Stop Chasing the Real Estate Market: How Builders Find Where Housing Demand Is Going

Jerry Zarrella (00:00)
Now Rhode Island right now

Our market is first time buyers. I don’t know where the market is in Florida right now, or I don’t know where it is in Salt Lake City, right? But you gotta figure out where the market is and don’t chase it. You wanna be ahead of that market. so we shift gears, we shift all the time. Like maybe three years ago, we were doing high-end homes, right? Doing high-end homes, right? And multi-million dollar homes. But that market has dried up a little bit.

Cody Crabb (02:02)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. Today I’m joined by Jerry Zarrella, owner and operator of Zarrella Development in Rhode Island. Jerry’s been building from the ground up for decades, single family homes, condos and more. And right now he is chasing where the market is actually going, affordable new constructions. And we’re going to talk about that. We’re going to talk about the market and the many other opinions that I have a feeling Jerry will have according to our

brief conversation before this. Jerry, it’s a pleasure. Thanks so much for joining us today.

Jerry Zarrella (02:33)
Same here, same here, good to, you know, I got a bad voice because the pollen up here is terrible and the winds blowing 35 miles an hour. was on a job site. I don’t want to sound much like that Secretary Kennedy got a raspy voice, you know, so, but I’m ready to go.

Cody Crabb (02:40)
And thank you so much for joining us despite that. We really appreciate that, yeah.

Yeah, well, thanks for powering through anyway. We really appreciate it. All right, so just to kind of start out, can you give us a little bit of background of kind of where you came from, where you got started, and kind of how you came to be where you are now? You gave me a little bit of an overview in the intro, but just for our listeners.

Jerry Zarrella (02:55)
That’s right.

Give me a little bit.

I was at Bryant College. My mother wanted to be a history teacher. Me, a history teacher, forget it. They closed the school down. I think it was when Kennedy got assassinated. So it was closed down for two weeks. So I was looking to get a job. So I went into the construction field. And I started putting up concrete foundations. Now that’s a tough job, concrete foundations. And I didn’t want to go back to school because…

At the time I I had a girlfriend and I was I wanted to build a family and I liked my business see If you like your business, you’ll be successful if you don’t like it get out of it Don’t don’t even waste your time. You gotta like it. I like I get up every morning I like what I do. I like being with the guys see and I handle with the guys I call them the weather guys the weather guys excavators foundation guys cement guys

is anybody that’s outside is a weather guy. That’s what I handle. My wife handles the inside guys, the plumbers, the tile guys, kitchen guys, the finish guys, right? So I like getting out there. I work in the rain, the snow, the heat, whatever it takes. I had to build a business. So when you’re building a business, you don’t put bounds on, you don’t say, I’m not gonna do this, I’m gonna do this. You do whatever you need to do to make the profit.

My name’s on my product. can after you’re done with me, you’re gonna see that I have pride in what I do and And I love working with the guys like we were in Florida all winter We had a bad winter here and I couldn’t wait to get back here. I like it was like I got reborn I came back here went outside with the guys. So that’s what I like doing and you know, the funny thing will tell you a short story

My wife is like, she’s very smart and she’s very, she has a certain way of working. She has to be for, she picks out colors, she has to pick out tile. She has to pick out colors, she has to pick out cap, she has to pick out knobs, has to pick out all this stuff. I don’t get in her area because I would mess it up, right? So we go to, we go down to Houston to a home builder show.

And she said, ⁓ she’ll take all kinds of classes. She’ll take all kinds of classes. If they’re over the class of construction, she’s in it. She’s a class major, right? I don’t do that, right? So she goes, I want you to go to this class. I said what? She said, that’s, learn how to handle subcontractors.

I said, Debbie, I’ve been handling subcontractors all my life. I handle some rough guys. I had worked with these guys coming for me, guys that were prisoners. We had a program in the state of Rhode Island where you would try to bring these guys into the program. I had them working for me. So we go down and she sides us up. I said, I’m not going. Huh?

Cody Crabb (06:49)
You’re like, I should be teaching this class. You want me to

go to it? Yeah, I assume you mean.

Jerry Zarrella (06:53)
The guy who taught it was Al Trellis. Al Trellis. wrote a book. How to Handle Subcontractors. Al Trellis. So I’m saying to Debbie, do I really have to go in there? She goes, oh come on, darling, come on. She said I paid 45 bucks for the class. So I didn’t want to go to class. It was the $45 that I didn’t want to lose the 45. So I go in, sit in the front row. Here comes this guy who’s got this book in his hand. Al Trellis’ book, right?

And comes out, he’s all dressed up. So you can see he was in the trades before, but he outgrew the trades. He now got into being a writer and stuff like that. So we’re sitting in the front row, and I’m saying, oh boy, I gotta listen to this, I gotta get the hell out of here. And he goes like this, do you know what this is? Do you know what this is? And no one in the class knew what it was. I said, I know what that is.

He goes, what’s that? I said, you know what? The subcontractors get you by the short hands. That’s what it is. That’s what he was holding up like that, right? And then we had a wonderful time. This guy who wrote the book, I swear to God, he must have been in my dreams. He must have copied what I had to say. Handling subcontractors is a challenge. I see my competition will go to a guy like my plumber.

your price is too high, I got a better price. Well, my plumber’s gonna tell this guy, don’t call me next time, right? What I say to him is I say, hey Joe, can you revisit your price? I never told him I got another price. I just asked him to revisit.

The key, use that word revisit. It just takes the animosity out of the guy you’re dealing with. You just tell him to revisit. And this way you can keep it going. So this is what I do all day. This is like, today we went down, we bought some footings. Well, generally when you build a deck for these houses, you gotta buy footings. Well, we’re trying new stuff. So they have this prefab concrete footing that you set up with an excavator. Goes right into the ground.

It’s beautiful. I figured it took me five hours to do what it would have taken me to do three days and I would have had a mixed concrete or get concrete. So this is the type of stuff that we’re constantly doing and we got a revolving our industry has revolving and if you think you’re gonna make money on it you got to figure out where your market is.

Now Rhode Island right now

Our market is first time buyers. I don’t know where the market is in Florida right now, or I don’t know where it is in Salt Lake City, right? But you gotta figure out where the market is and don’t chase it. You wanna be ahead of that market. so we shift gears, we shift all the time. Like maybe three years ago, we were doing high-end homes, right? Doing high-end homes, right? And multi-million dollar homes. But that market has dried up a little bit.

So now you see people downsizing. The big deal right now is a downsizer. And when you get a customer who comes in our office, I want to downsize. Cody, this is the funniest thing, right? All right, what do you want to get rid of, right? By the time they’re telling you what they want to get rid of, they just made their house bigger. ⁓ I can’t do that. We got the family coming over for Christmas, Thanksgiving. Can’t have a small room like that.

When you want to downsize, you gotta make it. Huh? You gotta downsize, but you know what?

Cody Crabb (11:01)
So do you want to downsize? just want a new house. Yeah. So do

you want to downsize? You just want a new house. Yeah. Yeah.

Jerry Zarrella (11:09)
Yeah, well when I’m talking to people that you don’t want to come in that I’m Billings like first-time bias right and they’ll say to me all the kids college all the kids are through college Everybody’s gone and I always say to myself I wonder who’s living in the basement, but they told me all the kids are going through college, right? So I tell them, you know, do you need to finish a room in the basement because half these kids that graduate They’re still living with their parents when I was a kid Cody when I was a kid 22 years

Cody Crabb (11:17)
Yeah, first time.

Jerry Zarrella (11:38)
I bought my first house. My son Paul, he’s 55. I met him by his first house when he was 23. My son Michael, he’s 56. I met him by his first house when was 28. My son Jerry’s 40. I met him by his first house when he was 19. And my daughter Sarah, I met her by her first house when she was in her late 20s. Today, these kids can’t get into it. They can’t get into buying their home right now.

It’s just too much stuff. Over regulation, I believe the cities and towns, over regulation. Everywhere you go, they hide a fee. ⁓

Before when I start off Cody, I used to just go in and get a bill to permit pay whatever it is. $800, $900 today you pay 1500 to 2000 for it. And then you’ve got all these add-ons, all these permit for the water, permit for the sewer, permit for the gas, permit for a central vac, a permit for cameras, permit for any other stuff, even in your racket, what you’re doing right now, you’re to take a permit off of that. And I’m saying to myself.

Where is all this coming from? When I was a kid growing up and I was in this business,

used to get elected every two years. So if you ran for town council, you got elected every two years. If you ran for mayor, you got elected every two years. Today they’re getting elected every four years. In the meantime, you let the fat people get fatter. That’s what they’re doing there. Giving their friends a job. They’re giving this, they’re giving that. They don’t care about us. When I listen to these people say housing is a problem throughout the United States, how are we gonna fix it?

Keep government out of it. They can’t even, they can’t fix anything. You want to fix a problem? Let us fix it. We’ll fix it. Get rid of all these fees you got. All those fees that you’re paying somebody who worked in your campaign to commit and inspect something. They don’t know what they’re inspected. I mean, these inspectors, if they were so good, why aren’t they all building?

If you’re on the electrical inspector, how can you not outrun on a business? What do you expect that I work for, right? So that’s the way I feel about it. And then today there’s a shift, there’s a shift like the 70s in the area that I would build, we were building.

five bedroom homes, three car garages, five bedroom home, three car garages, masonry, lot of masonry on them. And as I start going there, one thing I find, there’s not a lot of masons out here.

That’s a dying breed to be a mason. So we started to get rid of that because it was just driving the cost up and it was taking so long. You get a mason, then put up, you know, do a brick house that takes a lot of time and they’re not a lot, they’re not competitive and they’re just the fathers that the kids do it. And I look around and I’m saying, that’s like a graveyard. So I try to do no masonry on my houses. I don’t want to put any mason. You can’t get competitive bids on them and they look better without the

based on everything.

Cody Crabb (14:54)
See, that’s

a really good example of something where you’re not chasing the market, but you’re kind of seeing where things are and going and kind of reacting to it. But in a way that’s like, you know, this isn’t just a quick decision. Like you’re kind of analyzing all of the market together saying, you know, this is a tricky thing to find. would actually ask you before I have you go on, I would love to know kind of, said you think one of the issues is that you pay

Jerry Zarrella (15:09)
You do that and then…

Cody Crabb (15:24)
fees for building permits and things, and then they just keep stacking on each other. I’d be curious to know, you said, let us handle it. Like what other changes would you make? Like let’s say you’re redesigning the system, right? I’d love to hear kind of what you would do to kind of.

Jerry Zarrella (15:25)
Yeah, right.

If you want,

here’s why Rhode Island changed, Rhode Island changed, right? Rhode Island has less than a million people in it. We have 39 cities and towns. We have 39 building inspectors. We got 54 fire chiefs because we have districts.

Why do we have to have all this? I mean, you go to Florida, there’s large areas. We have a little town. The town has maybe like Block Island, it has a thousand people in it. Why do we have to have a full-time building inspector, full-time electrical and former inspector? They need to do it in districts. Now, our court system in Rhode Island, we have Kent County, Washington County, South County, Providence County, we have five

Why can’t we have the building department have five counties? Why does every city and town have to have their own? I’ll tell you why. Because I ran for council, you worked your ass off to help me get elected, right? I gotta give you a job. So, know, Cody, you gotta be a good building inspector. I’m gonna put you in there, I’m gonna teach you how to do it. Then you need an assistant.

Somebody has to get your schedule ready. So we’ll hire your wife to do the schedule, right? So this is the way it just grows. If they really wanted to do something, just stop it. And ⁓ when I listen to them on TV, I say, one, just put that off. Let me go watch the Red Sox, even if they’re losing. I don’t want to listen to the politicians, right? And so that’s one of the things that you’re going to do. And it’s just the fees, the fees, the fees.

Like if you bought a house right if you bought a house for me, right? I sold you a house. Hey, I sold you the house the 800,000 I Have to go and pay stamps. I pay the stamps So the stamps were like two dollars and thirty cents a thousand Now they raised it to six dollars. So every thousand dollars I gotta go pay six what I have to pay the stamps

Who’s getting that money for the stamps? Where’s that going? It’s going back into the cities and towns. It’s just another way they just build it up. If they really wanted to do it, they gotta analyze it. You gotta analyze it nationally. You gotta analyze it nationally. But in Rhode Island, every time a builder…

or a private person, you wanted to sell your house to somebody, every time that house transferred, you pay stamps. And you say, where does that money go? I’m paying stamps. It goes into the general fund.

And it goes into the general fund, which will decrease your property taxes a little bit, but puts it on the guy building the house. That’s not right. That’s not right. So if you want to make them affordable, let’s get in there and figure out what you’re going to do. But you know what the problem is out there Cody, I’ll tell you what. People are afraid to elect people that will offer change. People don’t want change. You know what I mean? But change is what you need.

And like in our business right now, when we first started, everything was oil heat. Everything was oil heat.

And then I said, Debbie and I said, why don’t we go to Fossey? Why don’t we go to gas, propane gas? We started building and everybody was, ⁓ the Zarellas are doing that. Forget it, forget it. No one puts an oil heater anymore. Baseboard, you never see that in a house. It’s all Fossey, it’s all gas. The oil is out. I was the first one to do that. Then they came up with a product, they call it OSAB, OSB, right? And play supply with. It’s manufactured.

It’s manufactured up in the lumber yard from chips chips and it’s like plywood, No one wanted to use it because it would swell on you if you get it wet would swell right? But if you’re not to take care of it, everybody uses that now those are the products that are out there and I just put in in Rhode Island the first foundation my foundation was assembled in Pennsylvania

If you go on my Facebook, you’ll see it. Similar to Pennsylvania. And that would pull off the walls are 12 foot long, eight foot, four inches high. They come up here, you have a crane, you pick them up, you set it. I set the foundation in three hours as opposed to five days if I went with the conventional way.

Same way today, I sent all my peers, I saved five days worth of work. But that’s because I’m hands-on. You don’t see me with a suit, you don’t see me with a tie.

I drive a pickup wherever I go. That’s my vehicle and a phone. That’s all I need. That’s my office. I got a beautiful office. But what’s the sense of me going down there? I’ll tell you why. I’m not a computer guy. So I just hire smart people like all the girls in my office. They know how to do everything. You want me to send you an email? You’re really going to get it on a Tuesday, Wednesday or Thursday because I don’t do emails. I the girls in the office do it and they only work Tuesday, Wednesday and Thursdays.

I’m

on a job. I love what I do. I like to look at a piece of property. I can see how I got to set it up. I got to see where the water table is. I got to see if it has any ledge in it. I got to see how the grating’s going to be. And then, you know, that’s what you do. And when you build a house, I see so many people, these young people out there that are doing these flips and these young people getting in there. You can’t make the land

Conform to the host you’re gonna make the host conform to the land if you get a lot that goes like this It drops off like that in the back

That’s a natural walkout. You put a ridge in there and you have a nice walkout back and you can finish your basement so one of your college kids can stay there. They can’t get their own house. anyways, so I see that happen all the time. Like I sit here and I just can’t get over, I can’t get over when people will bring a product to sell. I said, I would never bring that product to the market.

I would never do that. But that people that’s why there’s like in our business right now

People have, they’re not able to visualize. They can’t visualize. So what a lot of people do right now, like say I got five condos, they’re gonna furnish two of them next week. You gotta furnish them. If you don’t furnish them, people can’t visualize, right? Some of these realtors, ⁓ we’re gonna do it virtually. They take pictures and they put them on there and it looks pretty. Then all of sudden you drive up to go look at this condo. That’s four blank walls because they did the virtual furniture.

right.

That doesn’t sell like I tell these realtors and that the 40 my funniest thing with the realtors and I and I’m friends with my son Has a hundred and twenty Williams Stewart real estate’s got under 20 agents working for him But I tell these agents all the time. I said you’re already as good as your last sale. This is you know, that’s it You’re like you’re already as good as the last sale that you have right and you can’t you can’t do it the market changes the market changes and like

open houses but you see all these realtors they’re all dressed up you think they’re gonna go to the the gala the ball right they’re all dressed up I don’t want people like that I want people that know what the house is you know like I want to listen to them talk to the customers coming in so that’s the type of stuff that that we do

Cody Crabb (24:05)
Yeah.

So that’s that this is this is really interesting. So I feel like there’s an interesting mix here of, ⁓ you know, with all due respect, oftentimes I talk to guys your age. They’re like, no, I know what I’m doing. We’ve we’ve done it. We’ve it’s been it’s right and true. That’s it. You seem to be like, no, if there’s a better way, let’s let’s dig right in and do that. ⁓ I would be curious to know what’s what’s like your process for knowing if

Jerry Zarrella (24:31)
That’s right.

Cody Crabb (24:36)
a new process or a new technology or a new building technique is actually worth pursuing or if it’s just kind of a fad that’s going to go away.

Jerry Zarrella (24:45)
Nothing beats experience. So if you have experience over the years, now I’ve been doing this for 60 years. So I see things work, I see things don’t work. And I just have the experience and I go in there. Right now, now, Cody, this is the funny thing. The labor force out there is diluted.

Way back when, when I started, the guys would have diplomas, their fathers would treat them to trade, and then they’d take their kids to trade. Today you go out there, we got painters on the job. Now the guy who comes in, I talk to him, I said, you guys all speak English? yeah, yeah, yeah, we all speak English. I got the best, we’re number one, we’re number one, right? Okay. I go to the job, talking to a guy, guy gives me a phone.

I got to talk on the phone. What is this for? It’s a translator. They can’t even speak English. I have to talk into their phone and then they got to go read it. I got to go tell them, make sure you paint the skit board on those stairs, right? This is it. So today you got to speak two languages. You got to speak Spanish and you got to speak English. I speak two languages.

Speak English and construction swearing. That’s what I speak. That’s the only thing I don’t do that and I’m telling this kid get this bullshit out of here I want to talk to somebody who knows what they’re doing on the job. Call your boss. Oh, oh That they give you that that’s what you’re up against today And I don’t care where you are when they put a seawall up in Florida I was I have a place in um, it’s singer Island and I’m watching these guys and I’m trying to talk to them there in the excavating business I’m sitting out there

Cody Crabb (26:08)
you

Jerry Zarrella (26:32)
I’m saying that here it is in February, it’s cold back here, snowing, and I’m watching these guys work, I go talk to them. No one speaks English. You know, so this is what you’re gonna worry about. And you’re constantly gonna talk to the phone. It’s a translator. Have you ever seen that? You talk it to the phone and it translates it. I mean, I’ve never seen this. A guy gave me this the other day. I said, forget this. I’m not gonna translate it, you know? So, these are the things that you’re gonna…

Cody Crabb (26:49)
Hmm?

So for you,

it’s important that someone is, what is it that you’re specifically saying that you’re wanting to find in those?

Jerry Zarrella (27:08)
What I’m saying is

this, what I’m saying, I try to meet a different person every day. That’s how I learn. I don’t read books. I’m not a reader. So I’ll learn a little bit from you. I’ll learn a little bit from somebody else. I try to meet a person every day, right? And my son will say, Dad, you sit in the job and all you do is look, what are you doing? I said, I’m watching grass grow. What do you think I’m?

Jerry I’m supervising I’m gonna see if they make a mistake because if they make a mistake and After I sell a hose you’re gonna call me back for a warranty work I gotta make sure that they do everything right the first time So supervision is a big thing if you’re gonna be a flipper and I’m sure there’s people out there They’re gonna listen to you not probably not like what I have to say, but if you’re gonna be a flipper

If you remodel a house, more than 50 % of a house, like if you renovate more than 50, you should bring it to current code. Current code you should bring it to. I’m going to give you a little thing about concrete. So when I started off in the concrete business, it was 1,500 psi, pounds per square inch, psi, 1,500, right?

And that’s where we started. Now these foundations, I’m 60. I’ve been in the business for 60 years. I’m a little bit older than 60. But anyways, these foundations I put in 60 years ago are still standing there. And they’re 1500 PSI. Still standing there. Today you’re gonna use 4000 PSI.

because somebody decided to regulate it. Somebody in the Portland cement business got to Congress, got to a local person and tried to juice it up. That’s the way it goes. They’re killing our business. So we’re not only going to use 4,000 pounds. Foundations I did were 1,500 pounds 60 years ago and they’re still standing strong. This is what’s happening in our industry. We’re over-regulating.

And they just keep adding the cost, they just keep adding the cost. Now we had that building fall down in Florida. So the building fell down in Florida. I don’t know if you’re familiar with it. It came right down. Yeah. So now a condo lawyer said, you know, those people could have been sued criminally because they were told, they were told that there was an issue with the building and they were a condo board and they didn’t do anything about it.

Cody Crabb (29:24)
I remember that,

Jerry Zarrella (29:40)
So I said, well, why did somebody saw them? She said they all died. All five members on the border in that building went down, right? So now everybody overreacts. Now because that building went down, the building code changes. Now if a hurricane comes through, the building code will change. You have people that overreact. You have people that overreact, right? To me,

If you’re the salt and the earth guy, you’ve been doing this business all your life, those are the guys I want to know. These young kids that are coming over from Brazil or that Framus or anything else like that, they work hard. There’s no question they work hard.

They don’t understand the language. They don’t understand stuff. And where they used to learn, they learned their trade in a foreign country. Well, those countries are different. Unless you came from Sweden. I will say when I hire a carpenter, I will hire a Swedish guy because they know how to nail. Well, in Sweden, they know how to build, right? These guys come over there. You go into the basement. Now, this is it. You run a two by eight down in the basement. Run a two by eight, and you’re going to put the plywood into it.

So I go down to the job, I said to my son Jerry, come on, let’s go down to the basement. What are you gonna do in the basement? Let’s see how tight, how many they miss. And you go down there, and if you see the nail come on a side of the two by eight, you know they miss. That’s what you gotta watch out for, all right? And there’s a lot of things you gotta do, stuff like that, you know? But.

Cody Crabb (31:08)
Hmm.

Yeah, it

sounds like experience really just kind of is the key here. Kind of just over the years, you don’t even know what it’s important until you are actually there. ⁓ So if people are in your market and they kind of are like, hey, I’d like to get in touch with Jerry. I’d like to work with this company or want to get in touch with you. How can they do that?

Jerry Zarrella (31:32)
They can call our office, area code 401-884-9900. There’s three girls in the office. They work Tuesday, Wednesday, and Thursday. We shut down the office on Mondays and Fridays. Those are my time. That’s when I go out on the jobs and I stay there. My wife is on the jobs all the time too. And they can reach us.

Cody Crabb (31:55)
Awesome. Well, that’s great. Thank you so much for your time today, Jerry, and for all the little tips you’ve given us. And thank you, audience, for joining us as well. If you liked what you heard today, go ahead and give us a like, subscribe, comment, all the things. And don’t forget to follow us so you can get more awesome conversations like this one in your feed. Jerry, once again, it has been a real pleasure talking to you. Thank you so much.

Jerry Zarrella (32:14)
Thank you for having me. I enjoyed

it. I enjoyed it. Thank you, Cody.