just flocks to the park that's right there in the city. Longest city park. But in my mind, instead of them doing that, it's just a community of friends that are all renting the apartment and they're playing cornhole on the lawn, or they're sitting in the grass and reading a book. Or they have a hammock on their front porch, what have you. But it's, that's what I would be picturing because when I was in college, I would've loved to live in a not attached apartment cuz I couldn't stand the noise of people talking loudly or walking around at 3:00 AM or who knows what. And so this way you're getting space, but still really that community apartment feel without having to be on top of each other.

Yeah. I just had a flashback to like college in an apartment with a shared wall and the guy was always banging on our door. At first he was just a little bit crazy and I don't know, I don't think we were that loud, personally. Don't remember that.

Yeah.

I love that it's, feels more of a community kind of vibe than like that kind of apartment complex. And I imagine you would attract different kind of guests for, or I always call guest tenants, whatever you wanna call them.

Yeah.

That's super cool. Okay. And I'm gonna weave around a little bit here. Let's talk like financing, right? Because the other part of development to me that seems like it's such a long play, right? Like how do you finance it? Did you go private? All the things. I'd love to hear more about that.

I went with a hard money loan because speed, mostly. I also wanted to go with a specific hard money loan. Lender because they only charge interest based on how much you've drawn. So my options were two lenders. One of them I would pay, paying interest right away for the entire loan amount. And for the lender I chose, I'm only paying, so my first month payment was $2,000. I'm like, that's great for the amount of money that I've loaned here so far. I haven't drawn it all, but They have it in escrow, basically ready to draw. So that was a huge draw for me. The speed as well, just because right now it's really hard to satisfy a construction loan, let alone within the short period of time I needed. The other side is GC. I'm the GC on the project. For me to GC it, I can't go to a bank. Banks require you to have a non— I guess your partner could be a GC, but the main owner can't. At least the banks that I was talking to, they would require me to get either GC partner maybe, or an external basically GC. And I didn't wanna pay somebody the 10% or what have you, about $250,000 potentially to do something that I've had 10 years experience doing. I've had my own GC license for This is my fourth year come March. So it just felt like this is my time to grow and expand my knowledge and rather than hire that out. So that was a big portion in going hard money as well as the time and speed and accessibility of it. Draw systems a little bit easier. What else did I consider? I also risked— did 100% financing loan financing side. Something that's a cool concept for this whole property is every loan that I've received on this property so far has actually paid me at the closing table. I haven't had to put any money down for closing costs. I haven't had to put any money down for down payment or anything like that. My very first loan, I got about $20,000 back. Second loan, I got $100,000 back of home equity line so I could just draw it. Not really the same thing, but second one, $60,000 back. And then at the closing table for my construction loan, I got $200, which is compared to the other ones, it wasn't a lot, but it was 100% financing loan for a construction loan of a large scale that I was— I couldn't have gotten a better loan, I think. Especially with the terms.

That's very impressive. I wanna hear more how you did that.

Okay.

So I imagine that usually there's some kind of gap. Yeah. Let's talk about that. That's super cool.

That, that gets in depth. That's when I get long-winded. Okay. The initial property, I bought it in 2000, 2020, 2021, 2020. Trying to remember. 2021. Because that was the same year I had my daughter. So we bought it and it was 0.45 of an acre. It had a terrible house on it that my private money lender that we used to purchase the property knew our capabilities and knew that we could fix up the house and make it rentable.

So you bought it with PML initially, right?

Is that— Yes. Yes.

Okay.

Got it. Which my investor side of me is like, why did I not do a USDA 0% down financing, blah, blah, blah, property first? Purchase because I had done commercial purchase, but not residential at the point. And that an owner occupy, but that's a, that's another story. Anyways, the owner had it on the market and then it fell off the market 'cause nobody purchased it 'cause it was in such bad condition. I sent him a letter. He, I think after I sent him that letter, took him about 6 or 8 months to finally agree to sell it to me. And the jury's still out whether it was a timing thing. Maybe he had to wait out his, this, I think it was his business partner or a brother that was living abroad who needed to be able to sign at a consulate. And this was COVID time, so things were open and closed and open and closed.

Okay.

Maybe that was it, or it was because I was just trying to purchase it by myself and The same week he decided to sell it to me, I had brought my then boyfriend, now husband with me and said, oh, here's my husband. We're buying this house together to live in. And that same week he decided to sell it to me. So it could have been a sexism thing because of his culture that he was from. Or that's just a reach for me trying to overexplain. He wanted $220,000 for it and we talked him down to $160,000. And then I took that purchase agreement to my lender and explained what we wanted to do, what our intentions were, go through that whole development process to do duplex, fourplex in the back. And I was like, plus we want a little bit of money to fix it up and live in it while we do this development process.

So he gave us an extra $20,000.

And that was extra PMO?

That was, okay. Okay. Got it. Yeah.

So we got a free house and $20,000. Which is not, that's not really how it works because we paid more than, and that was when interest rates were really low. So it was a 10% interest rate on that. Okay. And that's not really low, but that's still low for him. He's 12% now for his repeat customers and 14% for his non-repeat customers. From that, we went, uh, 8 to 10 months later and did a home equity line. From our bank that we use and got the full home amount that they offer, which is $300,000.

And so you improved it, right? Somewhat. Or how did they, because it was worth, you got it for such a below market.

To be honest, it was just because the market went crazy.

Oh, the timing was just money.

I timed the market without realizing I was timing the market.

Amazing. Okay. I love that.

And on my city line, they do a drive-by appraisal. They don't do a true appraisal.

I love home equity, man. They're just a secret. So good.

Yeah. I remember stressing out for a week being like, they're gonna drive by and see the moss on the roof and they're not gonna do this. And yeah, they sure enough drove by and was like, yeah, your house is worth $480,000 and took a photo of it. And I was like, there's no way. Right. But I know, but I was like, okay, I'll take it. I'll sign whatever. Yeah, it was, it was one of those like, how lucky can I be? Moments. And then it happened again. We did the burn to learn, went through the whole process, realized I wasn't going to get the bank to sign off because they still saw it as value. And then, because they never been inside the house. Do you have a question?

No, I'm just pondering. Go ahead.

Okay. Um, and then he gave us additional to help with additional entitlement or what have you. Because at that point I was like, this is what I'm going to do. I'm going to reentitle it. We're going to tear it down and then get a construction loan and refinance and all that. And so he gave us an additional amount of money because we did additional collateral lien on another investment property. Mm-hmm. Okay.

So you were creative. Yeah. And that's securing the note to a different property for anyone that didn't follow. That's— it doesn't have to be the subject property, right? It's the beauty of real estate.

So yes. And instead of a, like, instead of the note or deed trust, basically a note deed trust that only exists on one property and it's just the lien attached to the other one. So it helps expand what value you can get in there. And he had worked with us for 15 years, with me 10 at that point. So he saw the value, he had the extra collateral. He gave us the additional, and then from there is refinanced into the construction loan. 'Cause we had to clear all of that after the burn to learn. There's no approval process, like they're not going to your planning commission or anything like that. With a traditional 8-unit or 16-unit apartment complex, you're required to do that. With cottage cluster, it's just like going in and getting a single-family home permit. Oh, wow. So just applying for the permit basically. And then it goes through planning and all of that at the city side, but it's not as— you're not waiting 21 days for the city to give you notes or anything like that. Wow. Okay. Letting your neighbors know for 18 days or X amount of days saves a little bit of time. And then that's into the construction loan. Did I explain that part?

No. So what, so I'm— I think I got lost. Maybe it's just me. So I got up to, I, I followed until you got to the point where you did the HELOC and then you refi'd out with a PML. Is that right? Or?

Yes. So the original PMO, HELOC, and then the original PML again. Okay. So he saved us a little bit so that we could do the Burnill Earth. We had other options, but I really wanted the city to have that opportunity. It cost me a lot of money and what have you, but it was, I would do it again because the bank thought there was so much value.

Why would you burn this house? So you had to get them off the note. Okay.

Yeah. They had never been inside the house or really looked at it besides that drive-by 2 years or a year before.

So I love this. Okay. Keep going. Okay.

And then from the private money lender doing, helping with the burn to learn, we refinanced out and then into that construction loan with the private money lender. Hard money. I think technically on their website it says hard money, but on their voicemail it says private money.

Okay. Yeah, that is— you did so many creative things on one thing. And so what do you think, like, going, looking back, like, obviously things evolved and I think sometimes we have to be really— in real estate, we might go in with one thing, but like you did every— I don't know if it was probably luck and you had the experience of looking back. Would you have done something differently or do you feel like things fell into place as you took the action you figured out as you were going along? If I can ask that.

I think it would be a mix of both. A lot of it, an investor who helps run or is part of the meetups that are happening in Salem said to me, you have to go through life with lucky girl syndrome where, you know, you just believe all of these good things are gonna happen because you're just that lucky. And I was a little bit like, I don't, okay. But now looking back and being not finished, but when I did get that final construction loan closed, it felt like a turning point of, I can understand all of those really lucky moments that took all of this education and networking and hard work that I did behind it, but also how lucky am I that The universe lined up so that I could have those opportunities and it, those opportunities I could see and direct them to here. Does that make sense?

Yeah, 100%. I, I'm my, in my head I'm thinking there's a term like luck favors the prepared or something like that.

Yeah. Right.

It's like lucky from the outside, but your experience, like you did the right moves. That's the thing. I think we hear these crazy stories and this amazing tale, but it's like You didn't just stumble onto this. You made the right moves. You were really strategic. And I just want to highlight that. And sometimes we don't know what the exit is, but if you are around the right people, the right community, like, everything's figureoutable.

There's always more options than what are on the table. You just have to look around.

100%. Okay, I want to do another circle back. And you mentioned that you're a GC and I think being a developer, we talked about this offline, it's a little bit of a boys' club. I have some great friends in real estate, they're guys, but it's unusual to be a developer and a GC. And so how's that experience been or what prompted you to get your GC license and all that?

My dad, mostly. He's a very private person for the most part because he's part of that generation where it's like you don't draw attention to yourself because that causes more karma, I think. But I'll out him a little bit here. He's been in construction for, oh, I don't know, probably 40 years or so now. He started when he was young with his dad, and so he has a great deal of experience and he's always kicked himself that he didn't go and just get those final journeyman certificates for everything that he's capable of doing. But he, for the last, I don't know, 10 years or so, found that as the property owner, because he doesn't partner with anybody, he only does his own, mostly BRRRR method with commercial and res— mostly commercial in the last 6 years, but used to be commercial and residential. He has a lot less issues that he runs into permitting-wise or zoning or code or what have you if he's not the owner and the GC. If he just does things as owner. And then subs out where he needs to for some of the trades. But he can do the large portion of things as property owner. So obviously that's changing a little bit here and there. Mm-hmm. That in some of the bigger cities as of what, 10 years ago, and some of the smaller cities you have to trade out everything. So it was one of those things where he's, I'm having issues with X, Y, or Z permitting. You have the experience from the last 10 years with me in construction. And he's like, it would be really helpful if you just could get your contractor's license. And I was like, why would I do that? You've never needed it. Why would I need it? He's like, it could just make things a little bit easier for, like a, he did a grant project where he took a older, I wanna say it was like an 18 '75 building and revitalized it. But the draw system was chaotic because he wasn't a GC. He was just the owner and basically acting like GC. So I didn't tell him and I went and I took the test and did all the things and then went in, took him a piece of paper and he was like, what is this? And I was like, I don't have my glasses, but it's blah, blah, blah. And he was like, oh. What is this, the CCV number? And I was just like, I went and got my GC license. He's like, oh, okay, perfect. I think about 2 weeks later is when I closed on the house and then the college, or not college, the cottage cluster. And that Sunday after I closed on the cottage cluster, I found out I was pregnant with my first daughter. So all of the big dreams of, okay, I can do all of the constructing on the side and X, Y, or Z kind of went out the window. 'Cause I'm like, I can't be remodeling kitchens when I'm 8 months pregnant. That's been the weird thing. 'Cause in my family, it's not just GC by name and sub it all out. It's GC and physical work. Like, he had an expectation for us to learn all of the process and know what we're doing and be capable on the job site, not get in the way. And so I'm very lucky to have such a Strong mentor.

Yeah, that's really, that's super cool. I can't fix anything. I'm just really good at cat herding.

There's always YouTube University, so you can always Google it or YouTube it if you absolutely need it, or call me.

Yeah. But I tend to wear the GC hat, like I bring in subs and I have my scrappy team and they know me and they know I like to work quick and I, my bone with GCs, like they're great, but they don't have a sense of urgency that I have personally.

Yeah. My, that's so true. That is so true.

Yeah.

So I feel like it's a female trait though, cuz we're just like, why are we dilly-dallying? What, what's going on?

Yeah. It's, yeah. So I have to ask, this being, how is your experience? But I feel like in the community, like we're in West Coast, right? It's really progressive, right? I feel like it's a very supportive community. We don't see ourselves a lot at meetups, but everyone's really great. How has your experience been as like a your GC in doing this? Has it been good or have you gotten any— I'm just curious, 'cause there's not a lot of developers you meet that are female, to be honest, or GCs for that matter.

Like how, what, what is my experience at meetups? Is that what you're saying?

Or just in general being a GC or being— I know, I feel like I've heard other women say they've gotten slapped, subs have not been respectful. I've personally never had that experience. I feel like everyone's extremely respectful and I respect them, but I've heard other stories and I'm just curious about your experience.

I would say the cool thing about being a GC and the owner, no partners or anything like that on my cottage cluster, is that if somebody is being disrespectful to me, it's not a, oh, you're just gonna get that in the industry. It's no, I'm paying them. I can choose to work with them or I don't. If they're gonna be disrespectful or treat me like I'm not a person or that I don't know what it is they're talking about, even though I do. There's maybe some arrogance in there too, but it's generally like my subs that I have right now hired out are all amazing. They talk to me like they would talk to anybody, whether they're male, female, have you. And there's no BS. There's nothing involved where they're like, let me dumb it down for you or mansplain it or any of that process. I'm really lucky. I did have one sub recently that did a bid for me and the very first minute they were talking to me like I didn't know anything and my husband happened to be working night shifts that day, so he came to the site just to check it out. And then he talked to my husband the entire rest of the meeting. And I was like, okay, I don't even care if I absolutely get behind 2 weeks. I'm not hiring you cuz this is professional and this is my job, not his. And my husband will say that to him. So it's just, it is part of the industry, but because it's not me and another man that's running the project. It's me running the project and my husband being a very background silent partner cuz he's not fully involved in the day-to-day. I get to make those choices and it does give me a little bit more strength in my femininity cuz I, I can go on site in a ball gown if I want to. I don't have to dress in all carhartt for somebody's respect. Correct.

I would wear like my ballet flats and my Supra, just like, I don't, yeah, I don't look the part.

I don't care. Yeah. And that side of it, I like my foundation guy and my excavator right now. Love them. I really hope to work with them continually in the future because they talk to me like I know what I'm doing and there's always new things that I can learn and there's, I don't know everything, but I do. Understand some pretty basic things that people try to explain to me sometimes. When I go to meetups though, I went up to a meetup in Portland and it was wild, but the very first person I talked to was a developer as well. And I have only been comfortable calling myself a developer for the last like few months because in my mind it's just The BRRR method, really, to a certain extent.

Mm-hmm.

But he just immediately was like, oh, you're a developer and you're female. Cool. Here's all these other female developers I know. And gave me a bunch of resources, which I was thankful for, but also I just want to— tell me about your deals.

I just wanna talk about your deals. It shouldn't matter, right? Yeah.

I'm thankful for the communities, but let's talk about what you're doing. Teach me something. Like, I'd love to learn anything from you. Mm-hmm. So that was an interesting interaction, but generally it's positive. Most of the time it's positive, or they think that I'm juicing just by name and just by subbing. Mm-hmm.

Yeah. Yeah, no, I'm really happy to hear that. I've had the same experience. I haven't personally experienced, I also don't expect that. Like I've, I have a very close-knit group of subs and they're, we're Yeah, I just, I, but I hear that and it bugs me cause I'm like, I've never experienced that. I also don't expect it. The one thing is I'll overexplain something. I'm like, I don't need to know exactly that much detail. Not in a bad way, but they're just trying to educate me and I'm like, okay, that's great.

Yeah.

Do the thing.

Yeah. Yeah.

No, I just, I was curious and I like, I don't think it should matter what gender we are, but there is the boys club and often the presenters are male and I, I shouldn't, I just wanna be part of the mix. It doesn't matter what, that's why I don't like lead with that, but I just wanted to ask because it doesn't matter, but the reality. Okay. I really fast wanna touch on partnerships and we'll probably wrap up here, but you don't have partners aside from your husband. Sounds like a silent partner. I run a similar thing. How intentional has that been versus bringing in other partners? I know, I don't know, working on other stuff, but I'm just curious.

I, it's just more natural. I grew up with my parents never taking on partners, mostly because they like to worry about like their money and if there's a problem, they fix it. And it's them as partners working together. Mm-hmm. Them being my mom and my dad. They, I don't think, have ever taken on a partner besides me. And for those that are unaware, you ever do a deal with somebody and you're a partner, You need to be on title at least 25% or more if you want it to count towards your experience for private money lenders or banks later on. That's something I didn't know when I was 19. It's something I didn't know a year ago, and I'm thankful for that information now because every deal I've helped my parents with for the last 10 years, none of it counts. It's just the stuff that I've done, which, mm-hmm, that's experience that should be on the resume. I will partner. So my next project that I'm working on is a build-to-sell. It's condos out at the coast. It's gonna be hopefully 40 units depending on what land use is available. And there's a land use company and an architect that I'm hoping to create a partnership with so I can put some of the soft costs on the back end, or at least put it towards like when you, when we close for the construction loan. And do it that, that way, depending on what they'd like to do. I see that there's value in it if you're looking to scale. I think especially at this point with my 15-unit, there's that evil part of investing where you're constantly like, if I took on a partner, I could make my life a little bit easier and I wouldn't be stressing so much to get this project done over here because I could have somebody I could delegate or share that burden with, or whether it's a liquidity partner and you're saying, hey, if I had somebody buy into this project, I could use this money over here for this flip or what have you, right? So we think about that every day, right? Every day you're like, I'm going to sell it. Not every bad day. I'm going to sell it all through this. Why did I even get into it? That kind of thing. And I have those days too. And so some days I'm like, oh, I could just sell it all because I'll have a pretty decent equity swing at the end. And then I could retire for 5 years and, but that's not realistic. I'm too much of a, an addict, I guess, to, I need to constantly find good deals.

So yeah, it is a bit of a game, right? This whole game. And I think we, yeah, even if I, I wanna become work optional, that's the way I'm framing it, right? Like I, yeah, enough passive income. Okay. This has been so fun. Is there anything we didn't talk about cottage clusters or advice you'd give someone just kind of anything we didn't touch on?

Advice is always— answer is always no until you ask. That's just something I've lived by since I was like 16, probably. You don't know what you're capable of until you start. And let's see, cottage clusters are just— it's a really decent niche to be in right now because of how quickly you can get through the permitting process and how many units you can get. I was just talking to an investor in Kaiser and he has a whole nother restriction compared to my city. So you have to look at all of that before you start looking for land. Mm-hmm. Don't be afraid to take on like a land use partner cuz they could take a lot of burden off of you from the beginning. You don't have to learn everything. You just have to be able to afford to pay the person that's already learned it. Always been good advice that I was given. Yeah. And if you want, you can follow me on Instagram. I am @rei.odyssey and also on Facebook, Kelsey LPJ. So I love talking about deals and just being part of a community. So I'm just happy to always chat about what I'm doing and love to hear what you guys are doing too.

That is awesome. I'll put all that in the show notes. Addressed a lot of the wrap-up stuff. Just, I always like to ask like a book or a resource you'd recommend that maybe was influential for you.

A book or a research? It's not REI based, but every single fall I read on rotation some older books because I feel like they apply to now. So if you haven't read Fahrenheit 451, which which seems silly cuz some people are like, oh, I read that in high school. Read it again cuz it will change every year that I read it. I have a very different perspective of what it is I'm consuming from that book. Or Animal Farm is also another good one. Atomic Habits is great for those that need to get out of their slump of scrolling Instagram late at night. Those would be like the main things. There's always the real estate books, but I feel like as people, we need to evolve outside of real estate so that we can absorb everything within those real estate books too.

For sure. Yeah. I think that we, and we rereading books, we find a lot of gems that we were in a different place. Like I, I've turned my car into university, so I always have something on. A lot of time are like old books. The language is dated and they're, but they're classics. So it's a great tip.

Yeah, absolutely.

Yeah.

Awesome.

Kelsey, this has been really fun. Thanks for taking the time and yeah, maybe you'll come back on when you've finished and you can talk about the ending.

Great. Very cool.

Yeah, this has been really fun. Again, for anyone listening, thanks for tuning in. We'll include, uh, all the ways to reach out and, uh, let us know what you thought and we'll talk to you soon.

See ya.

Actually, let me just check the Q&A really fast. Sorry. I think, right? Yeah. Yeah, I think we covered everything, but yeah, thank you again. I know it's late. I gotta take my kid to karate or taekwondo shortly. Hi. So I know you've got bedtimes. Yeah, the mom life, mom entrepreneur life.

Awesome. All right.

Thanks everyone for tuning in. Let us know what you thought.