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In this episode, real estate developer and investor Jose Berlanga shares insights from his 30-year career in residential land development, focusing on strategies for beginners, market trends, and scaling a successful real estate business.
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Jose Berlanga (00:00)
cash reserves, cash reserves and longevity, sticking around through good years, bad years, ⁓ finding your model again, not trying to jump around different sectors of the market because real estate is truly like other sciences, like law, like medicine. You cannot be different.Areas of this market and be successful you have to select how to go about it
Michelle Kesil (02:02)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil Today I’m joined by someone I’m looking forward to chatting with, Jose Berlanga, who is a developer, real estate investor, and a writer. So excited to have you here today, Jose.Jose Berlanga (02:23)
Hi, Michelle, it is wonderful to be here. Thank you for having me.Michelle Kesil (02:27)
Absolutely,so let’s just dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is?
Jose Berlanga (02:37)
The main focus of my activity in the real estate world is residential communities, single family residential communities. I do a lot more within real estate and other sectors. But let’s stay with this one since this is my area of expertise and familiarity with single family homes, single family land development. And we’ve been doing this for a very long time now, going on close to 30 years.building these communities, ⁓ a lot of them inner city transitional neighborhoods, areas that are amazing for investors because most of the large national companies, they prefer to build in the suburbs where they have a lot of land. They have a lot of space to build master plan communities. So I started with a tiny investment. ⁓ Like I said, close to 30 years ago, buying a very small lot that we ⁓
essentially tore down and build a new small home, which is how many, many builders and developers and remodellers start. That is always recommended to start with something small that you can kind of wrap your head around. And this company grew a little bit at a time from one little bungalow to a few hundred homes a year. That was the initial ⁓ takeoff.
of our company, one home at a time. We started multiplying to two to four to eight, 16, being very frugal in the way that we managed our operation, very careful in the way that ⁓ we managed our finances, went through good cycles, bad cycles, and ⁓ focused on that sector of the market, which was ⁓ residential single-family homes.
the whole story was very interesting because little by little, we expanded the company. We started getting more involved in more neighborhoods. of the interesting things about this business, which is good and bad, the barrier of entry is effectively not there. Anybody that raises a little bit of capital
Michelle Kesil (04:51)
⁓Jose Berlanga (04:57)
that has a little bit of credit, whether they have some savings or whether they have some access to some capital, can buy a small property and develop it. The best, I guess, way to start is by identifying what it is that you like about this business. Whether you want to remodel, whether you want to start from the ground up.⁓ If you like design, if you like the architectural aspects, the kind of capital that you have available. ⁓ And so we went through all those considerations and we started very small. And little by little we build up our lines of credit and our ability to expand and to go into other neighborhoods and to identify what were some of the areas with potential in the inner city.
That’s something that a lot of investors need to have a little bit of vision. Where do they think the market is headed? What are some of the pockets? What are some of the areas that appear to be up and coming where they could make a small investment ⁓ and go from there? you need to categorize ⁓ yourself within the risk factors. How much money are you possible risking? How much time do you have available to get your
your business off the ground, whether you want to do this part-time or full-time. So yes, you really, really need to understand yourself, I guess, before you get into this business and know that it takes time. It takes a lot of work. It’s not just jumping in and making money overnight. So there is a lot of planning and designing in the early stages until you get your plan in place.
Michelle Kesil (07:37)
Yeah, definitely. In which markets are you specifically operating in?Jose Berlanga (07:44)
Well, right now we are in a number of markets in the city of Houston. Texas is expanding tremendously. Most areas in Houston, and not just in Houston, like I said, all of Texas is experiencing a tremendous amount of growth. There’s better affordability than many other states. There’s employment, there’s the energy sector. There are many industries that are bringing headquarters toto all of the major metropolitan areas. So we are going, of course, the inner cities are becoming bigger rings. They’re expanding. What used to be the inner city was downtown. Then it became the area surrounding the downtown. And little by little, inner city has become a much larger territory, where there are endless subdivisions, ⁓ sub-markets, what we call.
in areas of exploration that have different styles, different designs. So we are pretty much in many areas of our city where ⁓ some of these neighborhoods, we enjoy ⁓ economies of scale where we can buy a few acres and perhaps create a community, gated community. So if you have the ability to do that in some of these cities,
That’s a way to go about it because you can condense your activity and put your efforts into one community or you can scatter your construction around different neighborhoods depending on… Every neighborhood has its own characteristics, its own appeal, ⁓ its own designs, architecture, the aspects of the HOAs, the homeowners associations, the requests.
and demand a certain appeal and look lot dimensions and so on and so forth. So we’re all over the place. I never recommend beginners to try to be all over the place. You have to start with one sub market, one price point because something very interesting in our industry is that not all real estate is the same. Not all construction is the same. If you’re building an entry level home, 300, 400.
or a million dollar home or a five or 10 million dollar home, there are different everything, different vendors, materials, selections, contractors, ⁓ equity requirements, financial institutions that address those types of products. So you have to know the product that you’re going in and the market that you’re going to attack and focus on so that you learn before you try to start being
all things to all people. this is something we’ve learned that you can’t really just jump around and try to provide a variety of products without really understanding what your market is.
Michelle Kesil (11:23)
Yeah, definitely. think that’s important for beginners. Is there any other advice you would suggest for someone that’s in the early stages of investing?Jose Berlanga (11:33)
Well, you have to figure out what it is that attracts you to this industry. One of the mistakes I’ve seen is people jumping into real estate for the sole purpose of making money. You know, they want to flip properties or they want to make a quick buck. And this is a very complex industry that requires risk, knowledge, experience, discipline, a lot of time involved. You have to know what to pay.Michelle Kesil (11:47)
youJose Berlanga (12:03)
where to pay, how to appraise, how to utilize the land, what is the best and most optimum utilization. So one of my recommendations is, first of all, identify your purpose, your mission, the reasoning behind you getting into this business other than making a few dollars, because you don’t normally make money right away. Not even, we didn’t make money on our first few deals. We just kept trying, we kept learning, we kept fine-tuning.our business model and little by little you start understanding what needs to be done in the different sectors of the market, what to pay for the different ingredients of what you’re building or developing or remodeling. And little by little you start perfecting. ⁓ You don’t find properties, quality properties right away. It’s a tough market where a lot of people are involved. You have to…
build a network of contacts of agents, brokers, other builders, and suppliers that can assist you earn your trust. Timing is a ⁓ factor. I always say that anybody can be a builder and developer if budgets and time didn’t exist. But the moment you incorporate a deadline and a budget into a transaction, everything changes.
Michelle Kesil (13:03)
Yeah.Jose Berlanga (13:28)
That’s what differentiates the entry level from the pros. If you can consistently hit your numbers, your costs, your timing, your budgets, your accuracy, that’s when you ⁓ absolutely start becoming successful. But when you’re just guessing and trying to appeal to different markets and come up with random numbers and guess.what you think you’re going to achieve. It’s a very, very tough business.
Michelle Kesil (14:01)
Yes, definitely. Thank you for sharing all of that. And I’m curious, when it comes to the things that have made the biggest difference in your success and your ability to scale, what do you feel the main keys have been?Jose Berlanga (14:21)
⁓ cash reserves, cash reserves and longevity, sticking around through good years, bad years, ⁓ finding your model again, not trying to jump around different sectors of the market because real estate is truly like other sciences, like law, like medicine. You cannot be different.Areas of this market and be successful you have to select how to go about it if you want ⁓ to refurbish
if you want to Remodel homes and flip them stick to that if you want to be a single-family Residential home builders stick to that if you want to do multifamily if you want to upgrade these type of multifamily developments stick to that there are builders who do a lot of commercial they do a lot of industrial and
Once you capture the essence of that specific niche market, you start becoming good at it and understanding it and taking the time to improve it. ⁓ don’t gamble ⁓ too much. And also this business, something that no one can predict is timing. They are cyclical. They are good years, bad years, and they change sometimes overnight.
The media, now everything is so globalized in the world between the media, wars, economies, trends, ⁓ everything that happens in every corner of the world affects this particular industry. The real estate industry is the first one to get affected because it’s a big ticket item. This is the first thing that people want to buy when things are doing well. It’s the last thing that people want to buy when things are not.
doing well economically or in their personal finances. So ⁓ when you start finally making some money and doing well, the number one mistake I’ve seen brokers, agents, investors make is to get comfortable, to get relaxed and to think, I made it. I got this. I’m going to start making a bunch of money and they become irresponsible with saving money.
putting money aside, becoming cautious with the amount of leverage that they go after and remaining conservative because those cycles will change. Good years will end, bad years will end and you have to be able to average them out. So don’t think for a minute that just because you started making some money, you can start being careless and getting in over your head with too many developments. I’ve done that.
I’ve done that and it’s a very painful experience when the market slows down and you get caught with so much inventory and so much debt. So watch out for that.
Michelle Kesil (18:07)
Yeah, definitely. And what are you most focusing on solving or scaling to next for your business?Jose Berlanga (18:16)
Well, ⁓ there are always areas within a business that can be improved because it’s a moving target. Code changes, guidelines change, markets, trends change. So you have to stay up, keep up with ⁓ your consumer, with code, with what’s selling, what’s working and what’s not from selections, from designs.⁓ Your team, you have to be very, very fast identifying who within your team is bringing enough to the table, is getting things done. ⁓ Who in your team is really just ⁓ making themselves look busy and not really delivering results. This is a really, really important teamwork because there are too many areas within the development and real estate aspects that not everybody can… ⁓
handle the entire package, even experienced people. You have to find land, you have to develop land, you have to do your research, you have to know about sales, you have to know about legalities, you have to know about banking, finance, accounting, finishes, selections, technicals, construction aspects. So you need to surround yourself with, you don’t have to know everything by the way. I don’t, I’m not an expert, although I’ve been doing this for many, many years.
I have the areas where I focus and then I have a team that focuses on the areas that I am not the best at. So identify what those are and protect yourself and cover yourself by supplementing those areas with a good team that truly understands what they’re doing.
Michelle Kesil (20:09)
Yeah, absolutely. And when it comes to development, what does that process look like? Are you there from like start to finish? And yeah, what does that kind of look like for you?Jose Berlanga (20:27)
Well, land development is very dear and near and dear to me. I’ve done a lot of land development over the years. And I actually wrote a book about it called Dirt Rich, which is a lot about that. How to value land, how to understand number one, best use, most successful utilization of any given parcel.So everything begins by identifying a piece of land and understanding its optimum use. Can I build ⁓ a little mall, ⁓ a strip center, a retail center? Can I build an apartment complex or a home community or is this a single family construction site? Once you determine what
the use is for that home or for that ⁓ piece of land, everything else starts falling into the right place because you start identifying the sequence of events that you need to execute in order to develop that product. You start doing your numbers. Something incredibly important are the early stages of your title work. When you enter into a contract,
and deliver it to a title company, you’re going to receive your title commitment. That title commitment is going to tell you a lot of things. ⁓ Not 100%. There are other things that need to be investigated, but a portion of it will help you ⁓ create or your new survey and ⁓ understand if there are any restrictions, if there are anything that prevents you from developing what you’re hoping to develop. And from that, the
process begins. You start your conversations with your engineers, with your architects. Those two are ⁓ necessary between your engineer and your architect. They will help you establish what is possible and what is not and try to investigate all of these things while you’re still within your feasibility period so that you don’t risk either your earnest money
Or even worse, risk buying a property that later you’re going to find out that it has problems and that you’re not able to develop what you intended to because there was something prohibiting you. Such as easements, ⁓ such as obstructions to the property ⁓ or limitations or things that are recorded. And not everything is recorded. So you need to go to your county or to your local agencies to really find out.
What is available? Do I have the utilities available to this property? Water, sewer, storage, sewer. Do I have ⁓ the utility services that will provide us with what we need? So all of these early stages, before you even touch the land, you need to do a lot of investigating. That is my recommendation. And of course, we don’t have time to get into each individual one of those steps.
But the message is figure out how to do enough research, call the due diligence period, your feasibility period to understand what you can and cannot do with the property that you’re planning to acquire.
Michelle Kesil (23:59)
Yeah, thank you for sharing and explaining all of that. So before we wrap up here, if someone wants to reach out, connect, and learn more, where can people find you and reach you?Jose Berlanga (24:12)
Yes, I can be reached at my website, josebarlenga.com. I can also be found on my social media, Amazon. If you Google my books, Dirt Rich or The Business of Homebuilding, they are for sale at all the book platforms and on Amazon. I love my books.Not to say because I wrote them, but because they are very interesting, not just for the industry, but for entrepreneurship. They tell you how to start a business, how to build a business, the do’s and don’ts, what are some of the fundamental aspects of starting in any industry. It allows you to organize your thoughts and to understand the sequence of events that are required in order to build a successful business.
And I think they are very helpful for anyone, both of those books, for anyone who’s trying to either get into real estate or any other industry where they are planning to start their business in any other sectors.
Michelle Kesil (25:21)
Perfect. Appreciate your time and your story. Thanks for being here.Jose Berlanga (25:27)
Thank you, Michelle. It’s been great visiting with you and hope we can do it again.Michelle Kesil (25:33)
Absolutely. And for you’ve tuning into the show, if you got value, make sure you’ve subscribed. We have more conversations with operators like Jose who are building real businesses. We will see you on the next episode.
