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Show Summary
In this conversation, Dylan Silver interviews Dallas Barkman, a broker specializing in new construction in Indiana and Michigan. They discuss the current trends in new construction, the impact of regulations, and the dynamics of the housing market. Dallas shares insights on the strategies employed by builders, the challenges faced in different counties, and the opportunities for first-time home buyers. The conversation also touches on the rental market, investment trends, and the experience of working across state lines in real estate.
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Investor Fuel Show Transcript:
Dylan Silver (00:00)
⁓ no, they’re making money. Every home. So it’s not at this point. They are not losing.Dallas Barkman (00:00)
no, they’re making money. Yeah. At this point they are not losing.Dylan Silver (00:06)
No, they haveDallas Barkman (00:06)
they have so muchaccount, the large builders, they have so much economies of scale. They’re buying product. mean, you think it’d be our Horton. They’re buying in bulk and they get lumber, windows, everything drywall at a cheap price. And then with the contractors, they drive down the price. They say, look, we’re going to guarantee you year round work, which most contractors in our area have never experienced. But.
Dallas Barkman (00:34)
At the, at getting the year round work, you are not going to get paid what you wouldDallas Barkman (00:40)
normally get paid by a mom and pop builder.Dylan Silver (01:32)
Hey folks, welcome back to the show. Today’s guest, Dallas Barkman is a broker in Indiana and Michigan. He specializes in new construction. You can find him across social media and on his YouTube channel, youtube.com/@dallasbarkman. Dallas, thanks for taking the time today. When we talk about the new construction space specifically, I’ve noticed that thereDallas Barkman (01:51)
Yeah, thanks for having me on.Dylan Silver (01:59)
seems to be more ground up construction, more new construction happening now than really ever in my lifetime. And it’s not just from big players. I’m also seeing it from maybe former flippers who realized the new trend is to get into ground up construction. How long have you been specialized in new construction for? So a long time, a long time.Dallas Barkman (02:19)
since 96.Dylan Silver (02:23)
What do you think is the driving factor right now for all the new construction that we’re seeing across the country?Dallas Barkman (02:29)
There’s been a huge buildup of demand from actually from the great recession. It all started. And back then we had a push to tear down a lot of properties. And also we had a strong fallout of people who were losing homes and the banks tightened up credit. So we had a good three to five years of a population not buying real estate.houses being destroyed and demolished and building up demand. Then you still have the younger generation growing, graduating from high school and college. And here we have a short of your housing.
Dylan Silver (02:58)
You know, it seems like a two-sided sword, right? Because on the one hand, we all want to have affordable housing.On the other hand, when there’s new construction happening everywhere, that certainly changes the landscape. I think for the most part, positively, because when there’s an abundance of housing, that means prices should generally go down. Are you seeing as well that there’s not just the big players, but also folks who may be buying infill lots ⁓ or former flippers who are getting into ⁓ new construction? Are you seeing that trend happening now as well in Indiana?
Dallas Barkman (03:48)
Yes. The market that I’m in is a fabricated very micro market type of area. So for example, one thing I left out is the, ⁓ regulations that were enforced and put on by local communities that really stifled new construction. in the County and I’m in the construction is either high end custom homes or in fill.Dylan Silver (03:49)
Yes, the market thatarea. So for example, one thing I left out is the ⁓ regulations that were enforced and put on by local communities that really stifled new constructions. So in the county I’m in, the construction is either high end custom homes or infill.
Dallas Barkman (04:17)
That’s all we have right now. Now, if we go one county south, we have D.R. Houghton came into town and a major builder out of Fort Wayne, which is about an hour from my market. And they are building, they’re knocking out houses left and right, more of a production style.Dylan Silver (04:35)
Now, when we talk about, you know, the DR Hortons, right, the large, you know, corporate builders. Generally speaking, I think that this is providing an opportunity for first time home buyers to getlower rates to get more cost effective housing. But you also mentioned that it’s specific counties that those builders are building in. Is that because the townships don’t want them in certain areas or is that just because there’s available land out there, more cost effective land outside of county lines?
Dallas Barkman (05:06)
⁓ it, it’s, it’s a mix. So the county I’m in, Elkhart County, we are very industrialized andthe government has wanted, we’re also very agricultural. And so the government has wanted to keep that mix. And so there are restrictions on development and we are just starting now to have the turn where the officials see, we need housing. And so we have two.
Dylan Silver (05:17)
Yeah, I mean, when we talk aboutDallas Barkman (05:34)
large developments going in, as you know, it takes a year or two to sometimes get streets in.Dylan Silver (05:43)
the process of building out a subdivision. think the general public may not be aware that the builders foot all of the cost in most cases. I mean, there may be situations where the town may pitch in, but I think that that’s less common than the builder doing basically everything. So there’s holding costs right from the beginning, right? And so if you have utilities take a while to get out there, if permitting and so forth, if any of this takes more time than predicted. It’s a risk, right?Dallas Barkman (06:14)
Right and what’s interestingthe two major developments going in One has taken about two years to plan and there was state money given to help fund the project and Ground was recently broken in August. It’s going to be a huge community with several thousand sites and local builders and then interestingly enough dr Horton is involved in the other one with an investor and
Dylan Silver (06:20)
One has taken about two years to plan and there was state money given to help fund the project. And ground was recently broken in August. It’s going to be a huge community with several thousand sites and local builders. then interestingly enough, D.R. Horton is involved in the other one with an investor.Dallas Barkman (06:43)
However, they are doing a take down on the lots. They don’t have any risks on it. The developerThe developer has the rest. And so the takedown agreement that they have is two to three lot per month. Wow. And we’re, they’re just getting the gas warnings in on now. So we’ll see if they actually follow through and start to purchase the two to three last, but they are actively marketing the
Dallas Barkman (06:49)
has the risk. And so the take down agreement that they have is to purchase two to three lot per month. And they’re just getting the gas lines in right now. So we’ll see if they actually follow through and start to purchase the two to three lots. But they are actively marketing the community.Dylan Silver (07:08)
Break that down for me. Cause that’s, that’s an interesting strategy. So there’s a developer who’s getting it shovel ready. Is that what’s happening? And then DR Horton is taking it from there.Dallas Barkman (07:19)
Yes, that is correct. They’ve worked in tandem and that was just the agreement. They were a little unsure of the market due to some things they’ve heard about the government oversight and that kind of thing. And that was the guidance that I had mentioned that they should probably take.Dylan Silver (07:19)
I’ve heard of this and I don’t know if this is generally true or if this is true in certain instances, but not most that some builders will purchase, especially in larger communities.⁓ where there’s potentially several ⁓ hundred homes, right? They’ll purchase the first three homes in a new area to set comps. Is that something that builders are doing or that you have seen done? I have not seen that, but I wouldn’t doubt that that happened. Because when I think about the strategy here, and I don’t know because I haven’t…
Dallas Barkman (08:02)
I have not seen that, I wouldn’t doubt that that happened.Dylan Silver (08:14)
participated in this side of the business. But when I think about new construction specifically, and I think about some of the lower rates that we were seeing out of new construction, especially, you know, comparing that with what flippers were able to source for, or what buyers were able to source on flip homes, it just seemed like, hey, this is almost, and I don’t like the term artificial, but it seemed like how were they able to get these rates that are just so much lower thanyou know, what people can buy outside of the major builders, right? And you come to find out, well, they’re buying down rates. And then at the end of the year, they’re basically, you know, fire sailing homes, because they have to meet a quota. With, you know, larger new construction and these corporate entities, do they have a little bit of a different model where not necessarily every home has to be a winner?
Dallas Barkman (09:03)
⁓ I didn’t catch that last part and I’llcome back to that. But what I can tell you is the two, I would call them a mom and pop builder and more of a regional corporate builder in our market will not lower prices at all. But they will offer to buy down the rate similar to the big players to set keep those comps in line. But yeah, if you want to the last part of that question I didn’t get.
Dylan Silver (09:08)
didn’t get. So for the for the large corporate builders is every home a winner for them or are they potentially selling homes for it for a loss in some cases?
It’s it’s not you know, a situation where you might see like like a dealership if you’re going to buy a car where it’s the end of the year and they’re they’re fire selling homes. No, they haveDallas Barkman (09:38)
no, they’re making money. Yeah. At this point they are not losing.No, no, they have so much
account, the large builders, they have so much economies of scale. They’re buying product. mean, you think it’d be our Horton. They’re buying in bulk and they get lumber, windows, everything drywall at a cheap price. And then with the contractors, they drive down the price. They say, look, we’re going to guarantee you year round work, which most contractors in our area have never experienced. But.
Dallas Barkman (10:21)
At the, at getting the year round work, you are not going to get paid what you wouldDallas Barkman (10:27)
normally get paid by a mom and pop builder. And the same goes for the salespeople. Salespeople’s commissions are quite a bit lower than what a broker or an agent is going to make. However, they’re going to have model time. They’re going to have some advertising. They’re going to be able to go out and talk to all the realtors and say, look, you know, this is what I got. And so it is a cake job, but they make you work.Dylan Silver (10:28)
Hey, I’ve I’ve actually had a Lennar, I guess it would be a Lennar agent on the show here. And as someone who’s not in that side of the business, it struck me as a great way to to get into the on ramp of being active in real estate, because you’re to get so many reps in. Right. You’re to be talking to homeowners. Now, from what I understand,either you can’t have a real estate license or it has to be inactive in order to, for the most part, in order to work with the national builders. But I mean, to talk about a great opportunity to meet as many buyers as possible.
Dallas Barkman (11:20)
It’s right, right. On both on both factors. That’s how I got into real estate by circumstance. I was actually in the securities business in college part time and got recruited by sales manager. And so that’s how I got into real estate on and itis a great opportunity. You get to know the business, know folks. The second part was I forget.
Dylan Silver (11:38)
From what you said that addressed the general idea that I was stumbling to make, which is that for folks who are trying to get into the on-ramp of real estate, there’s so many different ways to do it. One of the less talked about ways is through the builders.Dallas Barkman (12:03)
I know, yeah, not dinner, I know what I wanted to say. It depends on state specific onDylan Silver (12:07)
Now,Dallas Barkman (12:07)
your licensing. In Indiana, you do not need a license.Dylan Silver (12:11)
from what I understand, they typically don’t ⁓ want you to be selling outside of working for the builder, right?Dallas Barkman (12:12)
or a new construction to work with a builder, if you’re an employee of a builder.that is correct. You are captive with you are captive if you’re an employee now that has changed somewhat what I’ve noticed in the market and I’ve been approached by DR Horton and other builders
Dallas Barkman (12:36)
is look, we’re a little slow right now. So in this community or we’re trying out this community, can you list our homes or can you do open house time for us? And we’re not really wanting to take you on as an employee, but we know you’re experienced and, ⁓There are several builders doing that in our market. think it’s our market that’s very different from the larger market, metro markets, that’s just a different
Dallas Barkman (13:03)
model to sell where they don’t have to take on the overhead of an employee.Dylan Silver (13:03)
I do want to pivot a bit here and ask you about the rental market out there, and then also the types of properties that you’ve seen investors looking at. Generally speaking, there’s so many different ways for folks to be an investor, short-term rental, long-term rental, mid-term, travel nurses, and so forth. But you also have people that are buying small multi-units andyou know, doing pad split where they’re divvying up the rooms in a home and renting them out individually. Are you seeing any trends out there for investors that maybe have been different than the previous cycle?
Dallas Barkman (13:37)
Mm-hmm.⁓ boy. It’s pretty, well, we’re seeing more construction of larger units in our market due to the tax credits that we’re the government had, but that’s those have come to a completion almost. That would be the biggest change in my market that I’ve seen.
Dylan Silver (13:47)
Yeah, that 100 percent bonus depreciation and everyone doing cost seg analysis is interesting because it’s now, you know, a huge a huge tax opportunity. So.in addition of course to ⁓ the benefits of cash flow, you’re also able to take this large, large deduction. I do wanna ask you specifically about ⁓ being licensed in two states. You’ve got in Indiana and Michigan. How did Michigan ⁓ come about and also what’s it like doing business across state lines?
Dallas Barkman (14:37)
All right. I’ve always worked for builders who were licensed in Michigan. My maincore is Indiana. And due to interest rates rising and the inflation going up, the builder I was with several years ago, we parted ways. There was a major factory that laid off and I lost seven sales in one month. So in that transition, there’s a builder called Allen Edwin Holmes out of
Dylan Silver (14:44)
That’s how it starts, right? I think about Oklahoma, which is my neighboring state to where I’m licensed, Texas and Oklahoma.Dallas Barkman (15:05)
out of Kalamazoo, Michigan, who built about a thousand homes a year. And their main core is Michigan. And I started having clients for Michigan. And in order to get paid on those clients, I had to get my license.Dylan Silver (15:26)
Dallas and Oklahoma are just a hop, skip and a jump away from each other. But we are coming up on time here though. Where can folks go to reach out to you? Maybe they’re looking at new construction in Indiana or they’d like maybe your feedback on a project that they’re working on in Indiana. How can folks reach out to you?Dallas Barkman (15:46)
And my Zillow page is probably the easiest way. Just Google Dallas Barkman. That’s B like boy, A-R-K-M-A-N. And DallasBarkman Zillow. You can find my stats there and my contact info there.
for taking the time today. Thanks for coming on the show. Likewise. Thanks for having me.
Dallas Barkman (16:04)
Likewise. Yeah, thanks for having me.
