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Show Summary
In this conversation, Adrian Chu discusses his extensive experience in the real estate industry, including his ventures in brokerage, construction, and mortgage services. He emphasizes the importance of addressing housing shortages through innovative solutions and shares insights on navigating challenges in the market. Adrian also highlights the significance of mentorship and support for real estate investors, as well as his commitment to scaling his business and creating more housing opportunities.
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Investor Fuel Show Transcript:
Adrian Chu (00:00)
Yeah, think one of those moments, well, I would say, know, we’ve seen quite a few, know, since I started in real estate, lots of external factors that really, you know, change things overnight, right? In 2018, for example, Q1, Q2, around Q2 of 2018, springtime, interest rates shot up. And at the time, you know, we had multiple projects going on and…because rates shot up from, it was like around, you know, in the threes and then it became, got to the fives almost to the sixes. And so basically doubled within that short period of time, you know, homes weren’t selling. So we had to switch our strategy, you know, with some of our projects, we ended up renting them out instead with some other projects we were able to still sell them. you know, that’s good.
Michelle Kesil (02:23)
Hey everybody, 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, Adrian Chu, who has been making serious moves as a real estate broker, investor, also owner of a mortgage property management company based in Seattle. So excited to have you here today, Adrian.Adrian Chu (02:52)
Yeah, thanks for having me, Michelle.Michelle Kesil (02:54)
Absolutely, I think our listeners are really going to take something away from how you’re vertically integrating all of the facets of your business. So let’s dive in. First off, for those not familiar with you and your world yet, can you give us the short version of what your main focus is?Adrian Chu (03:17)
Yes, so I’m Adrian Chu based in Seattle, Washington. ⁓ I’m the founder of Specialty Real Estate Group, and that’s our main brokerage firm.We’re also in Oregon, California, and we’re expanding to Arizona. And in addition to Brokerage, which is our primary business, we work with lot of builders and investors on land acquisitions, project acquisitions, and sell-outs. We also have a construction division of our own that we build out projects and sell them as well. In addition, we have a mortgage company, a property management company,
and we also recently started a pest control company. And so a lot of you might ask, know, what, are these all related? Or you may figure out, okay, they do seem related and they’re all real estate related. And part of our business model is to vertically integrate across, you know, all areas of real estate.
so that we can help clients have a seamless one-stop-shop experience. So for example, for a home buyer looking to buy a home, we have our brokerage services, we have our mortgage company. For an investor, we have our property management company. If any construction work is needed, ⁓ we aren’t quite set up for third-party projects, but we do have ⁓ construction expertise to help support our clients. For a builder,
looking for their next project. We also have resource projects for them. We have financing ⁓ options, not just residential mortgages, but also ⁓ different construction loans.
hard money loans, commercial loans that we have access to as well. So we can help builders and investors finance their purchase. And then also with our expertise again in construction, and then we can help with sellouts if that’s the exit strategy. We can help with property management if the exit strategy is to ⁓ do a buy and hold or for example, stabilize the property through property management. And then when it comes time to sell, we can help with the sellout as well.
How all of these things started, my background is actually in the tech industry. I studied electrical engineering in school. I was very interested in real estate throughout my life. And when I was still a student at the University of Washington, I decided to get my real estate broker license. At the time, I was new. I didn’t know really what’s going on. But after I graduated, I went on to work in the tech industry. And at the same time, I was able to leverage that to purchase my first property.
and
then ⁓ lots of friends and classmates and know people I knew they wanted to buy their own home as well so that’s how I you know expanded the brokerage business ⁓ I decided that you know the same people they you know when they’re buying a house they would need a mortgage as well so I decided to get the mortgage license and then since then we’ve gotten a bunch of different states you know with the mortgage license and ⁓ in order to provide a very seamless convenient one-stop-shop experience for the class
Fast forward a few years, I continued to do my own projects and help people buy and sell and finance their homes. After a few years, I transitioned away from the tech industry to go all in into real estate. ⁓ From there, from the investment side, I…
explored rentals and they explored fix and flips and then also ⁓ most recently, and this was around 2016, they got into new construction and at the time Seattle was growing and ⁓ the land use code kept on progressing and there were a lot of opportunities to… ⁓
Create more housing. ⁓ There’s definitely a housing shortage in the Seattle area. you know, from, would say around 2010, a lot of tech companies locally started expanding. Lots of people started moving to Seattle. Most people you would meet around the city, you know, a lot of them are transplants from other places. And, and so, you know, there’s a huge boom of population boom in Seattle. And so as a
The city responded with land use changes and there were multiple waves of land use changes even within the short 15 years I’ve been in real estate. Every few years there would be a new land use change starting with 2018 there was a whole rezone of single-family zone properties, rezone to multi-family. So that was the first wave. In 2020 there was a change in the ADU legislation which we’ll talk about too.
to allow three up to three homes on a single family zone lot so for example ⁓ Primary home and then two accessory dwelling units. So actually that was one of our first ⁓ forays into ⁓
This new category that is coined on middle housing. I was one of the first adopters to do a Kind of a middle housing project involving keeping an existing house and then adding an accessory dwelling unit and being able to condo and sell those separately So this was in 2017. This was in the the previous generation of the ADU code and at the time people didn’t really know what what it was fast forward to
⁓ 2025, there’s yet another wave of rezone passed by city of Seattle and this time spearheaded by the state of Washington through the House Bill 1110 and House Bill 1337 to basically enable accessory units in all metropolitan areas in the state and also turn any residential zone lot to allow for at least four and up to six homes ⁓ to be on one lot. So all of this is very beneficial to create more housing
make housing more affordable, more reachable for buyers and basically implements this new category of much needed ⁓ missing middle housing.
And so and you know, the remarkable thing is it’s not just ⁓ Washington, not just Seattle that’s having ⁓ these housing shortages, you know, in the past 10, 15 years, lots of other places in the country are having the same thing. And another market that we’re super active in is the San Francisco Bay Area in California. And California is doing similar pushes statewide to ⁓ create more density to allow for additional units to
be built to allow for additional units to be sold separately to create more forms of home ownership, more opportunities for buyers because you know home prices have become you harder to reach for many people and so more housing is really the solution. I’m a strong believer in that.
And so how that ties back to all of the businesses we’re in, they’re all housing related. ⁓ We’re actively expanding geographically. We’re expanding the unit counts that we’re involved in in each of our markets. And ⁓ so part of that scaling and having that vertical integration really supports us in assisting our clients and then also for our own portfolio as well.
Michelle Kesil (12:28)
Amazing! Wow, that’s so exciting that you guys have so much to offer and so many segments of your business. I think that’s super fascinating that you’re able to hold all of these different verticals and help people in so many ways. What are some of the keys that have supported you in keeping this business running smoothly with all of these moving parts?Adrian Chu (12:55)
I would say having processes in place and all that is everything’s a work in progress. Every day is a new learning experience, right? But we continue to take each of those opportunities to continuously improve our processes. have a great, ⁓ most importantly, we have a wonderful team in place that’s been supporting us and being able to support our clients and support the growth of the company. And I would say that that’s the most important. ⁓We have a great team in place and everyone’s kind of on the same page and very supportive of our growth and ⁓ playing a huge role in what we do. ⁓
Michelle Kesil (13:39)
Absolutely. Yeah, the team effort really makes a big difference. So let me ask you this. Every business owner has those moments where things get real, maybe deals go sideways, or you have to make fast pivots. Would you mind sharing one of those moments you’ve experienced in your business and how you overcame it?Adrian Chu (14:02)
Yeah, think one of those moments, well, I would say, know, we’ve seen quite a few, know, since I started in real estate, lots of external factors that really, you know, change things overnight, right? In 2018, for example, Q1, Q2, around Q2 of 2018, springtime, interest rates shot up. And at the time, you know, we had multiple projects going on and…because rates shot up from, it was like around, you know, in the threes and then it became, got to the fives almost to the sixes. And so basically doubled within that short period of time, you know, homes weren’t selling. So we had to switch our strategy, you know, with some of our projects, we ended up renting them out instead with some other projects we were able to still sell them. you know, that’s good.
⁓
And I think the valuable lesson there is to always have multiple exit strategies. And when we were underwriting those projects, we already kind of had the different exit strategies in mind. First priority is to sell, but we can’t sell. Holding them as rentals, it’s still not a bad situation to be in. ⁓
that, you know, I think just having multiple strategies at the same time, I had a lot of peers that were also in real estate investments and, you know, they didn’t have rental as one of their strategies, right? They just had to sell and, you know, you’re forced to sell at the wrong time. It can be a painful experience. In 2022, same situation happened. Interest rates shot up after a few years of, you during COVID and kind of really low
interest rates right I remember those days where you know you get a two point something percent on an investment loan you know we were able to help clients do that and ⁓ but you know early 2022 rates started shooting up and it’s
You know, there’s always talk that rates would go down, rates would go down, you know, 22, 23, 24, we’re in 2025 right now. And rates are still relatively high. They came down from the peak a little bit, but who knows, right? A lot of these things are external factors that we as individuals, you know, we may not be able to control. And so being able to…
Be prepared for rates going up. Like I mentioned, yeah, in 2022, we had new construction projects that were going on. had bank construction loans that were tied to the prime rates and prime rates tied to the Fed rate. And guess what? In 2022, every six weeks or every month, the Fed would raise the rate by a quarter or half, right? And so every time that happens, the next day I would get a letter from the bank saying, oh, your construction loan rates.
going up it started at 5 % it became you know like 5.25 5.5 and then it shot up all the way I think when we finished that project we were at like nine and a half or or nine and three quarters or you know something like that and so just watching that change you know that’s kind of something that we had to absorb but you know good thing about underwriting sound that okay we were able to absorb that we still you know the project still ended up fine but
You know, these are things that, you know, sometimes.
we may not be able to predict. I know lot of investors went into multifamily right before 22 and ⁓ with the speculating that rates will stay low and that they could do some value add, exit the project. And I know that that market got hit pretty hard ⁓ after rates shot up. ⁓ But I would say, always have multiple exit strategies, always plan for the worst. And if the worst happens,
project still good, I think that’s still a good thing. And if the worst case doesn’t happen, just treat that as a bonus. And that’s always good as well.
Michelle Kesil (18:48)
Yeah, definitely that makes sense. There’s always those external factors that you just have to, you know, figure out how to overcome. And especially when you’re here for that long term game, it’s part of the process.So you mentioned about supporting investors in ⁓ developments and projects. What are some of the ways that you are supporting real estate investors? I know you mentioned you also have some of your own investments. How has that journey gone?
Adrian Chu (19:22)
Yeah, yeah, totally. Yeah. So for our investors, we offer end-to-end services and we expand our service offerings based on what people are looking for and how that maps into our existing expertise.And so for a lot of investors, ⁓ we help them find projects. We acquire projects for investors both on market and off market. We do a lot of marketing to sellers directly. We have about 100,000 sellers in our database across the Seattle area, San Francisco Bay area. The types of properties we target are
tear down opportunities for building new, ⁓ rehab opportunities for investor to go in and rehab and bring that back on market. And also multifamily as well, multifamily residential apartment buildings with value add opportunities as well. And so those are primary segments that we target from an investor ⁓ perspective for our clients. And then we’d like to… ⁓
We work with an investor and then for the stuff that investor doesn’t like, then usually we take those on ourselves and have our portfolio based on that as well. That way we maximize the deal flow, we prioritize our clients and at the same time, ⁓ we’ll have…
projects, know, and then that way we maximize deal flow because the clients get what they want and then we get the stuff that we aren’t otherwise able to place so that you know, I think that’s the typical way we approach it and we can maximize deal flow that way. It’s impossible, you know, as an investor, it’s going in the investor side of things, right? It’s impossible for us to buy every single property that we encounter. So we found that this business model works the best where we focus, you know, on ⁓
sourcing deals both for clients and for our own portfolio.
Michelle Kesil (21:30)
Yeah, that makes a lot of sense. Awesome. I love that. So what are you most focused on solving or scaling next for this chapter in your business?Adrian Chu (21:43)
Yeah, so there are lots of changes happening right now. ⁓ Like I mentioned earlier, the land use changes across the ⁓ whole country basically. the housing shortage is real.Aligning our business to support, how do we create more housing for more people? So, ⁓ Washington has the House Bill 1110, 1337, all those zoning changes recently propagated out to the city level a few months ago. So we’re actively engaging in projects. ⁓
both in our own portfolio and for our clients to, know, how can we enable our efforts to create more housing for more people? And likewise, same in the San Francisco Bay Area market, there’s even more of a housing shortage in San Francisco and the Bay Area, and the state’s been passing different zoning changes. SB9, for example, AB1033 allow for splitting the lot, allow for ADUs to become content
minimized and sold separately kind of what we’ve been doing in Seattle for you know eight years now. So far San Jose is the first city to adopt that and so we’re you know that’s another kind of avenue where we can implement the same business model and ⁓ applying a new market. So as far as scaling the business geographically scaling ⁓ unit counts within each market ⁓
both in supporting our clients and also for our own portfolio. And every day is a new thing, To studying the land use code, understanding what can be done within the framework of the land use code. And then also, how to best…
you know, handle other external factors, right? Interest rates harder to control with rising costs, you know, how do we mitigate against that? How do we leverage volume to… ⁓
to be able to provide more stability for our underwriting. Same goes for our clients, right? How do we underwrite ⁓ based on current market conditions, but also what kinds of things can we offer to help provide stability? Because there’s just lots of moving parts out there and ⁓ the more risks that we can mitigate, the more risk we can control, the more solid the outcome will be.
Michelle Kesil (24:21)
Yeah, that’s so exciting that you’re focusing on those efforts and supporting people with housing. I think that’s such a beautiful initiative to take on. So definitely lots of exciting things in your world. Thank you for sharing all of that. And before we go ahead, go ahead.Adrian Chu (24:38)
one last thing I forgot to mention.Yeah, I forgot to mention. Yeah, so we actually earlier this year, we launched the real estate development accelerator program for ⁓ investors and ⁓
You know, learn about the work we do. And so we’ve been able to run through a couple of courts of that starting our third court soon. And that has helped a lot of people learn, you know, everything. The goal of that is, you know, I’ve been doing this for 15 years and we want to be able to share those experiences so that, you know, for me, myself, I learn everything the hard way, just learning by doing. Nobody really, you know, told me, oh, this is this and this. So I’m able to share the 15 years of lessons learned, 15 years of mistakes.
so that someone starting out right now, ⁓ they don’t have to repeat the same mistakes. I think that’s beneficial too. And it will help with creating more housing for everyone.
Michelle Kesil (25:36)
Amazing. That’s really powerful that you’re supporting people and mentoring them. That’s such an important aspect of real estate because yeah, like you mentioned, most people just get thrown in there. So having that mentorship is so helpful.Awesome. So before we wrap up here, if someone wants to reach out, connect, learn more from you, where can people find you and connect with you?
Adrian Chu (26:05)
Yeah, so, you know, a lot of people have told me, you can just Google me, find me, but yeah, email, ⁓ yeah, feel free to email or connect on social media, pretty much on most of the social media sites. ⁓ Yeah, email is [email protected], pretty easy to remember, first name, first name, last name.com. And yeah, always, you know, feel free to reach out and always like connecting with other real estate folks.you’re happy to help. We all learn from each other, So that’s kind of our big model, really learning by doing.
Michelle Kesil (26:46)
Perfect. Well, listen, I appreciate your time, your story, your perspective. Thank you for being here.Adrian Chu (26:53)
Okay, yeah, thank you, Michelle.Michelle Kesil (26:55)
Of course. And for the listeners tuning in, if you got value from this, make sure you’ve subscribed. We’ve got more conversations coming with operators just like Adrian, who are building real businesses. We’ll see you all on our next episode.
