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Show Summary
In this conversation, Dylan Silver interviews Luis Daniel Roque, a fund manager and private lender, discussing the intricacies of real estate lending, particularly in the context of private lending and modular homes. They explore the evolution of lending practices, the rise of modular homes as a solution to the affordability crisis, and strategies for new investors in the real estate market. Luis shares insights on navigating investment opportunities, the importance of working with experienced professionals, and the dynamics of various real estate markets.
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Investor Fuel Show Transcript:
Luis Daniel Roque (00:00)
Yeah, I mean, it really comes down to the grind ⁓ where is getting back to basics, right? I see the successful flip flippers and we have several clients that are extremely busy. They have three, four deals in a given month. And I mean, that that’s over 20, 30 deals that they do in a year. And it’s ridiculous how someone can still find flips, but they’re being creative. It’s not just about the flip. It’s understanding what is needed locally in the market. Like you were saying earlier in regards to ADUs.Well, if you’re just looking for a fix and flip in a busy area like maybe Tampa or Orlando, you’re not going to find any. But if you’re looking to add value by adding an ADU, now you’re generating your own type of business. So I like to think of people that are creative like that as those. I play poker, for example, right? I like to play poker. And sometimes you don’t get any cards. Well, you got to get out there and you got to make your own luck. And same in this business. You got to get out there and create your own business opportunities by being creative and looking at value added opportunities.
Dylan Silver (02:31)
Hey folks, welcome back to the show. Today’s guest Luis Daniel Roque is a fund manager, entrepreneur and private lender focusing on funding smart, profitable deals that protect capital and create real upside. He works with investors and operators across residential construction and hospitality projects, blending discipline underwriting with long-term vision. You can find him online at hiscapitalgroup.com. Luis, thanks for taking the time today.I always like to start off really at the top. And you’re involved in a number of different segments of the real estate space. I’d like to dive into the lending portion of real estate. Of course, when we talk about ⁓ real estate lending in particular, you could underwrite the deals, you could find the right deal, but it stops and ends with the lender.
I know this as a single family, a realtor and then working with investors. But of course at any scale, lending is going to be where the deals start and end. How did you get into the lending space?
Luis Daniel Roque (03:35)
Yeah, so my background comes from lending. ⁓ I started at a very early age at Bank of America. I was a VP of the lending division there and I stayed there for quite some time. I did great. Then, of course, I joined the current company that with. I became a partner and we grew this into a development firm and then we also opened up our private lending arm in 2013. So I do have a background in lending. That’s really what I was… ⁓I started very early age and then of course my background is in finance.
Dylan Silver (04:09)
Now when we talk about private lending, this spans a number of different asset classes. I think a lot of people are familiar with hard money loans. Is that the segment that you’re lending and are you looking at another ⁓ segment of real estate?Luis Daniel Roque (04:23)
Yeah, see, and we are a private lender, but we also consider ourselves the hybrid of hard money and private lending. A private lender would be somebody that is probably in your neighborhood and is able to underwrite the deal within a day or so, just walk by the property and give you the money in 24 hours, 48. We are quite fast, but not that fast because we do business in most of the country. And a lot of our capital, in order to be able to turn it,and deploy capital, we have to be able to sell it in the secondary market. So what I mean by this is we have quick underwriting, we can deploy capital fast, we are looking at mitigating factors to help you
the deals and we are extremely creative, but we’re not going to be your private lender that’s going to give you the money just by looking at the property tomorrow and give you the money in 48 hours. So it’s a balancing between hard money and private money.
Dylan Silver (06:04)
It’s a collaborative approach. think for my vantage point, it’s better to have a little bit of skin in the game like that because if you’re not invested in it yourself, I know lots of folks who don’t want to ever have to deal with the portion of the business of what happens if we have to overtake this property. At the end of the day, the lender always has to think about, if we have to take this over, can we do it ourselves?Luis Daniel Roque (06:32)
Yeah, we are not a lender that is looking to foreclose. We don’t want to foreclose. We want our borrowers to be successful. We want them to make money. That’s why one of the matrixes that we look at is profitability, right, on any given deal. But we analyze deals, we give a lot of recommendations, and we want them to make money. We don’t want to take over the deal.Dylan Silver (06:52)
Now, when we talk specifically about some of the segments of real estate that people are getting involved in right now, I was talking to you before the show about ADUs in California. There seems to be more ADU development in California than anywhere else in the world. But we’re also seeing people get into a number of different asset classes outside of single family fix and flip or buy and hold. What are some of the segments that you’re seeing gaining momentum?Luis Daniel Roque (07:20)
Yeah, the definitely creative creativeness is the play right now. ⁓ We are a developer as well. We develop properties. As I mentioned, we have a strategy in our fund where we deploy some of our capital by lending it. But then we also have our own projects. One of the things we’ve seen to tackle the affordability crisis in the United States is building modular homes. And throughout the East Coast, we’ve been buying land. We put the services in place and we’ve been placing modular homes, which areNot a lot of people are familiar with modular homes. There’s quite a difference between a manufacturer home and a modular home, and I think that’s kind of picking up in the industry.
Dylan Silver (07:58)
Yeah, I’ve seen that as well. The modular thing is quite interesting because people think, you know, of, you know, maybe ⁓ a manufactured or a mobile home when they hear this word modular. But I’ve been to a modular home ⁓ factory, if you will, where they put together these modular homes. And it is a stick-built home from thethe ground up effectively just off site, right? And so in many cases, even a higher build quality, because you’re not dealing with the conditions outdoors that would come with putting up a stick built home on site.
Luis Daniel Roque (08:36)
Totally. mean, most of the requirements that the cities and municipalities have for these homes are outperformed by modular homes. So you get better earthquake resistance, wind resistance, fire resistance. When it comes to comparing apples to apples, a modular home is a much better built. It’s just that there is a problem in regards to getting those approved with some cities. I believe now cities are open toto hear more about these requirements and being able to work with this product because it does provide an avenue for affordability.
Dylan Silver (09:13)
Yeah, that’s a huge thing. mean, especially I’m from the East Coast originally. And so I know exactly how much of a need that is. Now, if you take these modular homes and you put them in some of these areas, I’ve seen even some modular homes that are almost indistinguishable from on-site stick-built homes. Can it provide a substantial ⁓ cost reduction?versus ground up construction in those areas, because I know of course the land is still going to be expensive. Is Modular going to provide them some level of cost reduction in those higher priced areas?
Luis Daniel Roque (09:51)
Yes, mean, for example, we’re building quite a few near Orlando, between the corridor of Orlando and Tampa.Our cost for a three-bedroom, two-bed, 1,200 square foot home, single-family home, with a two-car garage, the driveway, grading the lot, clearing it, of course, and installing the home is going to be about $210,000 max, including everything. That’s the turnkey solution.
Except for the land, of course, the land is the variable cost. But if you look at that, and that includes a driveway, includes a two car garage, really, our cost is roughly around $135 a square foot. Those are incredible prices. You can get those in the ground of construction stick build.
Dylan Silver (11:14)
Now, I would like to pivot a bit here and ask you specifically about working with investors across the country who are getting into some of these spaces. I’ve seen more and more people get into modular homes, get into ⁓ ADUs, get into self-storage, ⁓ all different what I would call…Creative land deals really specifically where you you have some existing land You’re either looking at developing it or adding another structure on there and in many cases These are folks that are coming from another asset class like they may have done or segment or real estate They may have done fix and flip or they may have done you know short-term rentals and now they’re moving into some of these other spaces when you’re looking at funding deals for someone who’s newer in
let’s say the modular space or someone who’s newer ⁓ in really any segment of the real estate space. Are there any factors that would guide your decision making as a lender, whether that’s prior experience or, you know, are they a contractor themselves, that type of thing.
Luis Daniel Roque (12:21)
Yeah, we’re always looking at ⁓ compensating factors in order to make the deal make sense, right? I would like to think that we are the lender that says, yes, but I don’t want to say no. I want to say, yes, I could do it, but I may have to add these caveats or conditions in order to make it work. And for modular home, I don’t see a lot of lenders being willing to work with modular homes because it’s new in the industry.Well, we are one of the few lenders that are actually working with borrowers, working on these modular homes. We do require experience, at least two deals in experience for some fix and flip or ground to construction. So they have to know how to analyze an investment, right? But when it comes to any regular fix and flip, we work with brand new investors that have never done a deal. But we’re always looking at mitigating factors, whether they have some liquidity,
Maybe they have some experience as a foreman for a large construction company. ⁓ Life experience and deal experience is taken into consideration in order for us to mitigate the risk.
Dylan Silver (13:28)
I’d like to ask you specifically about those folks who are getting into, ⁓ let’s just say the fix and flip space. I know that things are changing right now, rates are coming down, but for the last couple of years, it’s been somewhat challenging to be a flipper, especially if you’re competing with corporate builders who are putting up subdivisions in so many parts of Texas and so many parts of Florida and surrounding states. Do you have any…feedback for folks feedback or advice for folks who are newer flippers and are looking at getting into the game right now.
Luis Daniel Roque (14:01)
Yeah, I mean, it really comes down to the grind ⁓ where is getting back to basics, right? I see the successful flip flippers and we have several clients that are extremely busy. They have three, four deals in a given month. And I mean, that that’s over 20, 30 deals that they do in a year. And it’s ridiculous how someone can still find flips, but they’re being creative. It’s not just about the flip. It’s understanding what is needed locally in the market. Like you were saying earlier in regards to ADUs.Well, if you’re just looking for a fix and flip in a busy area like maybe Tampa or Orlando, you’re not going to find any. But if you’re looking to add value by adding an ADU, now you’re generating your own type of business. So I like to think of people that are creative like that as those. I play poker, for example, right? I like to play poker. And sometimes you don’t get any cards. Well, you got to get out there and you got to make your own luck. And same in this business. You got to get out there and create your own business opportunities by being creative and looking at value added opportunities.
Dylan Silver (15:41)
Now, when we talk about flipping in California, I think this is something that a lot of people ⁓ may sometimes shy away from just because of the higher price points. But on the flip side of that, you have the higher exits as well. If folks are flipping in California, can they, at least right now, bank on a quick turnaround on the sell side? Or are these deals potentially sitting on market for some time?Luis Daniel Roque (16:07)
Yeah, you definitely have to take some carrying costs into consideration when it comes to that, because I see some properties taking time, especially on the higher end segments of the market. The reality, it really comes down to affordability. Right now, we’re at a part of the market where rates should be coming down. But then we also see a lot of creative finance coming into the marketplace. That is a factor. I think as rates continue to drop and more creative finance comes into the market,then that will absorb the inventory that’s there, especially for the higher end markets. It’ll help to move those properties. But ⁓ if you have never done a single high end deal in your life and you’re looking to get into it, you got to be very careful because those carrying costs can really absorb.
Dylan Silver (16:54)
You know, one of the things that I’ve heard and I think it’s a great thing for any newer investor or even an established investor who’s doing something that’s new to them is to partner with someone who is experienced, you know, whether that is, you know, a contractor or someone who’s got geographic knowledge if you’re investing in a new area. What would you say to those folks who may be thinking, you know, okay, well, this is my this is my first flip and I’m just going to go out about it completely by myself.Luis Daniel Roque (17:21)
Yeah, you know, a lot of people like to cut corners and save cause by saying, well, I’m going to do this and I’m going to lease the property myself and I’m going to do the work and I’m going to subcontract to everybody else. And then you end up doing none of that. I’ve seen a lot of great acquisitions where people that are brand new buy the right deal at the right price with the right margins, but then they destroy the deal because of bad property management, bad construction management.And then they try to sell the deal themselves. And instead of moving it quickly with a local expert, they end up carrying it longer and eating up all the profits. So my recommendation is if it’s your first deal, work with experts, get the experience, understand why they do what they do, and get those first wins under your belt so that you could do the next one, sir, you’re on.
Dylan Silver (18:11)
I’ve also heard that people have to potentially be prepared for a plan B. Hey, if this doesn’t sell, are we prepared to rent this out? Of course, you don’t want to go in thinking it’s not going to succeed, but it’s happened enough times over the last handful of years where not with just one group of investors, with investors across the board, where you do potentially have to look at, if we have to hold this, are we comfortable with that?Luis Daniel Roque (18:37)
Right. And that’s one of the things I always recommend looking at deals with a multi-strategy ⁓ view, because at a worst-case scenario, like you said, if I can’t sell it, and a lot of people were stuck into that situation last year, rates weren’t coming down. So people had to keep them and we saw an increase of Airbnb rentals. So, yeah, definitely look at options and look at what would it look like if you had to keep the property.Dylan Silver (19:04)
I do want to ask you specifically about looking at ⁓ some of these deals in other markets outside of the majors. I’ve seen people looking at deals in Arkansas, in Alabama. I’ve seen people looking at deals. I just spoke with a woman earlier today in Ohio. When you’re looking at some of these other markets with a lower ⁓ price point to entry, other factors that come into play that may actually increase risk potentially in those circumstances.Luis Daniel Roque (19:34)
Definitely. mean, and I’m telling you from experience, we’ve been at this for quite some time. A while ago, we bought some properties, a portfolio of 20 properties in Montgomery, Alabama. They were extremely cheap. I think we ended up paying like $25,000 a door. And it was a win, right? I mean, we look at comps, we look at the repairs. ⁓ But then when it comes to the property management, nobody wants to go out there and collect the rents. So we got stuck with some properties that we couldn’t rent. And even if we rented them,We didn’t have anybody that was going to be the property manager to get us some cash flow. So we ended up selling them at a discount. So those are the little things that if you don’t understand the local markets and how the dynamics happen, then you’re going to get in trouble. So it’s always best to work with experts, especially for the first couple of deals until you become that expert that now you know what you’re getting into.
Dylan Silver (20:26)
Yeah, I mean, it’s critical, right? Because if you’re, especially when you talk about property management, not just, you know,potentially replacing a property manager if you find a good one to come in, but also to, know, that act of just replacing, meaning that the turnover can throw off residence. And so things could take some time. Even if you say, hey, hey, we found the perfect property manager to put in here. Now you’ve got to deal with a couple of months where things might not run as smoothly. We are coming up on time here though, Luis. Any new projects that you’re working on and then as well, what’s the best way for folks to reach out to your team?
Luis Daniel Roque (21:04)
Yeah, so we are a private lender. looking to expand and work in new markets. We just opened up, for example, the state of Hawaii and we’re lending in Hawaii as well. So we are creative. And more importantly, we are always looking to find ways to make your deal happen and try to say yes, but right. That’s our core. And if you want to get into modular homes and learn how to get through the process,Just reach out to us and we’ll walk you through it. We’re starting to work with a lot of developers looking into modular homes in the state of Florida, but we’re expanding to the rest of the East Coast first. And then from then it could go into the rest of the United States.
Dylan Silver (21:46)
Luis, thank you so much for coming on the show. Thanks for taking the time today.Luis Daniel Roque (21:50)
Thank you, Dylan. We’ll talk in a bit.
