Before You Buy Land: Engineering Risks That Can Kill the Deal

Jason Henrichs (00:00)
when somebody comes up with a with a piece of land, about 30% of the property is honestly ⁓ undevelopable. And so even if they inherited the property, whatever. It’s just like like man, this it’s not worth it’s not worth the dig, right? So like no don’t put your effort towards it.

You know, hopefully they haven’t replaced they haven’t bought the property. You know, in our in our world, like I hope the client comes to me for, hey, I got it under contract. Let’s take a look at it. And you know, and then I’ll I’ll take a look at it and figure out, hey, this is what you’re really gonna be able to build here. This is what you’re not. ⁓ you know, and we’ve had some instances where I mean people bought property and it’s completely worthless.

Freddie Steen (02:14)
Hey everyone. Welcome to the Investor Fuel Podcast, brought to you by Real Estate Pros. I’m your host, Freddie. And today I’m joined by someone I’ve been looking forward to chatting with. Jason of JRH Engineering, who’s been making serious moves way out in the great state of Texas, Houston to be proper, but a national footprint. And his niche and space in real estate is so exciting.

Because it’s Engineering. That’s right. He’s building from the dirt up. So, Jason, I’m glad to have you here. I think that our listeners are really going to take something away from how you’re approaching an asset class in real estate that is seldom understood. And that’s Engineering. Literally going in, dealing with MEPs, grading stuff out, and allowing these investors and other companies to come in and build on top.

of the great work that you’ve already done. So let’s dive in. First off, for people who may not be familiar with your world, Jason, give us the short version. What’s your main focus these days and what markets are you operating in?

Jason Henrichs (03:25)
Thanks a lot, Freddie. Really appreciate it. ⁓ yeah, so we mark operate in the market of Texas, North Carolina, and Florida, and we do civil and structural Engineering.

So

Freddie Steen (03:35)
That’s

that’s awesome. And tell us just briefly how you started JRH Engineering, what gap did you see? And how did you grow all the way to the other side of the United States having a footprint in Florida?

Jason Henrichs (03:48)
Yeah, no, it’s a great question. So we started 18 years ago. I started due to Hurricane Ike that came through the Houston-Galveston area. ⁓ devastated the homes. ⁓ and basically what happened is is the Department of Insurance requires an engineer to or their company to go look at the homes and make sure that roofs, windows,

Everything that was damaged was put on properly. And so we basically started our firm from that. ⁓ I worked at a a big Engineering firm beforehand doing construction management. And so we’ve grown from that. It was 95% of our business, now it’s five percent. And so so now we’ve flip-flopped it around and and ⁓ we’ve grown to doing all aspects of civil instructional.

Freddie Steen (04:40)
I love it. I love it. What what caught my attention about you, ⁓ Jason and JRH Engineering was the way you’ve been able to maximize on opportunities around a subject matter that is polarizing and white hot. And that is how you’ve handled these opportunities in Engineering with data centers. But also you marry that with a mantra at JRH Engineering that all dirt.

is not worth the dig. That’s not easy, especially in the it’s that’s not easy, especially in this climate. Jason, what’s been the key to keeping that machine running smoothly?

Jason Henrichs (05:18)
A lot it is just being honest with with the clients. So, and that’s what I really want people to take away from this is like we when somebody comes up with a with a piece of land, about 30% of the property is honestly ⁓ undevelopable. And so even if they inherited the property, whatever. It’s just like like man, this it’s not worth it’s not worth the dig, right? So like no don’t put your effort towards it.

You know, hopefully they haven’t replaced they haven’t bought the property. You know, in our in our world, like I hope the client comes to me for, hey, I got it under contract. Let’s take a look at it. And you know, and then I’ll I’ll take a look at it and figure out, hey, this is what you’re really gonna be able to build here. This is what you’re not. ⁓ you know, and we’ve had some instances where I mean people bought property and it’s completely worthless.

And so, ⁓ you know, one lady, she ⁓ building a whiskey distillery.

right down the road from us here. And ⁓ really passionate about her ⁓ you know distilling whiskey, you know, her product, you know, she’s showing showing all to me. It’s like it’s great, you know, but like just owning the real estate was a subsector of, you know, what she needed to do. And ’cause she was literally bottling it up out of her garage. And then so ⁓ the you know, HOA didn’t like that. So she bought a piece of property. Well unfortunately it was in the floodway. And

There’s nothing you can do with property.

Freddie Steen (06:42)
So, Jason, you mentioned something that I do want to lift out for our real estate pros audience. And what you spoke of is how there are so many different factors that come into play when you’re developing land. Can you just give our real estate pros audience, because I know they want to know, a couple trends that you’re seeing coming out of 26 going into 2027 that they should watch out for?

Because again, like you say, all dirt is not worth the dig. Give us a couple of those nuggets that we can take home with us.

Jason Henrichs (08:03)
Sure.

So you have to make sure that you’re gonna have, you know, of course you’re black out the big three, right? You’re have to have water, sanitary, and storm sewer and be able to outfall for the storm. And so the biggest issue is is having you know the capacity for all that. And so sanitary, even if you wanted to do ⁓ you know, a aerobic system, a septic system, you can only do a certain size, you know, in Texas or anywhere really. ⁓

Know it has to be a certain distance away from the well, you know, you’re gonna have to have a detention pond for for drainage. All this stuff takes up a lot of land and and also a lot of money. And so when we evaluate a piece of property, we look at all of that. And you know, on top of the other portions that a lot of clients do know about, is it zoned properly? Is it, you know, can can I build this industrial building here? Can I, you know, stuff like that. So, you know, it’s so important and

You know, I’ve learned in in what’s happened here lately, I’ll say lately, you know, the last five or ten years, it’s just getting a lot harder to develop. And so yeah, there’s way more restrictions. cities don’t want to change zoning. If they do, like you better have a really good reason. And so ⁓ a lot of it’s political, ⁓ you know, it’s

The rules and regulations for drainage have changed so much, especially for us since Hurricane Harvey. So ⁓ a lot of people don’t know this nationwide podcast, but Hurricane Harvey hit ⁓ you know the Texas coast. So I think it was 2018. And ⁓ it changed it changed everything for calculations. It’s it’s ⁓ detention ponds had to become significantly larger. A lot of places won’t let us put a pump ⁓ basin in. And so

You know, a lot of people were buying a piece of property, they don’t realize like, hey, 30% of that’s gonna be taken up by a detention pond. So, you know, if that’s not your performa, you know, if hey, I was looking at putting 100,000 square foot on this on this piece of land here and my numbers all run with the 100,000 foot, like, hey man, you’re only putting 70. Your numbers still work. And so, ⁓ and we get that a lot. I mean, I literally have that conversation, sir.

Freddie Steen (10:14)
So, Jason, you’ve built JRH Engineering 18 years, elbow to elbow with your wife. Can you tell our audience about why it’s important to collaborate with operators like you who have a wealth of knowledge that can be transferred from market to market? Can you express why that’s important? How that helps you?

Jason Henrichs (10:37)
It’s it’s just like, you know, hire good professionals, right? So you’re not gonna go do your own taxes, you know, you’re not gonna go ⁓ you know, you need to hire a good realtor, you need to hire really the best. And so if you try to wing it, I mean a lot of this stuff we you know, I’ll do a 30,000 foot view for you, you know, if you’re in our market for no charge. Just like, hey, does this even look right or not?

You know, and so a lot of people skip this step. And I mean, these these are I mean, people can lose decades of money that they’ve saved up over buying the wrong stuff.

Freddie Steen (11:11)
Jason, I know that every operator that’s listening right now would appreciate you answering this question.

In Engineering, in dealing with what has to take place to develop land, how important it is to have good relationships with the city and the town and the neighbors of which you’re building. How important is that?

Jason Henrichs (11:31)
it’s extremely important. So you have to you have to know the political climate, you know, if they’re gonna want to change something for zoning, you’re gonna have to ⁓ know who you’re dealing with, if there’s any changes that you can, you know, as far as the cities, counties, drainage districts, that there’s any changes that you know you can you can get away with, that you can do, you know. ⁓ like for instance, we did a project the other day and it was large, large tract, but

they were doing small pads on it for a ⁓ large oil company and they needed these pad sites we’re just doing three wells but ⁓ so they want you to use well per their design manuals like you to use this really expensive modeling it takes forever and because the tract was 3,000 acres and so it’s like hey look we’re only doing one acre pad sites can i just use this this really simple formula here and let’s make this happen

Yeah, that’s fine. You know, but I know I know the guy at the drainage district. You know, we’re a first name basis and you know, he knows I’m not there to scroll him. So

Freddie Steen (12:33)
And Jason, what you speak about so casually is so important to the real estate pros who are listening because you built this blood, sweat, and tears over 18 years and you’ve had success. I have to say, can you give us one thing that nascent engineers and people that are in Engineering companies that you’re hearing from the political and from the city level, from the municipality level, where Engineering companies are missing it right now?

Jason Henrichs (13:36)
I think a lot of Engineering companies are they don’t listen to the clients.

Freddie Steen (13:42)
Mm.

Jason Henrichs (13:42)
You know, cause like the way that we consider it is the order of importance is for how long I touch the project. Right. So I’m gonna touch I’m gonna own this project. Like Freddie, if you’re gonna go buy three acres and you’re gonna go build your podcast studio on there, right? So you call us up and so I’m gonna own this thing for a couple months, right? And you’re gonna own it for a couple decades.

And that’s the order of importance. You know. So it’s like, what do you what do you want? You know, like what is there, you know, like what is there something special that you want, something special you definitely do not want on there, something you you know, you can’t stand or you know, and and I I have to listen to the client to try to figure out like all right, you know, is there something you can’t live with? Is there something, you know, so I mean for instance,

Detention, right? Like the it’s required, they have to have it, but there’s certain things we can do. We can put it underground, it’s expensive, right? So it’s like, okay, is is the money thing not an issue? I mean, 95% of the chance it is, right? But sometimes we just can’t get away from doing it. If you’re doing a new podcast studio on Richmond Avenue in Houston, like, guess what? That land’s so expensive, like we have to put it under underground, you know. But I mean, I’ll tell.

I tell my clients all the time, it’s like, hey, is it cheaper to buy out the neighbor and go put the pond over there than spend $700,000 in a damn detention pond under your parking lot? Yeah. So

Freddie Steen (15:12)
Jason, I love to nerd out about land development. So I’ve got to ask you this. Give me two tools that have helped you equipment-wise in the last 20 years: innovation. We love talking about innovation and investor fuel. What are two mechanically things that have come into the market over the last, you know, five years? And looking forward maybe a couple of years ahead, what are you hearing about that’s coming that’s made your job easier when you’re looking at a plot of

Jason Henrichs (15:17)
Yeah.

Freddie Steen (15:40)
3,000 acres. What are what are those equipment things that you’ve been using and why is it better than what was before?

Jason Henrichs (15:46)
A lot of it is just stuff that we use to try to stay more organized. internal stuff that we do. I mean, this is I mean, it doesn’t sound flashy, but like checklists, right? So, like, hey guys, let’s use the checklist all the way from item, you know. I mean, for example, our structural checklist for a house is 102 check boxes. Wow. Do the whole thing, right? So

You know what happens is in and around the Houston area, there’s 23 different cities, counties, and drainage districts we deal with on a regular basis. And if they if they change the criteria, one change is every two years. That’s literally one change in a month. And so we have to stay on top of on top of that. And so, like, and it’s just trying to be just more in tune with what’s going on. You know, and I mean AI helps.

Freddie Steen (16:19)
And if

Jason Henrichs (16:37)
helps with you know keeping up with with some of it ⁓ some things that we do we don’t design with AI or anything like that but we use it for organization and ⁓ so and honestly you know a lot of the the county ⁓ GIS systems have helped a lot so GIS is like I can go look at where the water, the sanitary, the storm is on most cities and counties to find out like, hey, do you have this close? You know.

Because I mean I I looked at a piece of property for a client and this realtor led him down the wrong road. Hey, you can do this, you can do that. And his nearest water line was 560 foot away and you have to bore across a four-lane road. Man, this is a, you know, this is a one-acre track. You know, he can’t absorb that cost.

Freddie Steen (17:14)
Ouch.

Now, every operator I know has a moment where things got real. I mean, maybe a deal that went sideways or a time they had to pivot fast. D do you mind sharing one of those moments for us?

Jason Henrichs (18:13)
Yeah, I mean, ⁓ I mean we’ve we’ve had to pivot on, you know, dirt quantities before or ⁓ can end up being a factor, which is like, hey, we we changed like a compaction factor, right? So people don’t know like when you probably remember your little kid, dug a hole, pulled dirt out and filled the hole back in. Well that hole got smaller somehow. I’m like, where the heck does dirt go? Right? Well it compacted down.

And it disappeared. And so all of a sudden, you know, we didn’t count for a compaction factor. And all of a sudden we’re short on dirt, you know. And ⁓ so yeah, so like, all right, let’s pivot. ⁓ let’s make detention pond a ⁓ feature. Put a fountain, you know, let’s add a whole water, put a fountain in it. So, you know, there’s a couple things like that that we’ve done. ⁓ but I mean the biggest thing with all of that is honestly it’s like communication.

Right? Don’t try to hide it. Hey, dude, we messed up. This is what it is. Like let’s let’s go. How are we gonna pivot around this? Let’s, you know. Don’t let that contractor leave the site, because that’s that’s a problem. You know.

Freddie Steen (19:17)
Pivots. That’s the kind of stuff people don’t talk about enough. I mean, honestly, you know, it’s what separates the folks who just dabble from the ones who stay in the long game long term like you. ⁓ Jason, let me ask you this. What are you most focused on solving or scaling next? I mean, what’s the next real goal for JRH Engineering?

Jason Henrichs (19:37)
A lot of it is right now, I mean, we’re just we’re trying to scale, trying to scale smart. We’re like at football, right? It’s like you can outcook your coverage, you know. It’s like if you’ve you know, you’ve seen back, you know, the touchback all the way back to the end zone, the guy runs all the way back, you know. So like but you know, the ones they don’t kick it that far, then you know, they get tackled right there at the 20. And then so and it’s a real deal. So like we have to we have to try to stay smart about

You know, our training, our hiring, our marketing, you know, because like if I double the size of my company, like I I can ⁓ I’m sure I could do that. But could I double the size of the company and still be able to knock out, you know, your site plan in three weeks? No. So and so that’s you know, gotta scale, you gotta scale smart, really.

Freddie Steen (20:26)
Really scaling, doubling the size of your company. These are the things that our audience here at Real Estate Pros really salivate about. I mean, that’s big. Especially Jason, when you’ve already got this deep entrenchment when it comes down to, you know, FEMA and some of the other land developments that you’re doing around the country. I mean, you have interest in expanding into different areas of Engineering.

Is that correct? There’s some other niches that you see are possible profitable that will be profitable in the coming years. Is that true?

Jason Henrichs (21:00)
Yes, sir. ⁓ so you know, we try to scale. And so I also like to to diversify as much as I can. So FEMA will be like a public, you know, type project. So, you know, the way I look at it is that we have another 08 happen, then then I can rely on, you know, projects from FEMA, from you know, public works, from stuff like that. And it’s not a company killer because like if you only do neighborhoods, right?

And then so say if you only do neighborhoods in in one particular market and then that market drops, then all of a sudden, like you just got cut down 75%. Like that’s a problem. So now you got this whole office and everybody, you know, mouse to feed. So, you know, we try to diversify ⁓ as much as we can, you know, but you have to diversify smart again, right? Out kicker coverage. I’m not gonna go start something that that we’re not willing to put the research and figure out how to be experts on.

⁓ in the process. So

Freddie Steen (21:54)
Yeah. I can completely ⁓ agree with you there, especially when you’ve already got this deep entrenched understanding of all dirt it is not good to dig on and this bevy of Engineering experience. The next move can either compound things or create chaos depending on how you play it. Now, I know a lot of people listening, Jason, are either earlier in their journey.

or looking to level up like you. And I think they benefit from hearing this. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Jason Henrichs (22:31)
I mean, a lot of it is is is you know, getting out there. It’s also, I mean, just and being honest, right? Like if if something’s not going, like, you know, when somebody comes to a piece of property and hey, I want to, you know, do this, I’m not gonna, you know, just to get the work and lie to them to get the project, right? And so, you know, I want that guy, I see somebody who’s a developer, it’s like this might be the first time they’re doing it.

But I want to see them 20 years from now. You know, and if if I, you know, mislead in the wrong way and I bank bankrupt, I’m like, I’m never gonna see them again, you know. And so ⁓ so yeah, I mean, we do a lot of business networking events, you know. I always try to scale ⁓ my Rolodex. People have Rolodexes anymore. I don’t know. So my Zoho account. so but yeah, so that’s that’s really

You know, what we try to do and I honestly I love helping people. So I try to help as many people out as I can. so and I think that that helps a lot.

Freddie Steen (23:30)
Well, I think that that shines through even on the pod here. You know, you can’t fake that. I mean, relationships are everything, you know, in this space. All right. Before we wrap, Jason, if someone wanted to reach out, connect with you, maybe collaborate or learn more about what you’re doing at JRH Engineering, what’s the best way for them to reach you? Yeah.

Jason Henrichs (23:53)
Yeah, just go to our website, jrhengineering.com and that’s the best way to get a hold of us. You can give us a call, email. We have a form submittal ⁓ that you can fill out if you have particular property you want to look at, put the address in, what you’re trying look at, you know, and we’ll be happy to assist you if we can.

Freddie Steen (24:12)
Perfect. Well, listen, Jason, I appreciate your time, your story, and your perspective. I mean, we need more people in this space. We’re doing it the right way. So thanks again for being here, Jason.

Jason Henrichs (24:25)
Yes, sir.

Freddie Steen (24:26)
And for those of you tuning in, if you got value from this, make sure you’re subscribed. We’ve got more conversations coming with operators just like Jason and JRH Engineering who are out there building real businesses just like you. We’ll see you on the next episode. Thank you, Jason.

Jason Henrichs (24:47)
Thank you. You have a good one.