Everything You Need to Know about Qualified Opportunity Zones in Real Estate ft. Andrew Greer
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Andrew Greer Interview
What if I told you there was a way for real estate investors to significantly reduce their existing capital gains tax liability? And eliminate ALL capital gains taxes from a property’s future appreciation? The dream is real, and it exists in the form of Qualified Opportunity Zones, a program included in the 2017 Tax Cuts and Jobs Act to encourage investment in low-income census districts. So, how does it work? And how can you take advantage of these opportunity zones to grow your business?
Andrew Greer is the CEO of Thomas Strafford Investments, a real estate investment company based in San Diego. Thomas Strafford manages investments in single and multifamily renovations as well as ground-up builds throughout Southern California. An expert in local zoning, Andrew believes that specialization is key in delivering predictable returns.
On this episode of Founders Club, Andrew joins Oliver to share the big-time tax benefits of investing in Qualified Opportunity Zones (QOZs) and explain how the program works. He discusses how to find the low-income census districts that qualify as QOZs, offering insight around which cities have the most upside potential for developers. Listen in for Andrew’s advice on learning about zoning and find out how brokers might market QOZs to grow their business!
Here is how the Andrew Greer interview breaks down:
[1:23] The fundamentals of Qualified Opportunity Zones
- Invest in one of 8,500 low-income census districts
- Capital gains tax deferred, reduced or eliminated
[4:23] How the opportunity zone program works
- Double basis in spend within 31 months
- Works best with ground-up development
[11:37] Why Andrew is developing microunits in these areas
- Much lower cost per square foot
- Reduce cost of parking stalls (public transport access)
[17:51] The cities with the greatest QOZ upside potential
- San Diego, LA and Oakland
- New York, Florida and Tempe, AZ
[20:40] The benefits of investing in opportunity zones
- Deferral on taxes through 2026
- Hold 7 years = no tax on 15% of gains
- Hold 5 years = no tax on 10% of gains
- Hold 10 years = no tax on appreciation
[31:15] How to find Qualified Opportunity Zones
- Resources on Andrew’s website
- Search by address or census district
[33:42] Andrew’s advice on learning about zoning
- Attend local planning committee meetings
- Network through Urban Land Institute
[45:44] The best resources to learn about zoning
- No universal tool available (local specialization)
- Use Scoutred, Google city name + zoning
[51:07] How to market for Qualified Opportunity Zones
- Educate property owners re: selling for max value
- Search for cash buyers in area
[57:07] Andrew’s top tools and apps
- Workep (Trello on steroids)
- Facebook ads
What if I told you there was a way for real estate investors to significantly reduce their existing capital gains tax liability and eliminate ALL capital gains taxes from future appreciation? Today, Andrew Greer joins Oliver to discuss the benefits of investing in Qualified Opportunity Zones and explain how YOU can profit from the program!
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Full Transcript Below:
Oliver Graf: Welcome to another episode of Founders Club. Today, I’m here, downtown San Diego, at WhipHand Brasserie and Beer Bank. I’m going to be having a great conversation with Andrew Greer, the founder of Thomas Stratford Investments, on everything you need to know about Qualified Opportunities Zones. We’re going to be talking about all the tax advantages.
Andrew Greer: The biggest benefit of the opportunity zone, is, after 10 years, you pay no tax on the appreciated value at all.
Oliver Graf: How to find those types of deals, and what to do once you find them.
Andrew Greer: Good arterial line, which is what I look for with development is where the bus is going, follow the buses, and then build one or two blocks off from.
Oliver Graf: Oh, that’s a good tip. If you didn’t pick that up, that’s a really good tip.
Andrew Greer: Yeah, quite literally, if you’re looking for high density development on developed areas, that’s the way to do it. That’s funny, that actually is a really good tip. I didn’t even know that.
Oliver Graf: That’s a great tip, man. Thank you for that. Look forward to jumping in. If you like it, give us a subscribe, leave a comment, leave us a like, and we’ll see you on the inside. Sitting here with Andrew, about to enjoy a couple of these beers, straight from the beer bank, here at WhipHand. I’m going to be trying a Gravity Heights… Why does it change? Jesus Christ, Cheers for Sarah. I’m going to be trying the Gravity Heights, Cheers for Sarah, hazy IPA. And Andrew is drinking a…
Andrew Greer: Tangerine Express by Stone Brewing.
Oliver Graf: Stone Brewing, fantastic.
Andrew Greer: Cheers.
Oliver Graf: So, we’re going to be talking about opportunities zones, and getting started. So, according to the IRS, an opportunities zone is an economically distressed community, where new investments under certain conditions may be eligible for preferential tax treatment.
Andrew Greer: Correct. That actually sounded like I was interviewed by a cop, at first.
Oliver Graf: Yeah, exactly, exactly. “Sir, I have to ask you a few questions.” So, why don’t we talk about first, like, where did this come from? And why are they doing it? And then, let’s talk about all the amazing things that come from these opportunities zones, and then, how to take advantage of them.
Andrew Greer: Yeah. So, first off, they started with the JOBS Act in 2017, is part of Trump’s tax plan. They started the opportunity zones, and basically, they took disenfranchised census districts, 8,500 of them, and the governors of each state applied for them, and those 8,500 were approved, based on being very low income areas.
Oliver Graf: Got it.
Andrew Greer: And we’ll go over later why 2010 is such an important year. But, to just kind of put the pin in that for you, think about how things are very different from 2010, and how that could possibly affect which one of these zones are more beneficial. So, they open this up, and essentially, if investors come in with capital gains to invest, they can have their capital gains basis deferred, reduced, and then, essentially have all their gains wiped free off the slate, if they meet a few requirements, including how much you have to develop, what thresholds you meet, and how quickly you develop. And I can go over all those finer points.
Oliver Graf: Yeah, we’ll jump into all that here for sure, because, I think the tax advantages are some of the best I’ve seen in real estate in a long time, I think there’re some unbelievable opportunities that are going to come from it. But, did I hear you say that there’s 8,500 of these zones in the U.S.?
Andrew Greer: Yeah, there’s, I think it’s 8,517.
Oliver Graf: And they just looked at different areas based on whatever income factors, whatever determined them to be low income, and the whole point is to incentivize investors to come in there, and then spend money to redevelop those areas?
Andrew Greer: 100%, yeah. So, it was, they had to be very low income. The governor of each state had to apply for those census districts. They had to get approved. And the idea is to pour investor money into these areas by increasing the benefit to the investors.
Oliver Graf: Got it. It makes a lot of sense. It’s a win-win for everybody.
Andrew Greer: I wouldn’t say, one of the coolest things that’s ever happened to real estate, it’s probably the coolest thing and the most beneficial thing that I’ve ever seen. It makes the 1031 look rich.
Oliver Graf: Significantly less awesome than it was a few months ago.
Andrew Greer: Exactly.
Oliver Graf: Tell me a little bit about how the program works. I don’t want to get too far into the tax stuff, because I think we’re going to get to that, and I want to go really deep on that. But, like 30,000 feet up, how does the opportunity zone program work?
Andrew Greer: Yeah. So, an investor sees a capital gain, it can be short-term, it can be long-term, and they take those funds, they put them into a Qualified Opportunity Zone Fund, which can be just an LLC, it could be an actual fund. That fund invests into a Qualified Opportunity Zone property. And to go super 3,000 foot level on it, over the first 31 months, they doubled the basis in spend on the property, so that means, $500,000 basis in the property, you have to spend another $500,000 on it, within the first 31 months.
Oliver Graf: In order to qualify for all the benefits.
Andrew Greer: Yeah. Otherwise, there’s a million ways to work around that to extend it, that you have to be on that tract.
Oliver Graf: Okay. So, to give an example of that, and let’s say it’s a million dollar property, and it’s a multi-unit or whatever, and you need to put, let’s say, 30% down, so, 300K. So, in order for that to qualify, you’d have to commit another 300K into redeveloping that property?
Andrew Greer: No, it’s actually more complicated than that. The basis would be, so, you have your land value, and your asset value, the building. So, let’s just say the building was worth 700,000. You put 300,000 in, you need to spend 700,000 in redevelopment. So, it’s not a small amount of money that has to be spent.
Oliver Graf: Got it.
Andrew Greer: So, it’s the basis of the building, essentially.
Oliver Graf: Got it.
Andrew Greer: And there’s a lot of different things that qualify that as vacant land, and other things. But, think of it in a nutshell, that’s what it is. So, taking an apartment complex that’s maxed out highest and best use, and in disrepair, you’re probably not going to meet this requirement. You basically need to be putting sticks in the ground and building. And that’s why we love it, because we’re developers, and it incentivizes us to work with our borrowers, or our lenders, to give them a higher rate of return, based on not paying taxes over the long run.
Oliver Graf: So, the main benefits come in on the development side of things.
Andrew Greer: Yeah.
Oliver Graf: Ground up type stuff.
Andrew Greer: Ground up, and it’s really going to be quite difficult to qualify without some ground up aspect to your project. Unless you just have a building with major structural defects, there’s a few other things you can’t appreciate out value, to lower that basis. As soon as you depreciate the building, you nullify it, so, you have to actually build it, go through the process, get through your time period, then you can do your depreciation. So, there’s a few out there like, “We all were thinking of some tricks that we could run, and the IRS came back with their second review, and they were like, ‘No, no, yes, no,’ lots of nos.”
Oliver Graf: They have a little more guidelines, a little more clarity. Okay. Do you think that also applies to like adding more units or adding more square footage?
Andrew Greer: Yeah.
Oliver Graf: Or, is it like scrape and build? Or, is it like buy raw land and build?
Andrew Greer: So, you can add more units, and likely get there in many scenarios? I haven’t looked at it from a standpoint of adding more units, because none of our projects consist of that, ours are scrape and build. So, we’re clearing the basis many fold.
Oliver Graf: No problem. But it really sounds like it just comes down to the dollar amount.
Andrew Greer: Comes down to that dollar amount. That’s really what it comes down to.
Oliver Graf: Okay. So, just making sure that you qualify based on the amount of money that you’re putting back into the project.
Andrew Greer: Yeah, and consultants, permit fees. It’s not just hard labor and materials that can go into that value.
Oliver Graf: It’s total dollars in.
Andrew Greer: Total dollars.
Oliver Graf: I want to talk about why this is so exciting in a minute. But, first, why don’t you tell me a little bit about how you got into this, because I know you’ve been doing development deals for a long time, and I know that you’re very savvy when it comes to zoning and picking up discrepancies and things like that. So, how did you move in the direction of the opportunity zone stuff? And then, we’ll talk about why you’re so excited about it.
Andrew Greer: I’m always looking for ins and outs of the tax code. So, you can get updates on the IRS website. This one came out really strong in September of last year, even though it had been on the board prior to that. It really came out hard and some big Forbes article and a big Entrepreneur Magazine article, got it in front of me. I just happened to get incredibly lucky, and I went into escrow three days prior to that article coming out, on two parcels that were in the opportunity zone. So, that article came out, I looked at them, I realized that they were.
Oliver Graf: And this was just coincidence.
Andrew Greer: That was coincidence right there. So, from there, I actually went out and started prospecting for properties nearby, to acquire them, and we were actually able to bring in another lot.
Oliver Graf: Yeah, damn. On that project, you just added more.
Andrew Greer: Yeah, just adding more to it. We were looking at the property, it was one of several properties we were looking at. And the reason we were actually looking at it, and this goes back to the zoning, was, I was looking at it because they were reducing the parking in this neighborhood, and they were doubling the density. At the same time, opportunity zone came across, I was able to go from a 13-unit project to a 26-unit project.
Oliver Graf: And explain why that happened.
Andrew Greer: So, there was a city council action that was on the border and had been up for a while. And the ground swell on it through the community was that it was going to get through. We were fortunate enough to lock up the property. Essentially, it’s 13-unit price, with the hope that we would be able to add an additional 13 units to it.
Oliver Graf: So, you got an idea this might happen, but when you put the money down, and put the contract, and you weren’t certain.
Andrew Greer: Yeah. And there was a series of events that actually happened that same day. We were actually buying it to Airbnb it up until the point that we started construction, and that was the day they got rid of short-term rentals in San Diego. A lot of our transactions can be very quick, so, I did 100% deposit on this project. So, we paid day one within 24 hours we had to wire 100% of the purchase price. It was in foreclosure, there was a bunch of attorneys involved. So, we wired our money in, it was released at like 12:30, and by 9:30 that night, we got word that short-term rentals were no longer allowed in San Diego.
Andrew Greer: So, that all switched, and we’ve been able to short-term rent them right now, which is part of our hold strategy while we get permits, because it takes a while. But, yeah, so, we had that mixed with a few other factors. And so far, everything’s gone our way on it, despite that initial hiccup that was kind of a fun one.
Oliver Graf: Crazy. And then, really, I mean, fortunate at the same time, because it really is going to end up working out in your favor, because, had that law passed and then you went to buy that 13-unit, you would have probably ended up paying…
Andrew Greer: Much more.
Oliver Graf: A lot more.
Andrew Greer: Oh, yeah. It becomes a much more valuable property at that point, obviously, because there’s so many more units you can build on it, and I have less construction costs. And I can actually pop into that real quick, if you want me to explain that different. So, this is something that, we like the micro units, we like our pre-manufactured units, and we like to have a certain amount of parking. Because, when you look at a project, let’s just say you’re looking at a 1,200 square foot property, you have to build 1,200 square feet of it, you also have to build all your navigable space on the outside for it. It’s 1,200 square feet versus 600 square foot unit, has more navigable square footage that you’re not counting into your cost.
Andrew Greer: City of San Diego, you have to build two parking spots with that. So, now, you have 425 more square feet that you’re giving up elsewhere to build it. So, when you’re looking at your per square foot cost, you’re not even seeing what it’s really costing you. As you go down smaller, up until you hit about 300 square feet, between 400 and 450, you get about $3.90 a square foot. And I’m only building 100 square foot of parking for each one, and I have far less navigable space, is-
Oliver Graf: So, you’re maximizing a lot more.
Andrew Greer: I’m maximizing it much more. I go to that 1,200 square foot, I’m getting around 275 a square foot in rent, but I’m building an additional 500 square feet elsewhere, that you’re not even capturing in that. So, if I can get into highly dense areas, and build highly dense, with commuting available to it, I can just crush the rental the game.
Oliver Graf: And this is like a very new strategy, right?
Andrew Greer: Very new.
Oliver Graf: These micro units are very… I don’t know of any there in the city that are already built, unless…
Andrew Greer: There are some about a block and a half from us right now.
Oliver Graf: Okay.
Andrew Greer: And it’s really funny, most people don’t even know they’re there, they’re on the other side of Petco, and they were the first ones. And then, there’s a few more six blocks that way.
Oliver Graf: And just to explain what that means is basically, as San Diego and any other big city grows and becomes more dense, they’re building and approving smaller units, because there’s only so much left where you can build new stuff or build ground up, so, they’re allowing for less square footage per unit to be approved.
Andrew Greer: Yeah.
Oliver Graf: And the idea is, more co-living style facilities with just smaller rooms, wherein you will be like private area.
Andrew Greer: And it’s also, when you’re downtown and you’re going highly dense, you’re looking, in San Diego, depending upon where you’re at and what your soil’s like, between 50 and 60, as high as $65,000 per parking stall, in cost. If you’re using commuting and other ways of getting people around town, you’re reducing that cost dramatically. So, the big difference too is, micro units over here, they’re either 50 or 75% affordable, they’re incentivizing us, we’re doing 10% affordable, because they did it prior to the code. So that it entices the developers, because it’s really hard to build at 50 to 75% affordable, which is super hard. It’s hard to do it.
Oliver Graf: Because the numbers don’t pencil.
Andrew Greer: They just doesn’t pencil, you can’t make it work.
Oliver Graf: Very interesting. Do you see that being a big wave moving forward? Is that a big opportunity?
Andrew Greer: I think it’s, just like anything, we can’t build only micro units.
Oliver Graf: Of course, right.
Andrew Greer: So, I have units going out at the same time in another part of town, that are 1,000 square feet, three bedroom, two baths. We’ve used a different model on those. And then I have two parking spots per, but I won’t put them on a podium. So, it still works for us there, and that’s what that market demands. Down here, young professional, there’s huge demand for young professional living. You can put them in units like this that will work and they’ll love it. It’s not the desire to have 1,200 square feet if you’re a bachelor inside your house and you’re mid 20s, it just doesn’t make sense.
Oliver Graf: And if you live and work downtown…
Andrew Greer: Just hop on your bike.
Oliver Graf: You just need a place to crash.
Andrew Greer: Yeah. When I was in my 20s, I was at home.
Oliver Graf: Yeah, ultimately, I mean, it’s different strokes for different folks, right? Like, I wouldn’t want to live there, I’m not going to live in a macro unit, you’re not going to live in a micro unit, most people aren’t going to live in a micro unit. But, those people, there’s a little sliver of the market that that’s going to be perfect for.
Andrew Greer: 100%.
Oliver Graf: And, as a developer, it gives you an opportunity to capitalize on a new market.
Andrew Greer: Yeah, 100%. So, I think it makes a ton of sense.
Oliver Graf: What sort of projects are you working on right now in the opportunity zone?
Andrew Greer: So, we acquired three duplexes, all next to each other and they’re on separate lots. We’re assembling that to make one property. It’s pretty cool. We own all the East West lots. So, it’s North South and East West Street. So, we own the whole swath, and we’re going to be building 26 micro units on it. Really cool navigable space common area, we have some really good trees that we’re actually going to work around, 26 micro units of use at downtown. Super cool, within blocks of downtown, essentially, just outside. And what would be considered a fringe area, that is no longer fringe, and that goes back to my 2010 comment.
Andrew Greer: In 2010, this neighborhood wasn’t doing so well, now, it’s doing fantastic. And so, when we found out it was opportunity zone and what that meant and all those things, we looked around and we have a new housing development across from us. We have a 30-unit complex of thousand square foot units going up down the street, and we’re sitting here going, “Wait, we’re opportunity zone by one parcel?”
Oliver Graf: Isn’t that unbelievable?
Andrew Greer: And the benefit’s amazing.
Oliver Graf: Congratulations, that’s obviously very exciting. Where do you see, in this opportunity zone time span, where do you see the biggest opportunities?
Andrew Greer: The biggest opportunities right now are in San Diego, Los Angeles, Oakland. There’s a few spots of New York, and then, a few spots in Florida that I see that are hottest. There’s southern Arizona too, not quite, I’d put them more like B+ tier, on Tempe, Apache. I don’t know if you’re familiar, Apache is in the opportunity zone. That’s insane, you’re right next to the college. Short-term rentals, baseball players, just a thought if anyone wants to do that. So, I’m seeing that, and the reason why is the biggest benefit of the opportunity zone, is, after 10 years, you pay no tax on the appreciated value at all.
There’re several, probably 8,300 of the zones are in cash flow rich, eight cap, nine cap neighborhoods, throughout middle America, that exist all over the place. If I’m looking for highest depreciation to get that tax benefit, I don’t need high cash flow, I need high appreciation at the end when I sell the asset. So, I would not go towards those zones, because I want to see the highest net gain at the end.
Oliver Graf: Highest exit.
Andrew Greer: Yeah.
Oliver Graf: So, you like the higher end markets because of that reason.
Andrew Greer: Yeah, because I see the greatest appreciation upside. Obviously, when you have the greatest appreciation upside, you’ve the greatest risk, but, I enjoy the risk and we manage it. So, that’s what our job is.
Oliver Graf: Very cool.
Andrew Greer: Yeah, that’s where I see the highest value, and that’s why those markets in particular, for what I’m looking at, are the hottest.
Oliver Graf: You mentioned, it’s basically for developing, right? So, is there any properties that are excluded, Or…
Andrew Greer: Yes.
Oliver Graf: Okay.
Andrew Greer: Yeah. So, gambling, anything that, I believe if it’s more than 50%, it might even be 30% of your income, comes from alcohol or tobacco. You can’t have bars, you can’t have any adult stores, strip clubs, anything like that. Anything, think of it, when you were a little kid, if your mom called it a vice, you can’t build that, and those are really it, in a nutshell. So, basically, you can’t build a casino in an opportunity zone, and you can’t build a bar. But you could build a restaurant, you just can’t get the majority of your revenue from alcohol sales.
Oliver Graf: Okay, it makes sense. So, I think, we kind of already touched on it earlier, but I want to get into the tax stuff and I want to read you the way I understand it, and then you can add your thoughts. So, the main three things that seem exciting about opportunities zones is, one, deferral on taxes through 2026, right? So, if you’re to roll over a property, you can get into one of these types of deals and not pay any taxes till 2026. Second, no tax on gains, 10% discount, if you hold it for five years, and 15% deferred gains, if you hold it for seven years.
Andrew Greer: Yeah, and there’s a couple caveats on there, too.
Oliver Graf: Okay, we’re going to get into each one of these. And then, number three, and I think this is the biggest one, is, no tax on appreciation, if you hold it for 10 years.
Andrew Greer: Yeah, that’s the big one. So, the deferral of 10% at five years, as long as you’ve reached five years by December 31st, 2016, yes. Because this plan goes into 2046. But, if you find an opportunity zone in 2027, you only get the benefit of the after 10 years. What that means right now is, if you want to get the seven year benefit, the 15% reduction, you have to buy before December 31st. So, you have to be in your asset by then, this year, to get that 15%. Because, everyone has their taxes due, off of that end year date.
Oliver Graf: Oh, so, if you don’t do it by the end of this year…
Andrew Greer: You won’t get to the seven years.
Oliver Graf: You won’t hit the seven year mark before it expires.
Andrew Greer: Yeah, exactly. And that’s one of the things most people are confused on right now. That means, two years-
Oliver Graf: We’re just smart on their part, because they’re getting people to take action now, which is what they want.
Andrew Greer: Yeah. And that’s the idea is to get it to happen now. So, the five years, that’s two and a half years from now, if you haven’t gotten in, you won’t get that 10%. So, it pushes it again. So, we’ll see waves, I’m sure. From there, the 10-year, awesome, because you get that appreciation. But, there’s another trick here, that, if you have a 1031 client, who’s sitting there, and they’re going, “I have all of my principal, and I have to transfer all my principal and all my equity into the next asset,” you don’t with a qualified opportunity zone, you only have to transfer your gains.
Oliver Graf: Oh, so, you can cash out part of it.
Andrew Greer: You can cash out part of it, which is something you couldn’t do before, which, as you know, in the business of finding leads and doing stuff like that, we have a dial on who our prospect is right now. So, that’s a big one. Because, I’ve run into that before with clients looking to sell, and they’re like, “Oh, but I’ve got this big nut in here, I don’t want to move the whole thing over,” and you can’t piece it.
Oliver Graf: So, that could be the sale of anything, right? Real estate, a business, stocks, whatever, you cash that out, and then you have 180 days to locate an asset in an opportunity zone, and then you pull the trigger on buying that, you’re basically rolling that right on over you.
Andrew Greer: Mm-hmm (affirmative). A few legal steps in between there, getting it set up, so, it’s technically a fund and it’s purchased appropriately, yeah.
Oliver Graf: Yeah, not to cut you off, but I’m actually glad that you bring that up, we are not attorneys or CPAs, and this should not be considered tax advice. But we’re just going over the broad strokes, so people understand. So, you have 180 days to select from when you sell whatever asset you’re going to roll over, and then, I think the real huge benefit there is, if you have, let’s say, a million dollar, whatever piece of real estate business, you sell it, you get a million dollars to take into the next project, where, if you’re taxed on that, and you give that up, then you’re losing a large percentage of it, which gives you less leverage into the next deal-
Andrew Greer: Less bullets.
Oliver Graf: So, now you’re getting the full million to roll over, and you’re getting these other tax benefits. So, even if you’re getting a small return on that extra whatever, 300 grand on a million, that can make a significant-
Andrew Greer: Make a huge difference.
Oliver Graf: … difference on your bottom line on the return.
Andrew Greer: Now, there is another trick here that a lot of people miss, that is only 180 days, if it’s in your name. If it’s an LLC or an S corp, not a C Corp, they’re actually different, same thing, 180 days, you get 180 days from your corporate tax year. So, if you sold January 2nd of this year, a corporation, you wouldn’t have to be done within 180 days, it’d be 180 days from whenever your tax year is. So, if your tax year is December 31st, it’d be 180 days from there. Which, also, allows us, in our prospecting, to expand that bandwidth, and also, go to somebody and say, “Hey, don’t spend that money, we’re going to help you get this, with X, Y, Z.” It’s even more powerful.
Oliver Graf: Extra benefit.
Andrew Greer: Extra benefit that came out in the second review, and that’s just huge for business owners.
Oliver Graf: That’s great.
Andrew Greer: And you can also buy into a qualified opportunity zone business, it doesn’t have to be a piece of real property.
Oliver Graf: Right, yeah. Good distinction.
Andrew Greer: Yeah, that’s where I work, so, that’s what I know.
Oliver Graf: Yeah, very cool. So, there’s that whole roll over thing, which can give you a higher return on that money that you’re rolling over, then there’s the no tax on 10% of the gain, if you hold it for at least five years.
Andrew Greer: Correct.
Oliver Graf: And then, if you happen to hit the seven-year mark, which you can do by buying before the end of this year, December 31st, 2019, then you’ll hit an extra 5%.
Andrew Greer: Yeah.
Oliver Graf: So, you’re going to essentially save taxes on 15% of the gains, just by going on opportunity zone versus not.
Andrew Greer: Exactly. When you look at it from the perspective of like a 1031, in this, if you get a qualified opportunity zone asset that makes sense, this is so powerful, because, you can take your principal out, you can move only on over your capital gains, and then you can reduce that value by 15%.
Oliver Graf: Yeah. It’s crazy.
Andrew Greer: I mean, it’s, you just open this up, pull it out, shut it, and then do it. You don’t even need it. You don’t need a brain, it’s easy.
Oliver Graf: Yeah. Was that the no-brainer analogy?
Andrew Greer: Yeah, it was no-brainer. It was a little clunky, a clunky.
Oliver Graf: All right, I love it. And then, third, and I think this is actually, by far, the biggest benefit, is that, no taxes on appreciation, if you hold it for 10 years.
Andrew Greer: Yeah.
Oliver Graf: Any caveats or restrictions there?
Andrew Greer: You have to meet that 31 months redevelopment.
Oliver Graf: Right, yep, the money in.
Andrew Greer: Other than that, no.
Oliver Graf: And just to recap that, if I have a million dollar project, and I’m putting 300 down, I need to commit to an extra 600K in redevelopment, roughly.
Andrew Greer: If the building was worth 600.
Oliver Graf: Got it.
Andrew Greer: If the building was worth 900, you’ve got to put in another 900.
Oliver Graf: Got it.
Andrew Greer: So, whatever the basis, the asset, the basis of that, you have to increase that.
Oliver Graf: And that’s why you’re saying it makes more sense on ground up versus existing structure.
Andrew Greer: Mm-hmm (affirmative), that’s the big key.
Oliver Graf: So, 10-year tax-free development.
Andrew Greer: 10-year tax-free. So, essentially, you go to sell, since we live in the lovely state of California, you pay your taxes to the state of California, and you’re done. Yet, the real life to that, let’s just say you put a million in, you already paid it on that million, just as before, and now you, let’s say you take out another additional million, you’re just going to pay your money to the state of California on that. Rest of it, Federal, everything, done.
Oliver Graf: All free and clear.
Andrew Greer: Mm-hmm (affirmative). And you can now move that around more freely than you could if it was a 1031. And don’t don’t forget you can-
Oliver Graf: Or just cash out at that point.
Andrew Greer: Yeah, yeah.
Oliver Graf: And it’s all yours. Keep the whole thing.
Andrew Greer: Cash out.
Oliver Graf: I love cash now.
Andrew Greer: Weird.
Oliver Graf: Okay, cool. And I did also see one caveat around 2046, the year 2046.
Andrew Greer: Yeah, you’ve got to sell by 2046. So, we will be big buyers in 2046, because people will need to sell.
Oliver Graf: They must sell.
Andrew Greer: They must sell. It’s already on my calendar, it’s in my Google Calendar, buy assets.
Oliver Graf: Perfect. Put that on your calendar too, because that’s going to be a big year for real estate. What has this done to property values in the markets that you’re studying?
Andrew Greer: So, we’ve seen 25 to 30% increases in those markets. Some fake, some real. Because, some people are buying single family homes, and then, you can’t extract the value, there’s no value to extract there. I mean, it’s, you can’t get enough money back in. So, we’ve seen that it’s made them more competitive, but, truthfully, and this is why it is just leaning back on the other side of the people I work with, it’s really important to have good realtors, and good brokers managing your assets, because, I see stuff that’s not even to note it is qualified opportunity zone still today.
Oliver Graf: So, that’s someone’s broker or agent not letting the seller know that they’re in an opportunity zone, or just being unaware themselves.
Andrew Greer: I’m just assuming they don’t know. Unfortunately, it’s not like when you pull into like a neighborhood, they’re like, “Welcome to Barrio Logan, a qualified opportunity zone.” And the other thing too is educating the buyers and sellers on what it is, is also key, too. It’s how we’ve seen some properties change hands, it’s how we may be acquired some of our other properties.
Oliver Graf: I was going to say so, is that an opportunity for people to be looking for, these things that aren’t labeled opportunity zone, even if they’re in an opportunity zone?
Andrew Greer: Yeah, 100%, 100%. Some are getting the fringe benefit of wondering why their house is sold for more. I also see people completely putting the wrong information out about what it means. “Buy now, no taxes in 10 years.” It’s like…
Oliver Graf: Yeah, not knowing the caveats.
Andrew Greer: Yeah. So, that’s always interesting to see. But, yeah, no, definitely, it’s something for people to look for, when they’re looking.
Oliver Graf: So, speaking of looking, because, obviously, these qualified opportunities zones are very exciting, and provide a lot of value for investors and value for sellers that are currently sitting on these types of properties, where do you go to find where these qualified opportunity zones are?
Andrew Greer: Yeah. I don’t even know if you know this, I run qualifiedopportunityzoneinfo.com.
Oliver Graf: Well, good for you. Crafty.
Andrew Greer: You can search any address in the United States on my website, on my locator. Just click on Locator when you land on the page, and it’ll show you if the property is qualified or not. From there, you can zoom in and out of it, and look at all of the different zones, and find everything. If you want to do a search, if you’re prospecting, you can do a search by census district, just go to my page, click the link for census districts, it will take you straight to the IRS page, or you can download the Excel spreadsheet.
Oliver Graf: And what’s the domain one more time?
Andrew Greer: It’s qualifiedopportunityzoneinfo.com.
Oliver Graf: Qualifiedopportunityzoneinfo.com. Definitely check that out.
Andrew Greer: It’s been getting a lot more traffic, so, hopefully, it starts ranking a little bit better. We have a really good website name, so, I’m hoping, because that’s how people type it in, that’s, our locator is awesome. We were able to actually pull it and embed it directly from the IRS. So, they’ll allow it. If somebody else wants to do this, they can obviously do that too. But, I’ve learned, a lot of people don’t.
Oliver Graf: Might an opportunity there as well. Yeah. You put all the information, you make it easy to find, and it’s what? Based on tract number? Or by neighborhood? Or street by street?
Andrew Greer: It’s by tract number. And tracts are usually like, one tract goes from 25th to 30th, from Broadway to Market. If that gives you a visualization, knowing San Diego, it’s probably a quarter mile by a quarter mile.
Oliver Graf: But there are situations where, someone could be on one side of the street or the other, and they’re either in or they’re out.
Andrew Greer: 100%. We have, from us, directly across the street is for sale. I’m assuming they’re basing it off of some of the stuff that’s sold on the other side of the street, and they’re getting no love and everything on our side, selling like crazy. And it’s literally, I mean, you walk down the street, you can’t tell that it’s a dividing line by any metric. So, it’s pretty cool in that way.
Oliver Graf: It’s interesting, yeah. And so, when you’re studying all these zoning things that you’re looking at, where are you learning about this stuff? And what are some zoning things that you would recommend that people know, at least, to know enough to be dangerous for when they’re out talking to people?
Andrew Greer: The best thing to do, and the hardest thing with zoning is there is no easy application of it. There’s no universal tool right now. And it’s one of the reasons why specialization and development’s very key. Find the opportunity zones in your local area. Pull your farm, see if you have any in it. If not, look for what’s near you. And quite literally, type in your address of the center of your farm, find it on that map that I have, and then just start zooming back, and you’ll see it start appearing where the opportunity zones are. Find that area, find the planning committee that’s in that area. It’s going to be on whatever government website you have, and start reading their notes. And then, just go to the meeting.
Andrew Greer: There’s like five of us that attend these meetings. And we discuss everything that’s going to happen, literally everything. And it’s five of us, five of us, five of us, 200 people, because there’s something on the agenda that everyone’s really mad about. Five of us, five of us, five of us, five of us.
Oliver Graf: No Airbnbs that manages a thousand people there.
Andrew Greer: Yeah. But, it’s all those meetings in between-
Oliver Graf: And this is the Planning Commission, you said.
Andrew Greer: So, this is going to be like your community planning group.
Oliver Graf: And that was actually my next question was, is this county-wide?
Andrew Greer: No.
Oliver Graf: Or, is this city by city?
Andrew Greer: Knowing San Diego, I’ll give you an example, there’s Gaslamp, there’s Metro, there’s North Park, there’s an area for Barrio, there’s one for National City, those are all separate, different groups. Then, National City not being included, there’s a main planning commission that happens at the city, that goes over all the broader stroke.
Oliver Graf: Got it. So, there’s one big one for the county, and then each city, an area.
Andrew Greer: There’s actually 19 big ones in our county. There’s no major county, except for like, I think SANDAG comes in to play with that stuff, but they actually don’t have any control over anything that’s incorporated.
Oliver Graf: So, if you’re trying to keep your finger on the pulse of this stuff, which I know you’re really good at, you’re not going to all 19 of these, right? How are you-
Andrew Greer: You’re finding where the hot area is, in your town, and that’s going to require you having your ear to the ground, and then you’re going to that planning committee, and find it out. Maybe you’re doing two or three. So, if I wanted to go see what’s going on from like, not from Bay Park, from Bankers Hill, all the way over to North Park, I’m going to two groups.
Oliver Graf: Bankers Hill and North Park.
Andrew Greer: Yeah. So, I’m going to those two groups to find out what’s going on. That’s a good arterial line, which is what I look for with development is where the bus is going, follow the buses, and then build one or two blocks off of them.
Oliver Graf: Oh, that’s a good tip. If you didn’t pick that up, that’s a really good tip.
Andrew Greer: Yeah. I mean, it’s, I need buses for my choices.
Oliver Graf: So, just to repeat what you’ve just said, you’re finding the arterial lines of where the buses go, because that’s easy commuting for your people, and you know they’re going into areas that they’re trying to put money behind, and then you’re buying two blocks off of that, and you’re looking in those areas.
Andrew Greer: Yeah. And that’s quite literally if you’re looking for high density development in undeveloped areas, that’s the way to do it. It’s funny that actually is a really good tip, I didn’t even know that.
Oliver Graf: That’s a great tip, man. Thank you for that. Okay, so, you’re going to those two, the North Park and the Bankers Hill, those two meetings, and then are you going to also the San Diego one? The bigger one?
Andrew Greer: Only if there’s a vote. If there’s a vote, and I’m going to put my name in to speak just as a member of the public.
Oliver Graf: And this is, at these meetings, what are they discussing? They’re discussing everything that’s going to happen? Or, specific agenda?
Andrew Greer: No, only broad stroke stuff. So, there can be some community time at the beginning, but it’s usually, all the communities have discussed, they like this transit priority area deal, so, we’re going to vote on getting rid of parking in these areas in doing this. So, everyone that’s mad about it, come talk about it. Everybody that’s happy about it, come talk about it, and we’re going to vote.
Oliver Graf: And you’re just going there to listen?
Andrew Greer: Going to listen, and I’m going to speak, usually.
Oliver Graf: Speak, okay.
Andrew Greer: Yeah. So, you’ll get a minute, you can get someone else to seed you another minute, so you can talk for two minutes and basically plead your case to the members of the council, why it’s a good idea. A bunch of us, developers, went when they were doing transit priority area, and we were like, “Hey, let us mess up by not building parking, don’t stop us.”
Oliver Graf: That’s very interesting. Yeah, that’s a good way to keep your finger on the pulse of the development stuff that’s coming.
Andrew Greer: Yeah, the bigger stuff, because that’s just when you find out that it’s going to be done, the biggest stuff happens in the community, the biggest stuff. And if you want to have some ground swell, that’s the way to do it. And it’s really getting in there and having those conversations to push ideas that are working with what you feel will be beneficial. And I think it’s really important too. A lot of people like big, bad developer, truth of the matter is, we don’t want to build something that people hate, we want people to like it more than anything else, and to pay us as much money as possible to stay there. The motives aren’t just to build, it’s to get people to like stuff and want to keep coming there.
Oliver Graf: It’s like an artist, that’s your piece of art, it’s going to be in the public’s eye forever. So, why would you not want to build stuff people really love?
Andrew Greer: Exactly.
Oliver Graf: Very cool. We need another beer real quick, if you don’t mind. So, back from a brief intermission, we had to refill our beers. And today, I’m actually enjoying a Gravity Heights change, mother(beep). After a brief intermission, we’re coming back and we’ve got our beers refilled. Those are some great tips on kind of the planning commission. And I know that one thing you also mention a lot is the Urban Land Institute. What’s the difference between those two? And tell us a little bit more about that, as far as keeping your finger on the pulse in your local area and kind of networking with the right people in your market.
Andrew Greer: For me, I actually just joined Urban Land Institute. And one of the reasons why I joined it was, a lot of the guys that I do business with, and network with, and are doing big things, they were all members, and they kept telling me to join, so, I joined.
Oliver Graf: Usually, when a lot of successful people tell you to do something, you should do it.
Andrew Greer: Yeah, yeah. So, they have podcasts, classes, all sorts of stuff. But then, for me, I love the networking aspect of the business. I think it’s a huge part of any business, it doesn’t matter what industry you’re in. They have the monthly networking breakfast, then they usually do an event as well. So, I’m just starting to go to those. And that’s just where you really meet the people that are out there doing the same thing, taking some of the same risks, placing the same bets. I like talking to chip sliders versus outsiders.
Oliver Graf: I like that, I like that.
Andrew Greer: So, that’s a big thing for me. That one just happened right now.
Oliver Graf: Yeah, that’s a good one. We’re going to put that in the quote section.
Andrew Greer: So, it’s far better to be around people that are really in the game. The first time I did Airbnb, just to give you an example, people told me everything that was going to go wrong. And then, I asked them how many units they had, and they didn’t have any. Same thing happens with development, when I got into it, everyone was, “Oh, that’s crazy, this is insane. I can’t believe you’re taking that risk.” And I see having a W2 job as a risk, personally. I don’t knock on it by any means, but I like to be in control of my destiny, and that just means I take risk.
Oliver Graf: Yeah. Amen to that.
Andrew Greer: Yeah.
Oliver Graf: Would you recommend that someone get into both of those, as far as if development is a path they want to go down, and, or they service a lot of development clients?
Andrew Greer: Yeah, I would say so, for there is a barrier of entry to ULI. So, there’s definitely, if you can manage that barrier of entry of pain, it’s a pay to play. I mean, you can do it, yeah, I’d recommend it up front. Not as important if you’re just trying to get your toes in the water. Community groups, being on that ground level, we’ve been developing for six years now, and I just joined. And it’s really, it’s the next step in the game for us. It didn’t have to be the first step. First step is definitely knowing your community plan.
Oliver Graf: Getting down there and just-
Andrew Greer: Getting down there and learning it, and seeing what’s going on.
Oliver Graf: … pressing comms with the people making the decision.
Andrew Greer: Yeah. 100%.
Oliver Graf: And one thing you said, you speak every time. What are you speaking on?
Andrew Greer: So, if there’s something that’s been voted on, you get seeded time, you sign in, and you get time, and you basically speak for, or against it.
Oliver Graf: On whatever the topic is that time.
Andrew Greer: Yeah. So, yesterday was raising the fees for development. I didn’t get down there, but other developers I know did, and they spoke against it. For reducing parking, we went to speak for it. So, it really depends on which direction the wind’s blowing.
Oliver Graf: So, at the beginning, someone can just go, attend the meeting, listen to what people are saying, meet people. And then, as they start to work with more developers and get their own developments maybe going, then they can start actually influencing decision, so to speak.
Andrew Greer: Mm-hmm (affirmative). And it’s much more influence than you have on any other level in the community. If there’s a vote for mayor, you’re just a vote, you don’t have really a voice, unless you start a whole coalition and do all sorts of stuff. With this, you can go in and write impactful speeches. I’ve done some speeches that, we write them concisely, that, I felt like really, like, hit the point and made a difference. I’ve written speeches where I thought somebody was going to throw me out of the building. So, one of the best speeches I ever wrote, actually was my worst speech, and I didn’t know it was bad, until I did it. I was so proud of it.
Oliver Graf: As you’re in the middle of it, you’re like, “Wait a minute.”
Andrew Greer: Yeah. When I turned around and everyone said boo, it was pretty hilarious. So, yeah, it was my development and how we’re the next Uber, did not go over well.
Oliver Graf: Didn’t go well, huh?
Andrew Greer: Did not go well.
Oliver Graf: We’ll have to see the recording of that one.
Andrew Greer: It is online.
Oliver Graf: Yeah, I’m sure it is. So, just Google around, you might be able to find it. So, just to put a bow on the zoning thing, if someone’s interested in learning more about the zonings in their… community planning commission is a great place. Are there any other resources that you would recommend?
Andrew Greer: There’s no universal resource right now. The most universal resource would be ULI, because they’re all over. But, if you’re in a small town, not even a small town, a mid sized town, you’re probably not going to have a ULI. So, it needs to be… it’s Urban Land Development Institute.
Oliver Graf: Big metro areas.
Andrew Greer: Yeah, big metro areas. Certain parts of Riverside that aren’t even within 10 miles of the city center of Riverside, aren’t even going to be affected by ULI activity. So, with those, you really just want to find out what your community plan is, and see what’s going on. And that’s really the best way it’s, one of the hardest and most difficult things about development is the specialization. One of the things that I didn’t know when I started is how specialized it is.
Oliver Graf: Yeah. So, if you have a property that you’re looking at and you want to know how it’s zoned, what are potential zoning things could be attached to it, what’s the go-to spot?
Andrew Greer: In, basically, San Diego to the Inland Empire, you can do Scoutred.
Oliver Graf: What was that? Scout…
Andrew Greer: Scoutred.
Oliver Graf: Scoutred.com.
Andrew Greer: Yeah, that’ll do it for you. Los Angeles, if you search Los Angeles zoning, it takes you to their website. Actually, probably one of the most thorough websites. I just looked at a property on that, and I was shocked at the amount of free data available.
Oliver Graf: Good job L.A.
Andrew Greer: Yeah, just for one thing.
Oliver Graf: Yeah. Now you’ve got to figure out the traffic.
Andrew Greer: Yeah. If I were to go in and find it, I would search my city name, and zoning at the end of it.
Oliver Graf: Got it.
Andrew Greer: And this is a pain point that I’ve been trying to fix for three years, I’ve wanted to develop a universal website for this. And I’ve talked to many developers, and I’ve talked to many people about how to do it. And since there’s no clear language outside of just hard work and the ability to update, I don’t know how it’s going to be possible right now. So, it’s, they don’t speak any. The 19 municipalities in San Diego all have different zoning. So, outside of the communities within those, they all have different zoning. They don’t speak the same-
Oliver Graf: And they don’t talk to each other, which is unbelievable.
Andrew Greer: And they don’t use the same code names.
Oliver Graf: Right. Of course, not.
Andrew Greer: So, it’s insane.
Oliver Graf: Which, in reality, if you think about it, is a blessing and a curse. Because, it’s a curse, because it’s annoying to find out information about particular properties, but it’s a blessing for guys like you that have learned to find things that are zoned improperly, or, one side of the street is different than the other, different things like that, and you’ve been able to build a career out of that.
Andrew Greer: Yeah, it’s been very useful in that way for sure. So, yeah, I enjoy that aspect, at the same time, I dislike it. Because, it means that we’re really centralized in city of San Diego, if your address has San Diego on it, we know what’s going on, or if your address is National City. So, those are areas-
Oliver Graf: That’s where you’re really focusing on.
Andrew Greer: Yeah.
Oliver Graf: Because you can’t really focus on more than that.
Andrew Greer: It’s just too hard if you’re trying to build anything of discretionary value or anything of significance that requires a vote. And a lot of times, projects require a vote, if they’re going to worth the kind of money that we want to go after.
Oliver Graf: Right. And if you’re interested in more of the development stuff, me and Andrew did another video on how to be a real estate developer, that you can check out on the YouTube channel, that has basically everything that you just mentioned, from A to Z, how to do development projects. So, that’s definitely something that, if development is in your blood, something that you can go check out and take advantage of. Tell me about the deal that you’re doing right now in the qualified opportunities zone. You have more than one, right? Not the micro unit one.
Andrew Greer: So, we have the micro unit one in contract and being discussed. We have a couple others that are not being discussed.
Oliver Graf: Got it.
Andrew Greer: That are in different levels. Basically, is, we’re permitting doing preliminary work.
Oliver Graf: So, you’re very early stage.
Andrew Greer: We’re early stage. We don’t discuss it until we have certain things done.
Oliver Graf: Yeah. Which is smart.
Andrew Greer: Yeah.
Oliver Graf: That’s the type of stuff you don’t want to let out of the bag. So, what about what’s next? What are you looking to invest in now?
Andrew Greer: Right now, I really love pre-manufactured developments.
Oliver Graf: And for the layman, what does that mean?
Andrew Greer: Think of manufactured homes, we’re delivering a home to a site pre-built. We’re not delivering walls, we’re delivering the home pre-built, two to three slices, dropping it down on a foundation, and building it out. We have the first approved plan for that.
Oliver Graf: So, just to expand on that, that’s like a neighborhood of prefab homes, basically.
Andrew Greer: Yeah. So, the first project’s 10 homes. Just got that approved, and so, we’re finalizing on our demolition with that one, and then we have another one coming. We won’t discuss unit count, because it’s still in permitting. But, same scale of that one, and then we have two other sites that we’re currently negotiating on. Based on a few easements and different things going on, we’ll probably land one of the two, ideally, one of the two, maybe we land both, but they both have a lot of hair on them. So, we’re trying to get through that first. But, yeah, that’s, essentially, our build costs drops by 40 to 50% when we do that. And based on demographics, available units in the neighborhood, we’re generally going to be the premium product.
Andrew Greer: That would be really cool, once it’s done. I’m really excited. So, I’m also a dealer for that.
Oliver Graf: Nice, yeah, very cool. Well, we’ll keep definitely everyone in the loop on those projects. I want to come out and do one of your demolition days, so we can go through all that stuff. Someone that wanted to get into the qualified opportunity zones, how would you suggest that they market for that type of thing?
Andrew Greer: Yeah, no, this is the cool thing about it, this really is like one of the things that it’s just like the nam nam nam nam nam nam, you could just eat this up. So, it’s designated by census district. So, if you can put that qualifier into your search, you can start, so, go to title, I need all these addresses. I need you to keep census district attached to my data. So, a lot of people tossed census district, they don’t care. You go to my website, qualifiedopportunityzoneinfo.com, click on the link to get the Excel spreadsheet of all the opportunities zones. So, it goes, Name… It’s, City, Qualified Opportunity Zone, and then the District.
Oliver Graf: Census number or one of them.
Andrew Greer: Yeah. Go find your districts that you’re searching, overlay that data on top of it, now, pull it out, what’s your sell? Your sell is, did you know that you own a property currently located in a qualified opportunity zone? This is what it can do, X, Y, Z. Would that interest you in selling your home? I know people that are looking for qualified opportunity zone info. Same time, pull those same census districts, do a search on who’s buying property. You now have your buyers, you now have your sellers. Double in the transaction, stay in the business for 10 plus years, and then, sell it again.
Oliver Graf: That’s great right there.
Andrew Greer: Its only downside is you’ve got to hold it for 10 years for that.
Oliver Graf: So, wait, you’re, let me just walk through that, because I think that’s really, really powerful. Pull title…
Andrew Greer: Pull title.
Oliver Graf: … on whatever neighborhood you want, whatever city, whatever, whatever, have them include the census tract number, cross reference that with the opportunity zones.
Andrew Greer: Yeah. And I’m assuming you’ve already cross-referenced down a few of your other qualifiers, distressed, out of state.
Oliver Graf: Have equity, there’s nuts.
Andrew Greer: And now, your unique sales proposition is mind-blowing to them, because they’re going to start searching stuff. By the time this podcast comes out, I will have something up there for sellers on my blog, about this, so, agents can reference this for their clients, on the value of what it is. Because, anyone can sell a home. I don’t mean that in a demeaning way. Anyone can sell a home, but, can you sell it for its maximum value based on having the buyer, and knowing exactly what it’s worth and taking it to them? I mean, it’s-
Oliver Graf: Well, that’s the part where you just blew my mind right there, is the, yeah, you can find the seller, but now you’re also reverse engineering that same census tract number with all the cash sales. And now you’ve got cash buyers that are looking for those exact kind of properties. So, if you can get one of them to raise your hand, there’s a good chance you’ve already can find a buyer relatively easily.
Andrew Greer: Oh, yeah.
Oliver Graf: Because you know that buyer’s already buying those type of properties in that neighborhood for cash.
Andrew Greer: A Really smart guy named Ken taught me that.
Oliver Graf: Yeah. Shout out to Ken Claudio, it’s great move.
Andrew Greer: So, it’s very unique. If you’ve done the work to understand the zoning, you know that, this lot and this lot are not the same, and this is the story of this lot. When someone comes to me and they go, “Andrew, this is an RM3-9 lot. It’s on an alley, it’s a center lot, we have this much frontage, this, you already have X, Y, Z, completed for development, would you be interested in writing an offer?” Yes. And if they say, “It’s X, Y, Z,” and they’ve given me all that data, if I’m not interested in buying it, do you think if someone’s trying that hard, I’m not going to refer them to the guy that’s going to buy it?
In, I would guess, nine out of 10 times, if a property like that lands on my desk, I know the buyer.
Oliver Graf: Because, if it’s not you, it’s someone you know.
Andrew Greer: I know exactly who it is. I know who’s building that, and I know who wants that lot.
Oliver Graf: And that’s almost the same in every city with every developer, all across the U.S.
Andrew Greer: 100%.
Oliver Graf: Because it’s a small community of the people that are actually building most of the stuff.
Andrew Greer: Incredibly small. There’s probably 15 of us, and I know all 15, and there’s probably another five to 10 that come and go, who aren’t the big guys. We’re not the big guys out there, but the guys that are doing the urban infill stuff. Bring your value to the table for someone, and you’re just going to keep getting everything.
Oliver Graf: It’s great tip, really powerful. So, are there any downsides to the opportunity zones?
Andrew Greer: You’ve got to hold it for 10 years.
Oliver Graf: So, that’s just a liquidity issue, right?
Andrew Greer: Liquidity issue.
Oliver Graf: If you need your money before then, it might not be a good fit. But, if you’re planning to hold for a long time, it’s a go, it’s a no-brainer.
Andrew Greer: Is it overpriced because of that? All of the things that you need to evaluate a regular asset off of, you have to do in the opportunity zone too. So, you don’t want to just buy it because it’s opportunity zone, because if it doesn’t make any money, you don’t save anything on taxes.
Oliver Graf: Right. There’s no savings necessary.
Andrew Greer: Mm-hmm (affirmative). That 10-year plan means that you’re going to have to figure out how you’re going to finance it and do all that stuff. So, you’re going to have to have a level of sophistication. Most developers have it, but, there’s a level of keeping your real money in, some developers are not happy with. I’m like, 99%, it’s good. I’m trying to find a reason not to like it.
Oliver Graf: Yeah. That’s great, it’s really great. Lot of really great stuff on there. One thing I like to ask everyone before we wrap up is, what are some of your favorite tools that you like to facilitate your day-to-day, things that make your life easier, things that you couldn’t live without in the development space?
Andrew Greer: My biggest tool right now, I use Workep, because it’s kinda like a Trello on steroids.
Oliver Graf: What is it? Work app?
Andrew Greer: Workep. So, it’s, Work, E-P, at the end of it. It’s like Trello on steroids, like that.
Oliver Graf: Tell me more about that, because I’m a Trello guy.
Andrew Greer: Yeah. So, I found Trello because of you. And then, after using it, they somehow figured out I was using it and started marketing to me on Workep. And then, the thing I like about Workep is it ties directly into my Gmail. So, I can create my files. I have my boards, and as I’m repeating a board, I can pull it down, repeat it, rename it, enter it, and then create the file, and it’ll create the file in my drive immediately, and then start building it. So, I’d just click, “Oh, I need to create a template here for this,” drops the template in, starts soon, and it builds the folder in my drive.
Oliver Graf: Cool.
Andrew Greer: So, now, when I’m in my drive, I can go straight to it, or I can build it straight from there. Either way, I can access it.
Oliver Graf: And can you email in stuff?
Andrew Greer: Yeah.
Oliver Graf: Okay.
Andrew Greer: So, it’s pretty cool.
Oliver Graf: Yeah, that is pretty cool.
Andrew Greer: They’re pretty bad on the phone application right now, so, that’s the only downside. Yes, that would be my big one. And then, I’m also, I think that Facebook ads, if you don’t know it, learn it.
Oliver Graf: Or pay for someone who already knows it really well.
Andrew Greer: Yeah, 100%.
Oliver Graf: Yeah. Because that’s hard to learn, it’s a lot to learn, and they change it all the time.
Andrew Greer: Yeah. And if you don’t retarget and you don’t pixel people, you are literally riding a horse instead of driving a car. Do that.
Oliver Graf: Yeah. 100% agree. At the very least, put a Facebook pixel on your website, so that when people hit your website, you can now, at least, have the ability to collect that information, and follow them around with ads, when you eventually run them.
Andrew Greer: And you can do that for $1 a day. Agents that bring me deals or agents that are active, bring them to the site through different portals, or get them engaged on different videos, or append data for them. I set it up for $1 a day just to keep in front of them. And I rarely spend $1 because it’s such a small niche, but they all remember me, all the time.
Oliver Graf: Power of retargeting.
Andrew Greer: It’s amazing. You can become a celebrity within a very small niche. I mean, with a lot of money, you could do it in a big niche, but…
Oliver Graf: Yeah, well, then you’ve got to back up the truck.
Andrew Greer: Yeah.
Oliver Graf: Cool, man. Well, I really appreciate it. A lot of great info on opportunity zones. Is there anything else that you want to… if people want to learn more, or get in touch with you, anything you want to plug?
Andrew Greer: You can always reach me at [email protected], that’s two Fs, no T, .com. You can always hit me up with anything over there. Qualifiedopportunityzoneinfo.com, hit me on the contact form there as well. I’m the easiest person in the world to find if you just Google my name.
Oliver Graf: Yep, just Google, Andrew Greer, you’ll find him for sure.
Andrew Greer: I’m not the singer.
Oliver Graf: You have a singer, too, huh?
Andrew Greer: I have a singer, man.
Oliver Graf: Yeah, and there’s a lot of singers out there. Well, I really appreciate it, man. Cheers, thanks for everything. If you liked the show, go ahead and subscribe. If thought it valuable, hit the Like button, it really helps the algorithm do its magic. And if you have any questions, comment, Andrew, I’m sure is happy to answer any comments.
Andrew Greer: Oh, yeah. I’m always up on.
Oliver Graf: Awesome. And we’ll see you on the next episode of Founders Club.
“If I can get into highly dense areas and build highly dense, with commuting available to it, I can just crush it in the rental game.”
“The biggest benefit of the opportunity zone is after 10 years, you pay no tax on the appreciated value—at all.”
“You could also buy into a qualified opportunity zone business. [It] doesn’t have to be a piece of property.”
“Where are the busses going? Follow the busses and then build one or two blocks off of them.”
“The biggest [zoning] stuff happens in the community … and if you want to have some groundswell, that’s the way to do it. It’s really getting in there and having those conversations to push ideas that are working with what you feel will be beneficial.”
“Truth of the matter is, we don’t want to build something that people hate.”
“I like talking to chip sliders versus outsiders.”
“One of the … most difficult things about development is the specialization.”
“Bring your value to the table for someone, and you’re just going to keep getting everything.”
“If you don’t retarget, and you don’t pixel people [on Facebook ads] you are literally riding a horse instead of driving a car.”
- IRS Opportunity Zones FAQ
- Forbes Article on Opportunity Zones
- Urban Land Institute
- Los Angeles Zoning
- Kent Clothier
- How to Be a Real Estate Developer
Connect with Andrew
Connect with Oliver
Other episodes of founders club you might like:
Matt Fleming – How TO Build A 37 House Luxury Development
Cory Boatright – How to Make Big Profits Wholesaling Real Estate
Thank you for watching the Andrew Greer Interview!
If you’d like to see all the episodes go to: www.OliverGraf.tv/FoundersClub
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