Build-to-Rent Real Estate Strategy: Why Charles Garland Builds Instead of Buying Old Rentals

Charles Garland (00:00)
No, it’s it’s ⁓ the rents have have gone up since I would say COVID, 22, 23, ⁓ drastically. You ⁓ seen rent bases around here six, seven hundred dollars to now they’re eleven, twelve hundred dollars. 1920s, 30s model housing. somebody buys it, they f they rehab it, it’s got AC units hanging in the windows.

⁓ probably newspaper stuffed in the walls for insulation and they’re renting that thing out for eleven hundred bucks. And that’s what actually caught my attention to decide to develop here in this area because I started scratching my head and I was like, the this market is crazy. And I put the pen to the paper and I said, I can build and rent for not much more than this junk.

Dylan Silver (02:20)
Hey folks, welcome back to the show. Today we’re joined by Charles Garland, a developer and real estate investor in Kentucky. Charles, thank you for joining us here today.

Charles Garland (02:30)
Thank you for having me on.

Dylan Silver (02:31)
Now you’ve completed sixty two residential rentals, ground up construction. How do you manage being an investor while also being a developer?

Charles Garland (02:41)
Well, I devote ⁓ a lot of my time to just the development part of it and long term rental as far as ⁓ those aspects goes. ⁓ but I do if a deal comes along that’s that’s a ⁓ investable deal, ⁓ I’ll I’ll pursue it, but I don’t actively look all the time for that and seems like that works good for the ⁓ the way that I’ve work my

portfolios right now on and and things.

Dylan Silver (03:08)
Now there’s a lot of folks that are getting into development, but maybe from a you know, fix and flip or light rehab background. And of course these are two distinct segments of the real estate space. How did you get into the development side?

Charles Garland (03:23)
Well, I started out with ⁓ vacant property and it went from that to ⁓ buying and flipping and after I guess I’d figured out my time as I graduated from project to project over the years, ⁓ went from properties to vacant property to property with a structure, with no rehab, with minor rehab.

prefer not to rehab it. I preferred to just ⁓ buy and flip it. it seems like it’s worth more of my time that way. And then ⁓ I figured out that ⁓ I could ⁓ build from the ground up at a much cheaper rate than than buying and I’ve got a lot more equity in it to ⁓ to continue to build that way.

Dylan Silver (04:04)
Now when you’re looking for deals, is there any one strategy that has been successful lately for you?

Charles Garland (04:11)
It it just depends if you can, ⁓ well, you mean as far as like buying and and flipping or or buying and investing or

Dylan Silver (04:17)
Well, you know, in general, I mean there’s several different ways to look at it, right? So if you’re looking for a a property to develop on, you’ve got to find some good area and some good land, right, that you can get at a reasonable rate. But if you’re looking for a flip opportunity or an opportunity to buy and hold, that’s a different set of arithmetic that goes into that. But when you’re looking at deals as a whole, is there any one source that’s been particularly fruitful lately?

Charles Garland (05:29)
⁓ it it really depends if I’m gonna buy and hold or buy and and and sell. If it’s not ⁓ if it’s cheap enough, you can sell it. It don’t matter what area it’s in. I prefer ⁓ I mean if it if it won’t cash flow to the to the expectations of what I would want it to, I’ll I’ll I’ll buy it and dump it. ⁓ not not saying it’s a bad deal. It’s just not a deal that I want to hang on to ⁓ when I can invest my time.

into something other other that ⁓ that will make more money for ⁓ the amount of the amount of time that I put into it versus you know but I I’ve I’ve ⁓ it just really depends. ⁓ if it’s a high area that’s that’s ⁓ that’s a good area. ⁓ sometimes I’ve got really good deals, sometimes I paid a little bit more than what I wanted to pay for it, but it pays off because ⁓

It d it just depends on what you’re using it for. If ⁓ it goes

If you ca if it it’ll cash flow, I it it just all depends really.

Dylan Silver (06:23)
Now ⁓ you’re an investor in Kentucky. One of the things that’s really interesting about ⁓ Kentucky as as a whole is that it’s one of these, I would say a tertiary market, if I may say so myself, where there’s now more interest probably than ever from outside investors, where people are looking for deals, there’s more access to information. Are you seeing more and more people investing in Kentucky who may not be living in Kentucky?

Charles Garland (06:49)
⁓ as far as my and my end, I mean I don’t see a lot of investment. I see a lot of people migrating from other states and ⁓ they I’ve seen a lot that come from ⁓ different areas of the of the country, depending on what region they’re from. a lot of high tax states. It seems like people are fleeing and ⁓ Kentucky, Tennessee,

the Ohio, the Virginia area. These these areas through here, they they tend to still be affordable. in their mindset is the way I’ve been explained from them. And ⁓ so they’ll they’ll move here. ⁓ a lot of them have maybe remote jobs and things and they keep their same income but they come here and they flee the ⁓ the taxation and the government oversight, I guess they would say, and ⁓ they have a more comfortable way of living versus

staying where they are.

Dylan Silver (07:37)
Currently, does it feel like there’s a a heavy demand for single family homes in in Kentucky throughout the state?

Charles Garland (07:44)
There’s definitely the market, there’s not a lot of ⁓ there’s more demand of wants than than there is for ⁓ product on the market. So that keeps that keeps inventory high. and it tends that people in my experience have been more out to rent that that come here. not saying they all do, but a lot of them do.

⁓ and you know, I find a lot of people that don’t like to mow grass and they don’t want to they don’t want ⁓ the burden of ⁓ home repairs and ⁓ they just want to be able to pick the phone up and and call and if they have an issue they they call you and it’s took care of and they they want to go to work and and enjoy and relax and and ⁓ it meets their lifestyle and and ⁓ seems like there’s a large base of that.

That goes on around these areas.

Dylan Silver (08:28)
One thing that we’ve seen more of is build to rent communities and folks who are considering ⁓ developing a build to rent community. As a developer yourself, what’s your ⁓ feedback on BTR?

Charles Garland (08:41)
There there is a ⁓ there’s a large development that’s going in one town above me right here. And it’s a ⁓ build rent. some of it is. I’ve seen that. I’ve seen long-term living communities that they’re that they have projects going on right now, single, single level homes for elderly. basically a subdivision built for ⁓ elderly people that ⁓ they can

Basically rent. It’s a home, single family home and they ⁓ have all their needs to care of as far as ⁓ lawn care and and things back as far as that goes and they’re not wanting to ⁓ be a traditional homeowner with the responsibilities of it.

Dylan Silver (09:17)
Now, when we talk about what’s required to create a a build-to-rent community, I’m a little bit of a fish out of water in this space, but from what I understand, there’s a barrier to entry because your money’s now going to be tied up a lot longer and you don’t get that same type of you know ⁓ shorter time frame on a deal that you would in, of course, a build to sell. So it requires a specific type of of operator to go in and and do that.

Who who really can make a a built rent community? Is this, you know, something that’s exclusively for like large corporate entities or can smaller developers create BTR opportunities for themselves?

Charles Garland (10:29)
Well, I mean, I build it myself and and I’m not a a large entity. ⁓ it just depends on how you structure the deal and and and how how it plays out. you can use bank funding, private equity. you could use private equity loans or you could use private ⁓ investments as far as it depends on the deal, how much they trust you, what kind of experience you got. And ⁓

the the opportunity of of being there. I mean it it’s definitely a slower return, a lot slower than a buying a flip. So a lot of times it’s you start out it’s it’s ⁓ it’s best to have to be able to to diversify and and both to have some kind of cash flow plus some kind of investment long term.

Dylan Silver (11:12)
One thing that I’ve noticed from speaking with so many ⁓ syndicators throughout the country specifically is multifamily ⁓ commercial residential properties, right? Apartment complexes over the last couple of years have seemed to take a hit in many markets in in the Sunbelt. I’m in I’m in Texas specifically and it just outside of Austin, so I have that perspective of seeing so much.

multifamily housing go up and then it almost have a deflationary effect on rents. Are you seeing something similar out there or is there still not enough, you know, apartments out there?

Charles Garland (11:47)
No, it’s it’s ⁓ the rents have have gone up since I would say COVID, 22, 23, ⁓ drastically. You ⁓ seen rent bases around here six, seven hundred dollars to now they’re eleven, twelve hundred dollars. 1920s, 30s model housing. somebody buys it, they f they rehab it, it’s got AC units hanging in the windows.

⁓ probably newspaper stuffed in the walls for insulation and they’re renting that thing out for eleven hundred bucks. And that’s what actually caught my attention to decide to develop here in this area because I started scratching my head and I was like, the this market is crazy. And I put the pen to the paper and I said, I can build and rent for not much more than this junk.

And it’s it’s it’s that’s what it is. It’s just garbage. It’s stuff that ⁓ it’s actually six hundred dollars, seven hundred dollar rentals and and they’re almost doubling their money off of it. And kudos to them if they can get it. But you know, it’s just ⁓ they’ve changed the market in it. And ⁓ so when you build something that’s nicer, it may be just a little bit more, but you attract a different clientele. And when you step into a different clientele, you also

Step into not chasing rent. You step into not them breaking your stuff. You step into a career oriented person. And it’s it’s a lot ⁓ it’s a lot more feasible than some of these horror stories that you hear with people. It’s like, I would never do that. It’s always stopped up commodes, it’s holes in my walls, it’s I’m chasing.

from the first to the thirtieth and I finally get the last rent payment and then it starts right back over again tomorrow and it you not saying you don’t have that, but it’s the probability of it goes way down.

Dylan Silver (13:35)
You know, one of the things that comes to mind when we talk about rents that are increasing so drastically is also that there may be in in many cases a lack of, you know, workforce or affordable housing for the population that was there prior to that that rent increase. Are people there generally having a similar sentiment of, you know, we we have a shortage in workforce housing?

Charles Garland (14:40)
⁓ well yeah, that’s that’s probably never where you go that ⁓ you you run into to issues with

lack of people, skilled labor, if that makes any sense. but as far as back to like the older housing and stuff, you it’s the market’s changed. So ⁓ I mean the investor that that’s now buying into these homes, I mean you’re talking he was buying a house for in this area, twenty, twenty five thousand, f putting, you know, twenty thousand in it.

So $45,000 house, yeah, I could cash flow it at six, seven hundred dollars a door. But ⁓ now the market has changed and you don’t buy those twenty-five thousand dollar houses. Now they’re eighty, ninety thousand. And and the time you put twenty, thirty, forty grand in it on you know, a hundred and twenty thousand dollar investment, it it better it better bring twelve, thirteen hundred dollars per door. If it don’t, it don’t make no money. And if it don’t make no money,

don’t make no sense to buy it, you know. I mean it ⁓ and that’s not and that’s it and that’s if you’re using loans and capital. I mean I mean you could obviously make it cash flow if you wouldn’t if you was using strict cash, but that’s f for this conversation, that’s not a feasible for somebody to start out with. It’s it’s not ⁓ they’ve got to have a path to start it, you know, on on the way to do that.

Dylan Silver (15:57)
We are coming up on time here, Charles. Any new projects that you’re working on then also anything you’d like to mention directly to our audience?

Charles Garland (16:04)
Yeah, so I’ve completed this one project ⁓ that I currently have right now, it’s 62 units on 15 acres. I’ve recently acquired another 14 acres, 15 acres. It’s adjacent to this property, looking at building the exact same thing, probably a two year time span. and that’s what I’ve got going on as far as right now. And ⁓ I mean, anybody that there will, I mean.

I I started all this. I mean I’d ⁓ didn’t not from real estate background. None of my background is real estate. I I just kind of shift and

things as as as I can see an opportunity for money to come in on different different things. And I found that this one works pretty well. But yeah, if somebody wants to reach out to me, I’m just a small network as far as that goes. ⁓ I just advertise on Zillow and marketplace. Marketplace is actually a really good one. it’s free. Zillow’s free don’t cost you nothing. Apartments dot com is free and don’t cost you nothing.

And ⁓ use free platforms. I mean, why spend money if you don’t have to? And ⁓ I’ve got a a waiting list of people off of those platforms and I I spend zero marketing dollars. And ⁓ if you have a good product, you don’t have to spend a lot of money. You don’t have to have big billboards, you don’t have to have ⁓ a lot of ⁓ expensive

advertisement and but if anybody wants to they want to reach out and any questions or or ⁓ curious about ⁓ any advice I can give they could email me at garland and that’s G-A-R-L-A-N-D underscore Charles C H A R L E S at hotmail.com

Dylan Silver (17:36)
Charles, thank you so much for your time today. Thanks for joining us.

Charles Garland (17:39)
Hey, thank you for having me on.