How to Scale in Real Estate with Construction, Consulting & Smart Conversions

Paul Janaitis (00:00)
I’ll tell you a story. When I got started, about two years after my first 203K experience, I did do some work with an investor and he taught me a little.

little secret, and this has to do with the multi-unit properties. He was buying single-family properties and didn’t care what the sale price was as long as was under his line of the sand, and he was hiring me to knock the properties down, zoned RM1, which was the key, which allows for multi-unit properties. So buying as a single-family at any condition, complete demolition, rebuild as a legal duplex, and then condo the top and bottom out.

So he was getting into it for around 110, 115 on a purchase price, this is years ago, putting about 330 into a sprinkled duplex, fully built brand new ground up, and selling the top units for almost 400 and the bottom units for 350. So he’s squeezing $750,000 out of a potentially $450,000 purchase price. That was his business. And he was doing it production line style. I took that.

Dylan Silver (00:58)
my gosh.

Paul Janaitis (01:03)
And a lot of what I do is this anecdotal things, anecdotal stories of successful people that have done things that I’ve seen and I share that too. I don’t say I did it.

This guy did it, but it was great and I stole his ideas. So now a lot of things that I do, I do PUDs, I do single family conversions to condos, two unit, three unit, and then I cut them into individual condos and sell them off individually. So I learned that little trick by working for someone else watching the numbers. And he pulled me aside and said, we make more money when we sell them like this. We spend a little bit more money because we’re separating the utilities. We’re creating two deedable properties.

Dylan Silver (01:15)
Yeah.

Paul Janaitis (01:40)
but whether you sell them or even refinance them, you have a single deed when you buy it, you have two deeds when you’re done. I’ve got a real estate agent I did a deal with. Now, he financed his whole deal and sold half of the project off, owned the rest of it free and clear. So he bought in and renovated at a price point where…

Dylan Silver (01:47)
Can’t beat that.

Paul Janaitis (01:59)
the building itself paid for itself and allowed him to keep a unit with no overhead. So all profit at that point.

Dylan Silver (03:41)
Hey folks, welcome back to the show. Today’s guest is a Pennsylvania based general contractor and consultant who works with buyers to analyze deals and assemble the right teams. Please welcome Paul Janaitis. Paul, welcome to the show.

Paul Janaitis (03:56)
How you doing?

Dylan Silver (03:57)
Great, it’s great to meet you digitally here and I always like to start off at the top of the show by asking folks how they got into the real estate space.

Paul Janaitis (04:06)
Well, I got into real estate when I turned 19 years old. I got my real estate license and I actually sold real estate through college. That’s the way I paid my way through.

When I was finished, I wound up getting involved into construction. I started off putting cable for Comcast into the grounds and it’s grown from there. I opened my own general contracting company, I build houses, do full renovations and now I’m also a consultant and I work with people to help them assess their own projects, develop their own deals and help them find financing and contractors.

Dylan Silver (04:37)
So I’m a licensed realtor in Texas, but from New Jersey, by way of New Jersey, it’s very, very competitive for general contractors, Pennsylvania, New York, New Jersey. What was it like starting your business and establishing your business and then scaling it? And were there any major pivot points along the way?

Paul Janaitis (05:42)
Yeah, actually ⁓ I started working for other people, obviously as most people do, and I opened my first company back in 2007. And by 2008, my first full client was financing the renovation of a single family home into a triplex and hired me as a general contractor. But the property she was working on was financed with an FHA 203K renovation loan. So as I did this initial

project

and became aware of that type of financing, I developed a clientele that like and look for renovation financing and I specialized in doing these type of loans which are a little bit different than the normal contracting loan.

Dylan Silver (06:28)
Yeah.

Paul Janaitis (06:29)
With these loans, they ask us to put up some of the money. So your contractor, when you do these types of loans, becomes a part of the project with investing their own funds and getting paid back on draws. So once I got into that world, became clear to me that that’s the way that I want to work. And for the last 15 years, that’s what I’ve been doing, consulting and contracting. Take it.

Dylan Silver (06:49)
I wanna get-

I want to get a little bit granular and ask you about that world. You know, this is new to me. I said before the podcast here, I’m interested in it. So maybe give away a gold nugget, but don’t give away all the gold, right? Save some for for after the show, maybe. But for folks in person out there, I know you’re involved in teaching out there as well. For people who are both ⁓ contractors and realtors, I don’t know how common that is. It seems to be relatively uncommon, right?

Is there often a kind of synergy between both worlds or do you think that in many cases it’s two totally different worlds entirely?

Paul Janaitis (07:26)
They’re mostly two different worlds entirely. In my experience with the consulting end of it.

will bring the realtors in some of them are are familiar with construction some of them are they don’t have to be that’s what our job is some of them do have construction background and like to get involved after the deal closes that’s that’s usually not the best case because like anything else the the client is higher general contractor unless they hire the real estate agent to be there general contractor which would be a conflict of interest

shouldn’t

do that, the realtor is really just going to step on toes or possibly make a complicated situation more complicated. More often than not, the realtor should…

Dylan Silver (08:00)
Hmm.

Paul Janaitis (08:10)
should not get involved in the construction. They can be involved in finding out if the client is having a good experience, relaying that information to the consultant or even possibly to the contractor, but not making contracting assessments or going onto the project. Sorry to burst your bubble, but we don’t want the realtors in there playing around with the contracting end of it. Just like the lenders don’t want me talking to them or playing with mortgages.

Dylan Silver (08:35)
Uh-uh.

Right, mean, on your end, when you started as a realtor, you mentioned working your way through school. By the way, congrats on that because that is a massive accomplishment. You kind of glazed over that. But I know it’s not easy to do either one of those, right? To be a realtor generating income or a student full time. And then to go get your contractor license and to have experience in that realm as well. When you were starting out on your journey, did you have mentors who were able to

guide you and say, maybe you can do both of these and this is how they can mesh together. Or did you really see, hey, this is actually something relatively novel and niche that I’m doing that no one else is capitalizing on.

Paul Janaitis (09:50)
⁓ Both. I’ve had one very substantial mentor along the way who’s been guiding me in my real estate development. Not so much the construction, but more or less the development and the…

just the overall philosophy of the deal. And then initially when I got into it, I had a consultant, an older gentleman, who was suffering from terminal lung cancer actually at the time. And ⁓ he basically hipped me to what a consultant does and walked me through the project, which if he wasn’t as…

Dylan Silver (10:13)
Mmm.

Paul Janaitis (10:22)
informative and kind to me, these can be little hairy because they’re asking you to manage money in a different way. So this gentleman kind of like guided me through it and we got through the project he was at the end of his life and he kind of pulled me aside and said this is something you might want to consider and he basically showed me how this works and I took his advice and moved in that direction. that was the first person that brought me into this niche world.

Dylan Silver (10:27)
Yeah.

I want to pivot a bit here and ask you about creating these kinds of relationships because I know as someone who previously had no real estate experience, didn’t know anybody in the space, I was actually working for Nissan and knew nothing about real estate to then becoming a wholesaler than a licensed agent. A lot of it was through real relationships and through networking, but it really could have been sped up. I feel like I spent about a year.

trying to learn everything myself when the information probably could have been given to me or easier facilitated through other people. Is this something that you’ve consciously tried to do in listening to your story? It sounds like there was a lot of pivotal people who’ve helped you along the way. Or did you just kind of have a natural knack to rub shoulders with the right folks and building those kind of strategic relationships?

Paul Janaitis (11:34)
No, I probably should rub shoulders more. I found the need to learn this stuff and I just put myself in the situations to learn it. I came across a couple people, the consultant that taught me what I learned in the beginning, that was luck. But I was able to capitalize on it because I recognized it was a good thing to do and I was able to ⁓ accept what he was willing to offer.

Currently I do have another person I consider my mentor that’s been guiding me through all of my purchases and my real estate development. He’s more of a philosophical coach.

teaches me about detaching myself emotionally from the deal, making sure that we don’t purchase at the wrong place. His standpoint is if it’s over by a nickel, that’s your red line, don’t cross it, move on to the next deal. So he’s been giving me a lot of good pointers along the way. He’s very successful himself, and he was taught by another mentor. So he’s been passing it down, as do I. So with my clients and whatever I do, I like to be informative. I like to tell people the things that I know.

Dylan Silver (12:13)
Yeah.

Paul Janaitis (12:37)
other people be successful. I’m not a jealous person. I think that if everybody can succeed and grow and benefit from the things that I’ve learned, I’m more than happy to share them. And I like doing it. That’s why I teach the classes. That’s why I’m here today to talk to you and give you all the kind of questions you need to be answered.

Dylan Silver (12:53)
I think it’s interesting because there’s a lot of, I would say, information that’s passed down that you’re not going to get from a book. You can’t even get from the internet or chat GBT. But it’s through this kind of trust and an understanding that this person has been through it before. I’m going to heed their advice. And I don’t think that that’s going away anytime soon. But I do want to pivot a bit here, Paul, and ask you about

what’s it like coming up in the Pennsylvania real estate space? Because it’s very competitive, right? I I was in Texas before I moved to Santo Domingo and I definitely felt that it was noticeably, I would say more feasible to be a real estate investor and developer in Texas than it did certainly to be in Northern New Jersey. So what was it like coming up in the Pennsylvania space as a realtor and then as a general contractor?

Paul Janaitis (14:24)
As a realtor, was young. was 19 years old and full disclosure, my uncle is a broker. So I worked out of his office and it was in 93, 94. So a couple summers is when I did it.

was a real rough market too, you might not remember but we just got done the 80s housing boom and it was really depressed market. And my uncle always told me if you learn how to make money in a down market, you’ll be fine when things come around because as you know, the real estate market runs in cycles.

Last fall or 20 more years when I get back into real estate and development myself in Philadelphia, was fortunate enough to be living in northern Philadelphia, the Fishtown area, which is one of the hottest markets period in Philadelphia. And I was able to capitalize on a couple of good opportunities to buy some land, some lots, do some development.

Dylan Silver (15:09)
Hmm.

Paul Janaitis (15:16)
Philadelphia market is fueled by a lot of New York money that’s coming down. right now, Philadelphia is fired with large bills. putting tons of units online. Smaller guys, it’s a little bit tougher because the cost of putting things up is a little bit more than it was 10 years ago. But it’s still a pretty vibrant market, more for big money right now than for the smaller guy. But it’s a cycle, and it’ll turn around. Leaves a lot of opportunities for.

Dylan Silver (15:20)
Yeah.

Do you have a s-

Do you have a specific asset class that you have maybe positive experience or bias towards or something where you think, I think this is really something that I’m more interested in? For me, I like land deals in Texas. I think the land deals solve a housing crisis. You can do so many different things, RV parks, storage facilities, alternative dwelling units, and so on and so forth. Do you have an asset class that you really enjoy working with?

Paul Janaitis (16:04)
Yeah,

I’ll tell you a story. When I got started, about two years after my first 203K experience, I did do some work with an investor and he taught me a little.

little secret, and this has to do with the multi-unit properties. He was buying single-family properties and didn’t care what the sale price was as long as was under his line of the sand, and he was hiring me to knock the properties down, zoned RM1, which was the key, which allows for multi-unit properties. So buying as a single-family at any condition, complete demolition, rebuild as a legal duplex, and then condo the top and bottom out.

So he was getting into it for around 110, 115 on a purchase price, this is years ago, putting about 330 into a sprinkled duplex, fully built brand new ground up, and selling the top units for almost 400 and the bottom units for 350. So he’s squeezing $750,000 out of a potentially $450,000 purchase price. That was his business. And he was doing it production line style. I took that.

Dylan Silver (17:03)
my gosh.

Paul Janaitis (17:08)
And a lot of what I do is this anecdotal things, anecdotal stories of successful people that have done things that I’ve seen and I share that too. I don’t say I did it.

This guy did it, but it was great and I stole his ideas. So now a lot of things that I do, I do PUDs, I do single family conversions to condos, two unit, three unit, and then I cut them into individual condos and sell them off individually. So I learned that little trick by working for someone else watching the numbers. And he pulled me aside and said, we make more money when we sell them like this. We spend a little bit more money because we’re separating the utilities. We’re creating two deedable properties.

Dylan Silver (17:20)
Yeah.

Paul Janaitis (17:45)
but whether you sell them or even refinance them, you have a single deed when you buy it, you have two deeds when you’re done. I’ve got a real estate agent I did a deal with. Now, he financed his whole deal and sold half of the project off, owned the rest of it free and clear. So he bought in and renovated at a price point where…

Dylan Silver (17:53)
Can’t beat that.

Paul Janaitis (18:04)
the building itself paid for itself and allowed him to keep a unit with no overhead. So all profit at that point.

Dylan Silver (18:12)
I want to pivot a bit here and ask you about the regionality of investing and of real estate in general. I think a lot of people like the idea of doing real estate remotely, and I think there’s some place for that. based on my experience, it works a lot better when you have a lot of experience and a lot of expertise in a specific area. And I think it’s very, very difficult to do real estate really fully remotely. But do you have any experience or perspective on that?

Paul Janaitis (18:39)
real estate land deals trading paper selling contracts you can do that for them if you’re going to do construction you should be there

you should be there you should make sure that you’re on the same page you should have a relationship with a contractor and a contracting company and you should absolutely keep an eye on what they’re doing because if you don’t show up more than once or twice a month too much happens between your last visit and your next visit that the corrections become very expensive if you’re going to develop real estate you should be hands-on if you’re going to just buy and sell properties or buy and sell land then you can do it remotely