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Show Summary
In this conversation, seasoned real estate developer Matthew Otero shares his journey into the real estate industry, discussing his early experiences, the challenges of financing development projects, and the importance of understanding regulations and building relationships with city officials. He highlights the current trend towards new construction over flipping properties and offers insights into managing contractors effectively. Matthew also shares details about his current projects and the lucrative opportunities in the real estate market.
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Investor Fuel Show Transcript:
Matthew Walter Otero (00:00)
unless you didn’t know how to do dewatering, which I didn’t at the time, it would have cost me probably a couple hundred thousand dollars on the loan that was a million and a half dollar loan at the time. I would have lost it all. But because of the business I was in…I followed the company and for three days and three nights, I watched what they did, dewatering. And I created my own dewatering system for that project. And I managed to do it for $60,000.
Dylan Silver (02:04)
Hey folks, welcome back to the show. Today’s guest is a seasoned real estate developer with experience across Texas, New Mexico, and California. Currently in Texas, please welcome Matthew Otero. Matthew, welcome to the show.Matthew Walter Otero (02:22)
Hello, thank you for having me.Dylan Silver (02:24)
It’s great to have you on here, ⁓ Matthew, and I always like to start off at the top by asking folks how they got into the real estate space.Matthew Walter Otero (02:36)
Mine began at such an early age. ⁓ I grew up in the mechanical business, which is plumbing, heating, and cooling. ⁓ We did a lot of government contracts with the laboratories in Los Alamos and Sandia National Laboratories, which are the two government ⁓ entities, offspring government entities that built the atomic bomb. So⁓ and while we did some of that mechanical work, my father did a lot of, ⁓ mechanical work for my uncle who was a builder and, develop homes, properties and homes. And I was fascinated by this man because he’s just big Hispanic guy was retired sheriff. And I mean, he kicked everybody around on the construction site to make things happen.
But when it came to customers, that guy was just like a pussycat. He knew how to gain the customers and do the PR. And that was just fascinated by that as a little boy. And then I continued to grow up in the mechanical business and I started my own mechanical business at 26. And by 28, I started developing properties. ⁓
It was unique in the developing the properties that I did because there was this one property that I wanted, but I didn’t have the money for it. I didn’t have no cash. didn’t have no down payment. I was living in my mechanical business, basically contract by contract turning, I was turning over half a million dollars, but you know, what was coming in was going out just as fast. But what happened is this property, it was about 30 acres, was in a trust fund.
that owned it and I made an offer to the trust fund that, I’d give them $25,000 down and pay for the split of the properties and develop it. But I had buyers before I did that. I had two contractors and oddly enough, I had a brother and my father-in-law who wanted to build new homes. So I took third down payment, used…
their down payments as the down payment I gave to the trust negotiated the contract that after the properties were split and
building permits were issued, they would do acre drill lot releases on the amount of what they were selling, which they were selling at that time, I think it was $18,000 an acre, which is cheap. You know, this was back in the, in the, in the nineties, late nineties. And ⁓ so when they did that, we ended up
Dylan Silver (06:03)
Yeah.Matthew Walter Otero (06:13)
with 16 lots, they took their shares. ended up with, I think, nine lots of my own after it was all said and done. And they acre and a half lots, but we were, I was selling them for, I think it was $65,000, or I was building homes on them, construction and, you know.Including the cost of the lot for $45,000 an acre rather than the $18,000. So I just started from that and I started going haywire on the bank saw what I was doing and they were they were lending me loans on buying property developing it and then I got into because I had my mechanical
Dylan Silver (06:42)
Sure.Matthew Walter Otero (06:55)
licenses which is all the plumbing, heating, cooling, gas in New Mexico. I applied for a utility license and that was hard. It took me two times to pass that test. But the utility license allows you to do all the infrastructure which is the water lines, the sewer lines, the road construction, the sidewalks and all that. And I just started developing property from there. Borrowing paper money from the bank and building out properties.Dylan Silver (07:16)
Yeah.I think one of the things that ⁓ real estate investors talk about now currently when they’re looking at smaller projects is holding costs, right? But when you have a large ⁓ project, when you’re building out a subdivision, when you’re bringing utilities to an area, there’s, of course, massive holding costs involved in these deals.
Matthew Walter Otero (07:46)
A great deal. In fact, back then, banking loans were, you know, during the crisis of 2009, all banking regulations changed. And the idea of developing with banks, you can consider yourself a financial suicide.It’s just impossible to do the way that the funding has got to be paid in the interest payments. Whereas back then when I did them, the bank would hold the paper and then roll over the paper and pay off the loans when they were doing me construction loans and they would collect for each lot. You you can’t do that now. That was double rolling on the same paper. And, you know, of course everything changed. it is such a, unless you don’t have the full fledged cash to develop all the property.
and you use investors, that’s the only way it would work. Because the cost, you know, you could take, let’s take for instance, back then one project, you’d never know what you’re gonna face. And one project, even though I knew it took a lift station for the sewer line, I never knew nothing or I never recognized the idea of dewatering. And I don’t know if you know or familiar with dewatering in a project is, it’s when you know, you’re putting all your water pipes below the water table.
Dylan Silver (08:41)
I agree.Matthew Walter Otero (09:07)
unless you didn’t know how to do dewatering, which I didn’t at the time, it would have cost me probably a couple hundred thousand dollars on the loan that was a million and a half dollar loan at the time. I would have lost it all. But because of the business I was in…I followed the company and for three days and three nights, I watched what they did, dewatering. And I created my own dewatering system for that project. And I managed to do it for $60,000. And
because I did my own on that project, I did a couple more contracts, but dewatering wasn’t my thing. Developing was, you know? So yeah, you’re right. The unseen of infrastructure and not having the experience or having a developer
Dylan Silver (09:45)
That’s it.Matthew Walter Otero (09:56)
of infrastructure, the developing contractor. Having the developing contractor do the work for you,they’re the ones that make the money. If the contractor, if the developer, he’s lucky if he makes maybe 20 % of what the developing contractor makes. you know, unless you know how to do it, and I just happen to know how to do it, so it becomes quite easy for me.
Dylan Silver (10:58)
I want to pivot a bit here Matthew and ask you about some of the behind the scenes efforts that go into the paperwork and the regulation involved and the connections with cities and counties. When you’re doing developments these deals take time but they also take time to nurture these relationships. It’s a two sided coin right.Matthew Walter Otero (11:23)
It’s a difficult to decide requirement depending on the area you live. I’m here in Texas because Texas, and that’s one reason why Texas is flourishing. ⁓ It’s very deregulated. I mean, it just doesn’t have the regulations that other states have. ⁓ I tried to develop in California back about 15 years ago, butWhen I hit my first hurdle on the development property that, you know, there was this one bug I had to test for, that you had to stop the project and wait for the migration of this bug for six months. You know, that puts everything on hold. That puts the fact that you purchased the property, you got contractors lined up, you know, that one bug regulation.
just discourage me of doing anything in California. know, so yes, there are, unless you know all the hurdles and like even developing here in Texas, you know, you have to meet the burden of what their regulations are. But it’s simple if you know how to read and understand the regulations. But that can be difficult too, because the regulations are pretty much like the Bible, I call it, you know, and not that I’m a strong Christian or anything else.
Dylan Silver (12:34)
Yeah. I won.You need some translations.
Yeah.
Matthew Walter Otero (12:45)
Butit’s the translation and taking from one end and figuring out what to do with the other end. the Bertesen, if you don’t know how to explain to the city officials, they only go by the rules of this book. And 90 % of all city regulators don’t understand their own laws because they’re implemented by engineers that they’ve hired to create these laws in the books to develop.
Dylan Silver (13:04)
The rules of the book.Yeah, that’s a hundred percent my experience as a realtor. ⁓ It’s interesting that these systems, these regulations, the contracts themselves become so long, so complex. ⁓
you know with attorneys reviewing them that the people that are using them most day to day have maybe a very much surface level understanding of how to go about the process but when issues arise it quickly becomes tricky or hairy or expensive. I want to pivot a bit here and ask you about what I see to be a trend across the country but definitely in Texas where there does seem to be a big push for new build.
both from builders from lenders from builders that are vertically integrated with lenders even from Fix and flippers seeing that the fix and flip game may be getting more challenging to make a buck on and so people are Potentially moving more towards new builds new construction. Are you seeing that trend at all as well?
Matthew Walter Otero (14:23)
I am and when you say that it’s interesting that you say it on the flips because we had talked about this earlier. Money can be made on flips but the one burdens you have on a flip, unless you don’t know what you’re doing, your subcontractors can get to you and your subcontractors can drain you financially.And in that same token, so can the city officials drain you financially, you know, because your plan is to buy a flip and flip it, any typical flip on any home, whether it be new construction or old construction, ⁓ should not take no more than six months, the average three to five months.
But in an inexperienced way of not having to know all the regulations, that’s what takes time. And the trick part about a flip is people
The average customer of the home buying industry, two things about them. They don’t see and they cannot picture the end result. So when they come into a renovated home or they come to a property that all the dirt is just torn up and spread apart, they have no concept on their mind what it’s gonna be for their home. And the second part is if in home renovation, if you can’t take a 70s or an 80 home,
even a 50s home like my beach home here and renovate it to make it look like a brand new home rather than a repair and a patch up. That house is going to sit on the market for a long time.
Dylan Silver (16:40)
No question. Homes are sitting right now as is. And so if you’ve got a home that’s, you know, an old or aesthetic, it’s not going to be able to compete with homes that have incentives, rebates, you know, lower interest rates that are brand new, even if people pay a little bit more for them. I want to pivot a bit here, Yeah.Matthew Walter Otero (17:01)
Yeah, and exactly that’sgetting back to your comment about why the new home market is so valuable right now because it’s done. It’s completed. The people walk through their home. Of course, staging is one of the simplest things, the most important thing they do in a home to make people understand. Staging is when they fill furniture in and put pictures and everything. They get the sense of what their home is going to be like when they move in.
Dylan Silver (17:27)
That’sexactly right. Without the staging, you have to use your imagination. you know, however much money people spend on the staging, it’s more than worth it. I wanted to ask you about managing crews and managing contractors, because this is really what separates success from the rest, right? Because you’ve got to be able to manage not just one site, but potentially multiple. And even for folks who may be doing flips and scaling that business, it’s not
subdivisions,
right, but it is multiple job sites. What’s been your ⁓ best takeaways for folks who may be looking at managing crews or multiple crews and what advice would you give to folks who are looking at embarking on that?
Matthew Walter Otero (18:15)
Okay, you’re very, very correct in that category. ⁓ Again, like dealing with banks on developments, dealing with subcontractors on homes, unless you don’t got the right ⁓ system with your subcontractors, that can be suicide as well too. Because when you’re waiting for your ⁓ sheet rocker to sheet rock and you’re anxious to sheet rock, but your electrician, your insulation, your…plumber hasn’t done something right. That she worker is going to come in and say, oh, well, you know, this is not right. He’s going to move on to the next job. And the next job, it’s going to take him three or four days. And he may even have another one lined up to that. And if you don’t have these subcontractors, cruel is what I say, like the corrupt world of having politicians in your pocket. If you don’t have these subcontractors in your pocket.
You might as well not be in the business at all because that’s another way that you’re going to sit on that home indefinitely, even with development. Because having the crews at your service is most important to moving that project effectively and efficiently. if I always tell if somebody wants to get into real estate development or even in the home construction.
Find at least three or four partners not partners in the actual home renovation but create a kind of like a organization or a a ⁓ I don’t know what the exact word is that i’m looking for a coalition with with
Dylan Silver (19:56)
Yeah.Matthew Walter Otero (19:58)
controlling these subcontractors that you’re talking to another guy that owns and is flipping the home or two other guys and you’re working together to where you can keep these subcontractors in your pocket for when you need them.Because if you’re doing it by yourself and these subcontractors are gone, they’re gone. You may not see them anymore and you may have to be fighting for another subcontractor that even though when you put out your whole financial plan of what this home is gonna cost to flip and you had a certain budget based on one guy that you felt good about when you were gonna do the subcontracting on electrical, that market can change so fast depending on supply and demand.
The work is available, they’ll give you a good price. And even when they’re bidding on it on paper, they’ll give you a good price. But when they’re busy, they’re gonna shoot it through the sky. And you’re lucky if you’ll be able to get them. So you need to create a coalition of builders so that you can have these subcontractors at your beck and call.
And having subcontractors that have a good crew is most important. Making sure they have all their paperwork up to date from 10 nines to employees to insurance policies. Insurance policies can wipe out the developer because that’s the burden on you as the project owner. That if that guy doesn’t carry the right insurance and his person gets hurt on your property.
Dylan Silver (21:20)
you.Matthew Walter Otero (21:28)
They’re gonna sue you. They’re not gonna sue the subcontractor. Subcontractor’s not gonna have anything to nickels to rub, you know?Dylan Silver (21:36)
That’s, you know, a little bit of gold that we just got from you talking about how to really protect yourself, but also how to potentially partner with people strategically, not necessarily as a JV, but to keep people within your sphere of influence so that they aren’t, you know, jumping ship to the next location. ⁓ Matthew, we are coming up on time here, though. ⁓ Any deals that you’re currently working on,⁓ right now or what’s your activity like in the real estate space these days?
Matthew Walter Otero (22:13)
I got two projects I’m working on. One of them is a partnership I bought with two other partners about in 2022, which I think was pre-COVID. And I don’t know if you’re familiar, you said you’re a relative in Texas, so you obviously heard of Hurricane Harvey.Dylan Silver (22:34)
Yeah.Matthew Walter Otero (22:34)
And HurricaneHarvey came into actually into Rockport. The eye came right in here, moved out of the ocean between here and Houston and went back into into Houston and flooded all Houston. But the actual eye was here. And so I was able to buy properties. A dime on the dollar because.
those people that were living here and experienced that bad thing, they were freaked out by it. It mentally got them disturbed and they took what they could for their properties and their houses and moved out. And a lot of them, the insurances didn’t pay right because they didn’t have the right flood or the right hurricane insurance and ⁓ they still had the mortgage and they only paid one for instance is 16 acres that I have that was split into
Dylan Silver (23:06)
Wow. ⁓Matthew Walter Otero (23:23)
27 half acre lots. The guy had the 16 acres and the mobile home mortgaged together, but the mobile home, they only gave him enough to pay the property off and not the mobile home. So he still had the burden of the mobile home to pay off.And so we were able to pay him that difference and give him some profit in his pocket and picked up the property and I developed it out. So I’m holding on to that one. It’s 26 half acre lots, private community. It’s gonna have a gated entrance, high end home. Anywhere from the homes will be built anywhere from 600,000 to a million, two million, three. Second was in a town called Seton, Texas.
There was a road steel company that came in from the east and because of the deregulations here in ⁓ Texas They built a 1.7 billion dollar plant in a town that only has 3,000 residents and they’re just barely finishing up the plant so they’re not even in full operation and I just happened to pick up five acres and I designed and developed it for 40 lots 40 townhouse lots and
That house is still, I mean, home renovations, that’s one area that if you want somebody that is waiting for a home renovation, it’s in that area because there just no houses. They’re moving into the town of Corpus Christi. They’re moving into even here in Rockport and buying homes or renting apartments and driving 30 miles because this town was just, it wasn’t, the town brought the company, but they weren’t ready for the impact of the residents.
Dylan Silver (24:53)
Yeah.Yeah, that as often hap
Matthew Walter Otero (25:08)
So those are thetwo projects I’m holding on. So with my two properties, I’ve got all the properties are paid for in full. I have the infrastructure and designing that I paid out of my own pocket and that’s paid for in full. I just need the horizontal infrastructure, which is about a million between a million one on one project and a million five on the other. But we’re talking.
Dylan Silver (25:27)
Matthew,can folks go if…
Matthew Walter Otero (25:31)
We’re talking $30million in home revenues over the next 10 years.
Dylan Silver (25:37)
Where can folks go if they may be interested in reaching out to you about either this deal or maybe feedback on a deal that they have? How can folks get a hold of you?Matthew Walter Otero (25:48)
I’m on Facebook, Matthew Otero, very easy to look up. ⁓ I ⁓ have the logo of Amcorp Property Developers. ⁓ I don’t advertise much because I do more of my own projects and I’m not really doing much right now. I consult with a lot of contractors and I do home inspections as ⁓ a partnership with an engineer.So I do home inspections for the windstorm. ⁓ yeah, Matthew, Tara, or through you, if they contact you, I’m sure you can forward in the information. ⁓
I would, would, if people have ideas, I’m easy to share with ideas. And if you want advice on how to move these properties or move homes, I’m good on that too. And if you want to go on partnerships on, the guidance of my experience on how to make it happen a lot more, I’ll tell you one thing that’s going to be a very good industry to get into right now. If you can create a partnership of investors with about, ⁓
And this is a high number to be playing with, it’s still very profitable. It’s between five and $15 million is buying old apartments and turning them into new, either a complete renovated apartments or back what they were doing in California. And it’s worked quite well as they turn these apartments into condos. And it’s very lucrative.
Dylan Silver (27:03)
Yeah.Yeah, that would work.
Matthew, ⁓ thank you so much for coming on the show here today.
Matthew Walter Otero (27:19)
Thank you, thank you for your time.
