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Show Summary
In this conversation, John Harcar interviews Jackson Russell, who shares his journey into real estate, focusing on multifamily and modular construction. Jackson discusses his background, the importance of hands-on learning, and the strategies he employs to find deals and network effectively. He introduces modular construction, highlighting its benefits and challenges, and emphasizes the future potential of this method in the construction industry.
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Investor Fuel Show Transcript:
Jackson Russell (00:00)
Yep. So, modular construction, essentially by definition it’s…where anywhere between 85 to 95 % of the full vertical construction process, anything that’s material based in a construction of a project is built in a factory. And so we partnered up with a group. They’ve got a factory kind of near the Austin MSA and essentially they handle kind of all the way from foundation to CO, they some of just that overall benefits is, I mean, we’re saving 25 to 30 % of per square foot on a hard cost basis. And then you’re saving about 50 % of the time. And really that 50 % of the time, what that does for you is, I mean, your carry costs are a lot lower.IRRs increase
John Harcar (02:27)
Welcome back to our show. I’m your host, John Harcar, and I’m here today, guys, with Jackson Russell. And what we’re going to talk about with him, besides kind of his journey into real estate, what brought him up to today, we’re going to talk about some of the things he’s doing in multifamily and modular construction. So, Jackson, man, welcome to our show.Jackson Russell (02:44)
No, thank you for having me. Great to be on the show.John Harcar (02:47)
Cool, man. I’m excited to learn more. don’t know, I’ll self confess, don’t know much about modular construction per se. I’m excited to dive into it. But before we get there, why don’t you give our audience a little background on you, kind of, you what got you into real estate? What really brought you up to today?Jackson Russell (03:01)
Yeah, little background. Originally from Oklahoma, graduated from OU with finance and economics, got into the oil and gas space, which is very traditional for an Okie. But moved down to ⁓ Houston where I was doing consulting and ⁓ company valuations and whatnot.John Harcar (03:12)
Yeah ⁓Jackson Russell (03:20)
We had a project that was actually a minerals company, but they basically was a land acquisition company and really just fell in love with the real estate world, loved the transactional basis of it. so John had just started diving in from a personal research side.kind of learned everything I could. Actually went back up to Oklahoma City to start the brokerage world, kind of learned how to underwrite kind of the basics, but knew I wanted to get back to…
trying to go acquire deals and kind of on the asset management and GP side. So kind of took jump of a leap of faith and moved back down to Dallas and joined on with the sponsor for the last, call it six years, was with them where we did multifamily development, some medical properties. And so really kind of across the board, great learning experience. But like I said, Wando, my own company, back in early part of this year,
started 214 Capital.
John Harcar (04:16)
Okay,awesome. One thing I love to ask people, I think there’s always, most of the time there’s always a seed planted, like anybody when you grew up, anybody in your family, any family friends in real estate, a realtor, a, bot, you know, it was a landlord, bot land, whatever. Like, was there something way back then subliminally that just planted in there that you didn’t know that might have led you?
Jackson Russell (04:36)
Sure, yeah, no, mean, I think a little bit on a two front basis. My mom’s an interior designer for kind of luxury residential homes in Oklahoma. And so kind of learn through that of just the design aspects and kind of they’ve built houses growing up. We were in nine houses growing up until high school. And so they were always building something new. But then also my grandpa was a…mechanical engineer doing structures and houses as well. ⁓ maybe some of that rubbed off on me on kind of why I’m fascinated with the development side, but yeah.
John Harcar (05:06)
Okay.Well, I think too, when someone’s assimilated to or sees something like that, they see home in a different view. Most people see home as a home, right? You see it as a home, but also something that can make money, right? And I think that’s okay. So cool, man. So you finally, you get into, say you join someone else as your sponsor. What does that mean?
Jackson Russell (06:20)
Yeah, so, you know, we were new in the business. We still are new in the business for kind of the larger scope and sake. But normally you have to have someone to sign on your bad boy carve outs, your loan guarantees and everything like that. And so that was kind of our main goal is to partner up with a larger group to be able to do that. And so they were kind of the bigger infrastructure behind going to go do deals when we hadn’t had that track record before.John Harcar (06:34)
Okay.What?
Was that kind of your learning process, right? Or was it kind of like a mentor type of process to where you’re kind of learning the hands-on in the weeds?
Jackson Russell (06:55)
Yep, 100 % fully kind of thrown into the fire and tried to learn as much as we could, soak it up. We did kind of deals across the board. I feel like most people kind of have a lane and they stick to it. And there’s definitely benefits to that. no, we got to kind of see the full spectrum of full acquisition to divesting. We were looking at funds, the debt fund side and really just everything.kind of in and out of the capital stack to be able to go do our own deals. So it was very good experience.
John Harcar (07:30)
With the wealth of knowledge out there, I mean, why couldn’t you just learn this on your own? I what was so important for you personally to be in the situation of learning from someone who’s done it already?Jackson Russell (07:40)
Sure, I mean for one, I’m definitely a hands-on learner. It just, for my own personal experience, but until you’ve actually done it.It takes it’s different from just kind of following a checklist and and following a to-do list on hey This is how you close a deal. There’s there’s always it’s it’s really kind of down to the problem solving aspect Something’s always come up. I mean even even on the project we’re working on right now, I mean finding a modular lender as has been kind of a Learning curve to kind of almost teach lenders. Hey, this is what the process is. This is just a little bit of nuances and
John Harcar (07:55)
Right.Mm-hmm.
Jackson Russell (08:18)
we had a lender drop out on us with two weeks to go and you got to kind of fight those battles and kind of learn on the fly. So yeah.John Harcar (08:26)
You got to get punched in the mouth, man. That’s the best wayto put it. It’s like you got to go out there and you you can know everything, but until you get really punched in the mouth by that shot, you didn’t see coming. Then you’re not. That’s the real life. What were some of the biggest? What were some of the biggest struggles for you? Like biggest challenges at the beginning?
Jackson Russell (08:42)
I think, you know, really finding the deals was kind of our specialty. We still have great access to off-market deals and that’s kind of been our strong suit is really having deal flow and a lot of people do struggle with that. ⁓ But I think really…John Harcar (08:55)
Okay.Jackson Russell (08:58)
not knowing the asset management side, what was the kind of the, one of the key differentiators that we’re just, it was a huge learning curve on. Our first project that we were renovating was a student housing asset. And so, you know, even harder than a traditional multifamily pretty much, cause you essentially have a two and a half month window where you have to renovate or at least make ready all of the units. And so we were renovating all the units. And so we had to buy, you know,John Harcar (09:06)
Mm-hmm.Yeah.
Jackson Russell (09:26)
By day one when those students moved out, we had to be ready to go. so it took a lot of preparation and we were cleaning units up to the couple hours before students were moving in. ⁓ definitely hands on experience, but it was a good learning lesson for sure.John Harcar (09:38)
Wow, okay.I love that. So, okay. So, right now, you’re got your your own company. What’s name of your company again? 214 Capital. So, what are you, what’s your main focus right now? Like, what are you guys doing? What type of deals are you doing? What is your, you know, buy box or avatar? Talk to us.
Jackson Russell (09:48)
So 214 capital. Yes.Sure. Yeah, so, you know, really the buy boxes, anything kind of touching the residential space.
Our first project that we did right as we got launched was a co-GP deal, kind of utilizing someone else’s track record for a land entitlement fund. And so we were essentially buying large multifamily tracks as single family tracks that are agricultural and rezoning them to be multifamily or single family developments. so, something like that, it was something we had done before from our previous company, but just the only
John Harcar (10:57)
Mm-hmm.Okay.
Jackson Russell (11:09)
difference was we used to develop them ourselves for selling it off and soJohn Harcar (11:12)
Got it.Jackson Russell (11:13)
But no, and then, you know, we’d love to get back into the acquisition side of the multifamily. Really just deals haven’t really made sense, right? From a value-added standpoint, I think they’re starting to, especially with the rate cuts that happened. I think that was today, right? ⁓ And so hopefully get back in that, but then we’re really focused on the development side right now. We’ve, like I mentioned to you earlier, we’ve got a great relationship with a modular home builder. And so really trying to explore.John Harcar (11:26)
Mm-hmm. Mm-hmm.Okay.
Jackson Russell (11:40)
that and grow that path.John Harcar (11:42)
Cool. And we’re going to talk about the modular construction here in a few minutes. That’s why I cut more questions for you real fast. You mentioned you find good deal flow and we know it’s a difficult market, right? So a lot of things aren’t making sense. Things aren’t penciling out. So for someone that maybe is coming into the game, right? They might be looking to get into development or what you’re doing. What are some things that they could do that might set them up for success? Maybe give them better chances to better underwrite things, those type of tools.Jackson Russell (12:08)
Sure, yeah, mean, I think…The off-market property is, not a make or break, but it is just so crucial to give you that extra time that you can, without having any other competition, you’ve got direct line of communication with the seller. Because one of the worst things that we’ve kind of encountered with brokers is sometimes you don’t get the full story. And I get it, they’re doing their job, they’re trying to make you think that there’s other buyers.
at the table always and everything. But you’ll see a property that’s been on market for 400 plus days and you’re like, all right, well, yeah. Yes, yes. No, and then so I mean, on the land side, mean, we’ve gone kind of door to door.
John Harcar (12:36)
Right.Yeah. And that that that’s all you gotta get it for it goes is that all things gone.
Jackson Russell (12:54)
you know, knocking kind of thing to find land parcels to see if they know their neighbors vacant lots. There’s different softwares out there utilizing AI to kind of skip trace landowners now. And so that’s how we actually found the first two parcels of land that we’re working on right now. So, you know, it’s a lot easier when it’s off market. We got them for about $100,000 less than what they were originally wanting to sell for. So kind of gives you a good basis going in.John Harcar (12:56)
Mm-hmm.Nice.
That’s awesome.
So you mentioned you door knocking. mean, can’t imagine you really are. Are you really knocking on physically the doors for all these different parcels?
Jackson Russell (13:30)
I have, yeah. And especially when we were, I mean, I’ve done that on the capital racing side. was walking in Highland Park. I’ve got these little, it was our best marketing tool. We raised a million dollars from doing postcards. And I didn’t want to pay the $3,000 for some of those postcard mailing companies. And so I was like, I know Highland Park are going to be accredited investors. So just hit the markets I knew.John Harcar (13:39)
⁓ huh.Fantastic.
Right.
Jackson Russell (13:56)
dropped it in the mailbox.John Harcar (13:58)
What other ways are you out there finding either property or investors?Jackson Russell (14:01)
So yeah, mean, on the investor side, still learning that accredited investor networking basis.know, mailers has been a good one for us. We’ve been going to conferences really outside of the real estate network. We’ve been kind of going to more of either construction conferences. We’ve been trying to get into a couple of medical and doctor conferences. We’ve had a lot of good luck with the venture capital space of just kind of teaching them about real estate. And so kind of those networks, the problem I found with going to kind of just straight real estate conferences is
John Harcar (14:29)
Mm-hmm.Jackson Russell (15:16)
Real estate guys were all kind of deal junkies in some way or another and everyone wants to talk about their deal. Whereas if you go to a venture capital conference, we can kind of add value where I’m learning about a new industry that I don’t know a ton about and then I’m kind of telling them about a project they may not know about.John Harcar (15:20)
All right.Before we talk about modular construction, if once again, someone’s wanting to get into the business, what are some things to look out for? What are some things to really maybe hone in on? What are some better avenues that might help them get a deal faster or grow their business faster?
Jackson Russell (15:49)
Yeah, I mean, I think kind of when I started 214 Capital, you know, I kind of want to get back to the basics. My background has been doing really we were looking at the kind of that middle market 40 to 60 million dollar deals and.You know, I just was very realistic with myself when I was just like, I know I need to start with smaller deals, just get a couple, build that track record. And so the first couple of deals we’re working on now is they’re all build for sale style models where, you know, where our timelines are 12 to 18 months versus, you know, four or five year hold where. ⁓
John Harcar (16:13)
Mm-hmm.bright.
Jackson Russell (16:26)
it will take a while to get that track record because everyone wants to see exits and see that IRR on past projects and it of doesn’t really matter what you’ve done in the past. you know, I think it’s hard to get started, but I would say just honestly be open to partnerships as well. Kind of anyone that’s come to me and offered, like just really just interested in what I’m open to learn, like I’ve kind of either put them on as a, you know,John Harcar (16:36)
Yeah.team up.
Jackson Russell (16:55)
advisor type role or even almost just on a monthly mailing list of where we get on weekly calls or monthly calls of just kind of teaching them business because I’ve got two guys in particular that want to learn the business.John Harcar (17:06)
Nice. That’s awesome, man. All right, cool.Modular construction. What is it?
Jackson Russell (17:13)
Yep. So, modular construction, essentially by definition it’s…where anywhere between 85 to 95 % of the full vertical construction process, anything that’s material based in a construction of a project is built in a factory. And so we partnered up with a group. They’ve got a factory kind of near the Austin MSA and essentially they handle kind of all the way from foundation to CO, they
And so it’s a nuanced process where
You can’t go get your typical architect, your typical designer. So they have all that in-house. And so it makes it easier for us for our sake. But kind of
some of just that overall benefits is, I mean, we’re saving 25 to 30 % of per square foot on a hard cost basis. And then you’re saving about 50 % of the time. And really that 50 % of the time, what that does for you is, I mean, your carry costs are a lot lower.
IRRs increase
and so and really time also kills deals and so being able to kind of get in and get under construction get it completed as soon as possible just kind of it the margin for error decreases and that’s also another thing like I mean your control over costs are a lot
a lot more accurate. You you’re doing all the design and manufacturing up front, so you’re essentially blocking in those prices. And so we’ve got GMAX contracts, which is essentially a pricing guarantee for the total construction cost up front, which is just a piece of mind for investors as well as myself.
John Harcar (18:49)
Yeah, yeah, yeah, yeah.Great prose. What are some of the cons? If you’re talking, if someone’s inquiring about it.
Jackson Russell (18:54)
Yeah,sure. Yeah, I think the cons are from, and I also mentioned this as well. So I think there’s a kind of a stigma between just from talking to investors, talking to other lenders, there’s a stigma on manufactured housing is mobile home parks, it’s low income, not anything touching the luxury space. ⁓ But
John Harcar (19:12)
Mm-hmm.Right.
Jackson Russell (19:18)
This, that’s kind of, couldn’t be further from the truth. This company has done 6,000 luxury homes kind of all across the country. And they did the tallest high rise in the country that’s modular. So it was like a 28 story class A, know, double class A building in New York City. Yeah, yeah, so it’s a…John Harcar (19:29)
Wow. Okay.I didn’t know they made one that big, dude. Wow. I’ve seen some beautiful
modular homes, man. I I’ve seen some ones that are just like, is a modular home. What? Yeah, it’s awesome.
Jackson Russell (19:43)
Yep,So yeah, very cool technology and really the scalability even going vertical actually gets your margins get even better. And so we’re starting out with a couple of townhome projects, but our goal is to get back into kind of a podium style or kind of mid rise project because that’s where we can really maximize that value.
John Harcar (19:53)
Okay.Why did you choose this versus traditional builds?
Jackson Russell (20:08)
You know, I got introduced to this company from a business partner and so…Wanted to hear them out, but then also just I do see it kind of being as a future for construction in general I think with rising interest or rising basically rising construction cost This is a great Avenue to be able to cut some of those costs and still give a very quality product at the end of the day and I think that’s The quality product piece is huge for us Especially here in Texas like you if you’re competing with so many different apartments you have to be able to to stay up with the
John Harcar (20:34)
Yeah.Jackson Russell (20:39)
withthe level of finishes and everything. so just really just as well as being a small team, they handle the full construction process. That’s a huge benefit for us to not have a huge outlay of overhead for a construction project. But yeah, getting back to your further your previous question on the weaknesses, know,
Honestly, I think it’s challenges of the capital stack right now. That’s kind of been our main hiccup of just, it’s almost like teaching, when you have to teach an investor something on a pitch, you’ve almost already lost them kind of thing.
John Harcar (21:03)
Yeah.Yeah, right.
Jackson Russell (21:13)
Yeah,John Harcar (21:14)
Right.Jackson Russell (21:15)
so it’s just what it’s a learning curve, but anyone that’s kind of interested, like always would love to explain it to them and walk them through the entire process. We’re kind of putting together some more materials just surrounding that as more of a learning materials piece. And because just, know, with the lenders even, essentially the process there is we have to takeJohn Harcar (21:30)
Sweet.Jackson Russell (21:37)
We had to basically draw upon 25 % of the construction cost upfront to give to the manufacturer. like a lot of lenders will request pictures or progress photos, because it’s essentially billed and drawn upon after the actual completion of that work. And so with that being in a factory, that’s impossible to do. so that’s been the biggest headache there.John Harcar (21:41)
Mm-hmm.Jackson Russell (22:03)
Other weaknesses are, I think, when we start getting to the actual multifamily and ⁓ larger markets, there’s certain challenges where the biggest gap that we can have between basically peers are about 30 feet. And so when we start looking at…John Harcar (22:17)
Hmm.Jackson Russell (22:22)
clubhouses or kind of amenity spaces, there’s definitely some challenges there with kind of what the capabilities are. essentially, still 80 to 90 % of the project could be modular and then the remaining 10 % is almost a traditional construction, then that’s kind of what our plan would be.John Harcar (22:25)
Yeah.Very cool, man. Well, man, you shared a lot. I appreciate you coming on and sharing all this. If there are people out here that are listening that are, you know, maybe want to invest in maybe some of your projects, they want to talk about modular construction, how do they get in touch? What’s the best way to reach you?
Jackson Russell (22:57)
Sure, yeah, 214invest.com is our new investor portal. So it’s got kind of whatever current deal we’re raising for, and it’s got a form on there that, and I’m pretty good about getting back to people quickly. that’s the easiest way.John Harcar (23:11)
Sweet.Awesome. Well, once again, man, Jackson, I appreciate you coming on and sharing all that knowledge, guys. I hope you got some value from this. I mean, I know I did. If you do have interest in anything that he talked about, if it resonates with you at all, reach out. Jackson, again, thank you, guys. Hope you enjoyed it. See you on the next one. Cheers.
Jackson Russell (23:29)
Thanks,John.
