Subscribe via:
Show Summary
In this conversation, Nik Farooqui discusses the critical issues surrounding construction project management, particularly the consequences of inadequate oversight and assessment. He shares a case study of a luxury home project where a contractor absconded with a significant amount of money, highlighting the importance of regular evaluations and the role of consultants in navigating such challenges. The discussion emphasizes the need for transparency and accountability in construction projects to prevent financial losses and legal disputes.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Nik Farooqui (00:00)
Just actually a couple months ago, I flew from Texas out to Florida because that happened to a family that was building a luxury home, almost a $4 million home. Contractor did probably about $300,000 worth of work for and then he disappeared, but he took $3 million already. And the reason why they did that is because nobody was actually taking ⁓ assessment of the project throughout the phases.And so they just kept on putting in money for the title company. The title company kept on paying out, paying out, paying out.
Michelle Kesil (02:01)
Hey everyone, welcome to the Investor Fuel podcast. I’m your host, Michelle Kesil, and today I’m joined by someone that I’m looking forward to chatting with, Nik Farooqui, who’s been making serious moves as a project manager for commercial and retail stores, also offering in-house construction and development services. So, excited to have you here on the show today.Nik Farooqui (02:26)
Be sure to have him, yeah.Michelle Kesil (02:27)
Of course, I think our listeners are really going to take something away from how you’re approaching creating and these new development projects, supporting retailers, working with contractors, developers and all the consulting services that you offer. So we have a lot to dive into. So let’s begin first off for those not. Yeah.Nik Farooqui (02:52)
Good.Michelle Kesil (02:53)
First off, for those not familiar with you and your world yet, would love to hear the short version of what your main focus is.Nik Farooqui (03:01)
Yeah, our main focus is project management for commercial and retail teams, specifically or developers that work with commercial and retail. We build everything from gas stations to retail stores, everything from a vanilla box build up inside like a retail, like a chain or a mall, all the way to freestanding brick and mortar buildings, all the way to site utility development for gas stations and product like pipeline that kindWe also offer, we do land investing as well and it’s interesting because some of our clients that we do the project management for are actually the ones who are buying the land that we are developing for ourselves. And so it’s kind of ⁓ a good unison there.
Michelle Kesil (03:45)
and are you operating throughout the whole US or in certain markets?Nik Farooqui (03:52)
Yeah, typically the Southeast. So I’m based out of Dallas, Fort Worth area in Texas. Although majority of our projects are North Carolina, South Carolina, Florida, Georgia, a couple of Louisiana, a few in Texas, mostly like towards Houston, Texas. We’ve gone out to Colorado. We’ve done a couple of projects in California. I don’t recommend it. That’s pretty tough. And then our home base was originally from the Midwest. I’m originally from Chicago.And so we have a lot of clients in the Chicago land market that we continually deal with and get some projects up there several times a year.
Michelle Kesil (04:25)
Awesome. What have been some of the keys that have allowed you to keep this business running smoothly?Nik Farooqui (04:33)
I would say that our number one key to keeping business running smoothly is the fact that we integrate into our clients business that well. You know, as a project management contract team, it’s imperative that we don’t separate ourselves from the actual end user. We become a part of their team. We’re a strategic partnership with that client. They want us to operate as if we were an in-house construction project management team for them.And so one of the things that I do in our consulting side is whenever we get a new client, I will spend the first three to six months doing all of the project management myself. Then I’ll allocate it to one of my employees. And the reason why I do that is because in order for me to be able to understand the people, the method, the product, that means I need to be hands on with it. And then when I hand it off, I need to be able to provide support for my team.
If they have questions or if they’re running into something, I don’t want them going back to the client. I want them coming to me and hopefully we can help resolve that upfront. And once you still kind of get the idea, the culture of that client, then it’s even easier to integrate because now you know the people that you got to call. You know what to say, what not to say, and you can get ahead of a problem. So if I’m looking at a set of drawings and I say, Hey, listen, my client has made a revision on this plan. This is an outdated plan or an outdated design.
I don’t have to now go through their architectural design team. I can make that decision right up front and say, hey, listen, this is an outdated design. Here’s the new design. If there’s going to be change order involved, let’s talk about it. Or if we can get onto it pretty early. My clients love that fact because they know that we are truly taking pride in ownership of each particular project.
Michelle Kesil (07:03)
Yeah, absolutely. That’s important to have that level of support for all of your clients.What are you most focused on solving or scaling next when it comes to your business?
Nik Farooqui (07:18)
I want to scale the land acquisitions and development aspect of it. I want to be able to purchase more and more and more more larger acreage properties, develop those out at least in entitlements and then be able to turn around and put that back out to our end user clients or anybody else as well. Most of that’s going to be still in commercial retail, although I will go with residential and start doing like, you know, several lots. You know, I want to get into⁓ Major subdivides more than I do the minor subdivides. So I don’t want five parcels. I 50 parcels So we’re trying to get after the larger pieces of land that we could buy and develop and make sure that the entitlements are ready for The other aspect of scaling for the project management aspect is ⁓ again creating strategic partnerships I have a partnership with actually my brother’s business where he does software development ⁓ to help with taking care of some of the
I would say, I don’t want to say mundane, but some of the more administrative tasks that happen in an office, that software based on AI can now replace two or three people’s tasks, freeing them up to be able to focus on things that are a little bit more important. So developing those kinds of strategic partnerships that I can now bring to my end user, to my client is a huge part of it. And then obviously making sure that we are staffed up properly to be able to take on.
the volume of projects or the volume of clients that we’re seeing on an annual basis.
Michelle Kesil (08:40)
Yeah, absolutely. Would love for you to expand on the land development piece. What does that process look like for you?Nik Farooqui (08:44)
andYeah, so you know, there’s a lot of different venues for purchasing land, for land investors, let’s just say. A lot of people will focus on the infill lot. So you might have like a half acre parcel that’s in the middle of a subdivision that you could purchase. Many ways of going about doing it, you might want to try to purchase it, you know, for 10 grand below market value and then try to resell it and eat up that 10 % for profit margin. I don’t do that. That’s not our niche. When we look at property,
land in general, vacant land, I always look into the eyes of a developer. Do I want to keep this and build something on it? Because then it will show me the characteristics of why somebody else who might want to develop it would want to buy it and what the value for that is. So what we do is we go through the process to acquire, sometimes it’s rural land. I typically don’t do anything less than five acres, typically not even less than 10 acres, but it does happen from time to time.
And so when we purchase this, really want to look at it the eyes of like, not just myself as a developer, but somebody else we want to develop it. That being said, once that decision is made, we purchase that property, then we’ll do some further analysis and see if we can’t do entitlements or maybe a conceptual subdivide or, whatever plans we have for that. And then we’ll farm it out. And if it’s, if it’s brings enough income in to make it worth selling.
then we’ll sell it. Or if it’s something that we just absolutely want to keep and do ourselves, then we’ll absolutely keep it and do it ourselves.
Michelle Kesil (10:46)
amazing, that’s really inspiring in such a cool way to work with these different types of projects.Nik Farooqui (10:53)
Well, it’s unique, you know. So what ends up happening, Michelle, is that when you have land investors, typically the idea is buy low, sell high, right? That’s the name of the game for almost anything. But what they’re missing out is why would you want to sell it high if you could sell it even higher? Or why would somebody want to pay you more than what you just paid for it? And that means you have to take a look at that parcel and not see for what it is.Michelle Kesil (10:54)
Thank you.Nik Farooqui (11:18)
but see for what it could be and then help it get to that direction that makes it marketable. And so it’s not about flipping paper. You can’t flip paper and land as easily as you could. And like if you’re, if you’re investing in just a single family homes or, you know, like a four and five unit multi-families, that kind of stuff, that type of stuff, you could flip paper pretty fast. But for land, one, the deal cycle is significantly longer. Two, due diligence that you have on vacant land is completelycompletely different than what you would have on a property, on like an actual structure. On actual structure, you’re go check out the MEP, the roof, the foundations, and these kinds of things. But on vacant land, you have to take a look at perc tests. You have to take look road access. You have to look at slopes and understand the engineering for it. Then you have to kind of zoom out and see what is the area around it? Can I do this for single family zoning or can I do multi-family zoning or can this become a commercial zone? Then you have to start taking a look at easements.
You might have the DOT or the state that owns property right adjacent to it, which you can’t get drive access through. Maybe they’re doing that for conservation purposes because they’re trying to offset a drainage runoff. All kinds of things come on in. And so the cost of acquiring land is significantly more sophisticated as well as more expensive. And so you have to kind of walk into it the right way.
Although it makes it very, very interesting, it’s just not as simple as flipping paper and contracts like you could with a lot of single family or multi-family type of stuff.
Michelle Kesil (12:44)
Yeah, that makes a lot of sense. It’s definitely a whole other process than those other typical investments.Nik Farooqui (12:53)
Yeah, and so, and look, you know, for me, like I come from that background. Like my father was a developer, general contractor. My grandfather was overseas, but he was called the magistrate of development, which would be like the mayor of all construction of a city, you know? And so, you know, I have two brothers. One brother was involved with the business as well. I got involved with this as a kid, you know, got involved with the real leadership part.of the business when I was 19. I actually walked away from this. started a completely other business, unrelated to anything investing or construction or otherwise. 2013, my father passed away. took the business back over and revamped it and then really pushed on the project management aspect of it. And that’s been doing extremely well for us, especially coming out of the COVID era where people were laid off and it just wasn’t a good position for people to hold on to staff.
Michelle Kesil (13:43)
Absolutely, that makes a lot of sense. As far as the project management piece of your business, I know that you mentioned it’s for commercial, retail, gas station, that whole line of buildings. Can you expand on specifically how you support them?Nik Farooqui (14:00)
Yeah, I mean, and by the way, I will do residential as well. I mean, we’ve done everything from custom homes, know, one and a half million dollar and up homes to, you know, helping out with subdivides, meaning, you know, multiple parcels. But our primary focus is in the commercial and retail. And so, you know, the way we support them, we take any project or typically multiple projects all the way through the lifeline.Meaning everything from plan review, architectural design, permitting, actually breaking ground on construction, all your pre-con stuff, all your construction part of it, all the way through close out. So it’s a turnkey formula that we own that project for the entire time. And so when we get into it, there’s a lot of moving parts to any project. If you think about how many things are involved, how many different trades are involved, contracts are involved, change orders are involved.
You know, have SPVs that are involved, design changes that are involved. You have all kinds of things that are are continually changing per project. And if you have a team that gives you 12 or 15 projects at once, as they do for us, then you need to be on top of that and map that correctly and have the professionalism to sort through all that stuff with some precision. so our goal for my team and I is, again, just assimilate, integrate into that team so that we get to know all of the inner workings.
and then literally be a surgeon going after it. You have to be extremely precise with every single thing that you do. But when you do that enough, it kind of becomes second nature anyways.
Michelle Kesil (16:15)
Absolutely. Yeah, that precision is important. And yeah, definitely the more that you work on it, the more you understand how to make it flow for your business.Nik Farooqui (16:28)
And by the way, we get clients that might have a project that kind of went south somewhere, right? And they need to reassess where they’re at. And they might bring us in for that part of it too. So it might be a project that might be halfway done, or they’ll give us just phases of it. Hey, Nik, can you help me out with the pre-con and development part of it, all the way to permitting? Or we only want your help in the actual construction part of it until we start getting towards finished product and substantial completion.You know, sometimes they’ll give us that. That’s kind of rare, but it does happen. I tend to see more of that when you have a individual owner. And I get this probably a handful of times a year. Were you might an investor or maybe even a homeowner who has spent a lot of money with the contractor. That contractor has taken that money and gone to the wind. Money’s dried up. You have no idea where you’re at. You have a project that’s 50 % done and 90 % of the funds are already gone.
We need to reassess what’s happening and what the best approach is.
Just actually a couple months ago, I flew from Texas out to Florida because that happened to a family that was building a luxury home, almost a $4 million home. Contractor did probably about $300,000 worth of work for and then he disappeared, but he took $3 million already. And the reason why they did that is because nobody was actually taking ⁓ assessment of the project throughout the phases.
And so they just kept on putting in money for the title company. The title company kept on paying out, paying out, paying out.
And then they realized that all the money’s gone. Nobody’s looked at this project and we can’t even find the contract at this point. There’s all kinds of lawsuits going on of that nature. People are doing that everywhere. So we’ll get calls from people to, Nik, can you go out there? Can you take a look? Can you get us an honest assessment? Can we hire you on as a consultant to help us?
Finish this thing out. Can you bring in a new GC qualified these guys? Can you bring in some new sub trades qualify them? Let’s take a look at their contract and start to We align that project at least to get to completion because if you don’t do anything you’re just sitting on you just burn money away for you know for no good reason
Michelle Kesil (18:27)
Yeah, that makes a lot of sense. I know it’s crazy how all these things can go sideways and then yeah, you have to come up with the cleanup plan and help people in the end.Nik Farooqui (18:31)
Yeah.Yep.
Michelle Kesil (18:42)
Awesome. I know that you mentioned you do consulting work. What does that aspect look like?Nik Farooqui (18:47)
Well, I think to a certain degree, I think the project management aspect is consulting to a certain degree, right? Because we’re taking a look at the project and giving our best feedback on it. Now, if the project’s already kind of like, trim and true and we just need to run it, you know, it’s already past the permitting phase, know, budget’s allocated, we can get to work, you know, put shovel and ground, cool. But there is sometimes a little bit of consulting aspect that comes to that too, because you might be like, hey, this isn’t best use or hey, I wouldn’t do that over there because, know, XYZ code or…you know, maybe local municipality frowns upon this or whatever, or hey, we see some slope changes, or hey, you know, your soil engineer missed out doing soil borings over here. We know it’s contaminated soil. It’s going to cost a lot more. Maybe we should move the structure over a little bit. Any of those kinds of things sometimes get involved as well. We also will be, ⁓ I will consult for directly to ⁓ a few investors, mostly general contractors. And that
A little bit different because general contractors will bring me in and say hey listen Nik We’re trying to build a pipeline. We’re trying to refine the pipeline For our team that might be an implementation for some kind of software that might be training I’ve run in plenty GC’s offices where they hired on two or three college-aged Project management because they need staff, but these guys are still you know, green behind the ears So how do we get them up to speed right? How teach them the bidding process teach them?
the project management process, teach them the change order process, show them how to get from A to B and get a successfully completed project, right? So a little bit of mentorship in that. And we also have other businesses that will be like, hey, Nik, can you come on in and take a look and see where are we burning money? And what you find is those two things are kind of related. A lot of times you’ll have heavily staffed.
offices. They got 15 project managers, they got 10 estimators, they have a whole bunch of warranty people, they have accounts payable, accounts receivable. And so what happens is from phase to phase as that project file goes from one person to another, it’s going to get plugged up somewhere. Which means somewhere in the end, somebody else has to try to backtrack it to get all those loose ends tied up. It’s a logistical nightmare. And so, and we saw this a lot, especially in the COVID era.
when we had people getting laid off. And so you might have a project that was kind of started and then you laid somebody off or fired somebody and now don’t have the staff and all the information that’s in their head or in their notebook, you’re not privy to that anymore. And so because you have a decentralization of information, you can’t get that to the next phase. How does somebody who’s brand new coming in to that project pick it up successfully? They’re going to struggle every step of the way.
And so we see those kinds of inefficiencies and those kinds of breakdowns in the pipeline all the time. Let’s talk a little bit about investors. Investors will hire on GCs to go do their work. The GC may or may not be qualified. They might have other types of clauses in their contract that are not very favorable to the investor themselves. There might be money issues. If it’s a large enough project, we go through title companies. Somebody has to assess that. ⁓ And so
You know, there’s different things that we need to do as consultants to get involved with that part of it, to be able to serve that investor properly to make sure that his money or her’s money is well protected throughout the process.
Michelle Kesil (22:08)
Absolutely, that makes sense. Yeah, that’s super important.Nik Farooqui (22:11)
Yeah, so we do lot for investors specifically. We do a lot of site visits documentation, so we’ll go there. We’ll you know sometimes it will run. You know drones sometimes will run 360 degree photographs and start building stuff up because we want to document all the phases for where it’s at. That’s really important because then we can compare that to where the construction schedule is and where the cost is right. And so if you have contractors that are taking draws up against the contractual amount, but their work is not up to that part.or not up to that point, we need to have a different conversation. Hey, I can’t approve all of this right now because we’re not there yet. This payout’s supposed to happen when the drywall’s going up. You guys aren’t even framed yet. You know what mean? And that’s a lot of money in between. And so ⁓ we want to make sure that site documentation’s correct, that we advise our investors correctly to make sure that their money’s protected. I consider us kind of an insurance policy.
Michelle Kesil (23:05)
Absolutely. That’s super important to have that protection. Awesome. So before we wrap up here, if someone wants to reach out, connect, learn more from you, where can people find you?Nik Farooqui (23:07)
Yeah. That’s right.Yeah, well you can find me, know the easiest place I keep changing social media profiles. Honestly, I keep them I just keep adding more and more because you know different businesses kind of bring different people but the easiest place to get a hold me honest and these days is if you just go up on Instagram go to Instagram it’s Nik underscore Farooqui spelled out There’s no numbers or special characters or you know that kind of stuff. You can connect with me there Or you can go straight over to WWW dot North star
landgroup.com. That’s my website. There’s a contact page on there. Feel free to reach out. ⁓ Be happy to converse with you guys and see where we can help you out.
Michelle Kesil (23:55)
Perfect. Well, listen, I appreciate your time, your story, and your perspective. Thank you for being here.Nik Farooqui (24:00)
I appreciate you.Michelle Kesil (24:01)
Awesome. And for the listeners tuning in, if you got value from this, make sure you subscribe. We’ve got more conversations with operators just like Nik, who are building real businesses. See you on the next episode.
