Some real estate investments are riskier than others, especially in an economic downturn. Class A multifamily developers, for example, are likely to lose their tenant base in a recession. So, what can developers do to forecast what the world will look like at the end of a build cycle and make decisions accordingly? And what can we ALL learn from this approach that will help us prosper through multiple market cycles?
Scott Choppin is the Founder of Urban Pacific, a real estate development company out of Long Beach, California. With 35-plus years of experience in the business, Scott has led the development of nearly 1,700 units throughout the Western United States. He is also responsible for a recent innovation known as Urban Town House, a middle-income, multigenerational housing product that serves urban families in California. Scott’s work has been featured in Forbes, The Los Angeles Times and Builder Magazine, among many other media publications.
On this episode of Apartment Building Investing, Scott joins me to explain how he got his start working for a large development firm, describing the wide range of skills and knowledge he picked up before striking out on his own. He discusses how he leveraged joint venture partnerships in the early days of Urban Pacific, what the company is doing to mitigate risk in a recession, and why he is optimistic about the current circumstances. Listen in for Scott’s insight on transitioning from a W-2 to real estate development and find out what YOU can do to survive and thrive in an economic downturn.
Key Takeaways
How Scott got into real estate development
- Family background in industry
- Work for large firm to learn on job
Why Scott chose another firm over the family business
- No coddling
- Gain broadest, deepest experience
What Scott learned in working for a big developer
- Fill in broad framework of knowledge
- Exposure to every aspect of business
How Scott transitioned into entrepreneurship
- Build network of capital contacts
- Joint venture with other developers
The structure of Scott’s early joint venture partnerships
- Let me manage day-to-day operations of deal
- Defer to senior partner as guarantor
Scott’s advice for shifting out of a salaried position
- Save 2 to 3 years of monthly income in cash
- Build developer fees into deal (overhead coverage)
The challenges around doing development as a side hustle
- Best to learn by working in industry
- Even small, local deal requires daily oversight
What kinds of deals Urban Pacific has done
- Urban infill, residential development
- From duplex to 453-unit multifamily
How Scott thinks about mitigating risk in a recession
- Watch market signals to avoid oversupply
- Focus on workforce housing for stable tenant base
Why Scott is optimistic about the current circumstances
- Accelerated leasing velocity + rents holding
- Lower costs for construction and land
- Greater availability of labor from shutdown
Connect with Scott Choppin
Resources
Join Michael’s Mentoring Program
Download Michael’s Free Report—What’s the Best Investment: The Stock Market or Real Estate?
Join the Nighthawk Equity Investor Club
‘6 Ways to Build a Career in the Real Estate Development Business’ by Scott Choppin
