Fred Cornforth - Real-estate Developer

Updated: Jul 9



Ryan Dye, Executive Director of CoLab INC talks with commercial real-estate developer C. Fred Cornforth - founder and CEO of the CDI Group of Companies.  Fred talks about his journey into the field of real estate and some lessons learned on the way to building a billion-dollar portfolio.




Listen on your favorite platform:

Get the latest the There To HerePodcast sent to you


Find more real etstate podcasts from CoLab INC

Follow us on social media: Facebook

Instagram

LinkedIn


Full Transcpript:


Ryan (00:00):

From CoLab Inc, it's There to Here, a show about entrepreneurs, innovators, and investors and the impact they seek to make on the world. On today's episode we talk with Fred Cornforth, founder and CEO of Community Development Incorporated and the CDI group of companies. Fred shares some key insights on how he built a billion dollar portfolio over a 25 year career in commercial real estate development. I'm Ryan Dye, Executive Director of CoLab, and today's episode is a bit unique as it is part one of a two part series on real estate. Fred thanks for joining us today.

Fred (00:32):

Thanks Ryan, it's good to be here.

Ryan (00:33):

Like many of the guests we've had on There to Here, your entrepreneur journey did not start in real estate. Perhaps you could touch on your career path as a young man and share how you got into commercial real estate development.

Fred (00:47):

Yeah, I always felt a struggle between two professions. One to be a pastor and also another to be a businessman. I think I was destined to be dominant in the business side because I remember winning 27 straight games of Monopoly in college, and so it was a precursor, probably a forewarning to me that real estate was the way I should go. When I was a pastor every place I went I had a building project or an expansion, so it was always building, development, land, something affiliated with that.

Ryan (01:21):

Tie in a little.

Fred (01:21):

Yeah, but I absolutely love it. Sure it's frustrating at times but overall it's been a wonderful profession to be involved in.

Ryan (01:31):

Yeah, so what was that turning point where you went, "You know, I think real estate is the are of business I want to focus on."

Fred (01:41):

When I left pastoring I was developing orphanages around the world, and I was working particularly on an orphanage in Mexico. I was slowly starting to see, because this was a ground up project, and so I was able to see... I was starting envision all the steps that needed to happen and take place. One thing led to another and there was a very important meeting that I was at a Boise Hawks baseball game and I was sitting next to a couple that happened to be in real estate and we got talking, and I'll never forget what she said to me. She said, "Well if you can do orphanages overseas, you can do real estate development here in the US." I thought, "Wow, I've never thought of that before."

Fred (02:27):

She invited me to this event that was in a couple of months, and before I left that event on the first night I had my first deal. It was about a $5 million project. I threw myself into it, the 70-80 hour work week and got lost in it and loved every minute of it. It's a little bit like if you were going over a waterfall where you never actually hit, you keep tumbling through.

Ryan (02:56):

The eternal free fall.

Fred (02:57):

Right, the eternal... Right exactly, so it ended up... In the middle of that it led to other developments and that actually got me going. Even to date, we've done about 40 orphanages ourselves that we've been able to fund through the money we've made with CDI. Instead of out doing orphanages and asking for money, we were actually able to keep doing orphanages but we generated the money or the income to actually do the orphanages ourselves. That's been rewarding too.

Ryan (03:30):

That's fantastic. Yeah. What was your first real estate project here in the United States?

Fred (03:36):

It was a residential development, single family homes where we actually helped people. They did 70% of the work on their own home, but it was heavily supervised and overseen. We were able to arrange low interest loans for the families, but it took them nine or 10 months to build their own homes but that was the first one. Then the next one we did we started doing the subdivisions so we were learning about all the civil side of it, all the approvals, the process of going through and getting land subdivided, permitted, and then the individual lots to the point where you could sell them.

Fred (04:12):

We started making money on the sale of the lots along with making some money from... The building of the homes through the Sweat Equity Program really wasn't for profit motivated endeavor. Eventually we started picking up all these little extra things and the very first project outside of the single family residential was a senior project not very far from here. It was a small one, it was a $4 million... I say small now, but back then it was huge, but that $4 million project we happened to compete at a national level for it and the particular state we did that project in hadn't had those funds in it in 20, 30 years and so it was a big deal that we were... We happened to meet the right people at the right time, whether you say that's fortunate, luck, or God moments. I don't know, that's [crosstalk 00:05:06]-

Ryan (05:06):

It's a mix of all.

Fred (05:07):

Yeah, so that's how we got started.

Ryan (05:10):

Was that here in the State of Idaho?

Fred (05:13):

Yeah, it was here in the State of Idaho, about 45 minutes from where we sit.

Ryan (05:16):

Wow, that's great. The first projects were single family homes and not apartment complexes?

Fred (05:21):

Right, mm-hmm (affirmative).

Ryan (05:24):

Since that time you've developed complexes in 27 different states roughly.

Fred (05:29):

Right, right.

Ryan (05:30):

Are those primarily apartment complexes or duplexes?

Fred (05:36):

Right and what happened was... What really got me going on the apartment side was we had bought land that we were going to use for the single family program, but it also had some perfect land for a senior development. I had both going at the same time and that really began to open up some doors for us too. Met the right contractor, met the right architect, started to build a reputation in the finance world where people were starting to seek us out as opposed to us begging and pleading for somebody to believe in us and trust us enough to see a project through. All total I've done 125 apartment communities that serve both families and seniors. We've also done student housing as well. We've done multi 100 bed facilities for different universities and colleges, but it's all under $1 billion so far in my career.

Ryan (06:43):

Yeah, that's a lot of contracts.

Fred (06:46):

It's been a lot of fun.

Ryan (06:47):

When you're getting ready to do a project and you're in that exploratory phase looking at land, things like that, what are the things you're looking for?

Fred (06:55):

Well land is tricky because it's a little bit like dating. Something might appear attractive but you don't want to be married to it, so you really have to approach it cautiously. This is gender exclusive, so I mean this can go any way. Yeah, when you approach land you really need to have your head on straight and you need to think beyond. It's like, "Wow, this is a great location," but then maybe the soil is really bad and there's ways to discover that without spending a lot of money. As you approach a piece of ground and I won't say the city but it's within two or three hours of us, a great piece of land, it even had streets, all the water and sewer were to it, but what we found was we noticed that the sidewalk across the street was super thick. Then there was some repair work that was happening in the street.

Fred (08:01):

We went over and looked and we saw that the asphalt not only was thick, but the road mix that was underneath it was extraordinarily... It looked like they had to go down four feet, so they had to remove four feet of soil and then recompact it with non-native soil, foreign soil in. All those indications to us were that this soil is bad and so we walked away from that project. It ended up being a smart thing. When you approach a piece of ground you want to make sure preferably that it's in the city limits, that if you can see curb, gutter, and sidewalk which is a common term that we use when we're talking about streets, most cities require gutter and curb and sidewalk so there's a dollar per lineal foot that that runs. There's inexpensive common sense ways that you can evaluate land by looking at it if you know what to observe in the area of what's already there.

Fred (09:12):

If you're new and I have done maybe 10 projects in areas where there weren't other developments around and I'll look you straight in the eye right now and I regret doing every single one of those. I was the one that was out the furthest, I was the next one at the end of the line. You would think that that would be a natural thing but I actually encourage in-fill as opposed to adding to urban-

Ryan (09:41):

Being an outlier.

Fred (09:41):

Yeah an outlier and contributing to urban sprawl. The problem is when you try to do in-fill sometimes people try to jack the prices up because they know that it's got less risk. When you're approaching a piece of land your goal is reducing the risk, because sticks and bricks, that's the term we use for everything that's above the footings. The real variable in real estate development on the apartment side and single family housing, the risk is not in what's above the foundation, it's what's in the soil, what surprises you're going to get. I remember checking out a site thinking that it had sewer to it because it was a manhole there right on the property so it looked like-

Ryan (10:33):

Sure.

Fred (10:33):

Yeah, everybody would assume that.

Ryan (10:35):

Right.

Fred (10:36):

You've seen the word assume broken down and this totally smacked me with it. Yeah, when it got time for the civil engineer to go out and check that I already had the site under control, I had the financing lined up, we were literally ready to start construction when I found out that the manhole was there but the sewer line was 200 feet away.

Ryan (10:55):

Oh man.

Fred (10:56):

This was 200 feet away down a newly paved street that the mayor didn't want me to cut up so I had to take a circuitous route. Ended up costing me $175,000 extra because I didn't look at the manhole. Sometimes the city doesn't know or they'll tell you something and you think, "Well I can trust that." I will say this city because I've never quite forgiven him for it, but this was in St. George, Utah. I remember going to the office. It was around noon and everybody was at lunch and some guy in a back office could see me at the counter and he said, "Hey can I help you?" It's actually the guy that's the head of Public Works for the City of St. George. This was 20 years ago so I'm sure he's not there anymore.

Fred (11:41):

He asked me what I wanted to do and he's getting out the maps and he says, "Oh yeah, yeah you've got sewer here. There's an eight inch line that runs right out the whole length of your property and it looks like you're good to go." I said, "Well can I get what's called a will serve letter?" That means that as part of the due diligence that developer does is you want to get documentation that all the city services are not only available to you but that they have capacity because sometimes there'll be a sewer line there but it's already being used by everybody that's upstream from you. He gave me a letter saying, "Yeah, we got an eight inch line, looks empty, there's nobody using it." Great.

Ryan (12:22):

Yeah, you're good to go.

Fred (12:24):

We actually get as far as pulling the permits and our guys are out digging on the site when we find out that the sewer line does go by our property but there's an intersection a quarter of a mile away and it stops there a mile and a half short of the city's most active sewer line, a mile and a half short.

Ryan (12:46):

Oh my goodness.

Fred (12:46):

I had them kept going on the construction because if you stop... I mean you don't want to stop, you don't want to demobilize in any case if you can avoid it. Yeah, I had to go up and down the street and I was what 33 or 34 years old probably at the time. I'm going up and down the street, I'm getting in with the city, I'm doing research at the county to see who owns these tracts of land along the way, and within 60 days I got everybody who owned land that would benefit from that sewer line, I got them signed on, they contributed cash to an escrow account, the city signed off on drawings, and so we actually built this mile and a half long sewer line to connect it to the city services while we were building the apartment complex. It was almost by luck that we found out that it didn't connect.

Ryan (13:43):

What would have happened if you didn't figure it out?

Fred (13:43):

Right, right, and I share these tales only because partially I want to cause a jolt of adrenaline that will kick in to somebody, heighten their awareness to really be on guard that you can even get a letter from the head of the city that will say something.

Ryan (14:02):

Got to verify it.

Fred (14:03):

Right, or there's a manhole on a property, think we're all good and you'll actually find out that indeed it's not.

Ryan (14:10):

Well do you find that having been in this industry for so long, and obviously things change over time, but dealing with various municipalities especially in a variety of states, that you're going to run into all kinds of variations to rules and regulations that I would imagine could be prohibitive of someone wanting to continue in this field because it becomes so aggravating to make sure that you're crossing all the T's and dotting the I's properly.

Fred (14:37):

Right, well I think you add in all the varied policies at both the federal, state, and local level, and then you add into the personalities of the people that are interpreting all the codes and the policies. I mean it's like going to a family reunion. I don't know what your family reunions are like. I only like maybe a third of the people there at a family reunion and they're family, right?

Ryan (15:01):

Of course.

Fred (15:02):

Two-thirds you really don't and it's about the same. I mean people are people whether you're related to them-

Ryan (15:10):

Or not.

Fred (15:10):

Or whether the one sitting in the-

Ryan (15:10):

Or you've elected them.

Fred (15:11):

Right yeah. Yeah, I've seen so many instances where we had people that were doing everything they could to work for us and then we've had people work against us. This didn't happen to me but it happened to somebody that I've done probably half a dozen projects with. It was a big project in California, they'd gotten it approved, and they had got all the plans done and so they submitted them to the building department. The head of the building department didn't want the project so he sat on the plans, and he actually exceeded the ordinance of how long he could hold onto the plans but he kept sitting on them. He told this developer friend of mine, he said, "Well sue me."

Fred (16:01):

What happened during that time was he was getting the building code changed because they were about seven, eight years, which is common, but it's another thing you got to be mindful of. Every city has a building code and your plans need to be built to that, but you also need to be mindful that during that time that you're drawing your drawings and you're getting ready to start construction that that city could change its code. Which would change your plans, which would change the cost. This building official delayed him long enough to get a new code update and it increased the cost per square foot $15, $20 a square foot and it killed the project. Even though it was zoned, the city had approved it, the city counsel had signed off on it, the city needed it, the building official he was able to kill the deal because he didn't want it or he didn't like this developer.

Ryan (16:57):

That's pretty powerful.

Fred (16:59):

Yeah, yeah that was a $3 million hit on that deal.

Ryan (17:03):

Yeah, well you've touched on this but regardless of the industry, a wise entrepreneur can learn a lot from their peers on the pitfalls to avoid in business. What would you share on the what not to do in real estate?

Fred (17:20):

Well I think one of the challenges that I have having 150 to 200 employees at a time. I've had every type of employee and sometimes employees can be activists, because housing it's really needed in some areas. But when you approach real estate development an activist mind isn't the best way to approach. You can be an activist. You can be pro-housing for everybody and having accessible housing and affordable housing, but if you approach it as an activist I think you can get tied up and you end up taking the energy and the time that you could be producing housing in a community that wants you to be there as opposed to fighting your way into a community that doesn't want you there.

Fred (18:14):

Probably the biggest mistake... I haven't made this one but once in my life, and it actually had part of the approvals on the land. This happened in a state not too far from us but not here in Idaho in a very conservative state that you would think would be pro-development, pro-construction. They ended up delaying us on the zoning approvals even though the land was partially zoned for what we needed it. We were having to go in for a slight zoning modification and they held us up and then they really cleaned our clock on... They made us put in two times more parking than the code required. They made us put 3/4 brick on the buildings instead of 1/2. That happened to kill it, but when you get land that isn't zoned right and ready to go right now, I really strongly discourage somebody from doing that. You're going to regret it. Even if you get it changed and approved that there'll be other roadblocks that come up.

Fred (19:29):

Development's already hard but when you add to it trying to get NIMBYism, not in my backyard thinking. It's odd because you get a business owner who's got a lot of employees and he's having a problem or she's having a problem bringing in employees because there's nowhere to live, you would think those people would be first in line to say, "Yeah, let's get some apartments if we can." We have found that sometimes they're blind. The NIMBYism will erupt so strongly in their own lives that they won't realize that they're actually hurting themselves.

Fred (20:10):

One other mistake that I think you should avoid, especially if you're doing apartments and this really has to do with a duplex or bigger. Now in my own portfolio we have projects that are hundreds of units and then we even have single family that we have that maybe we bought for one reason or another, but really when you start to approach a project you really need to keep in mind there's probably going to be three or four things in that timeline of developing it that could be a deal killer unless you developed experience and a skillset on how to work through those things that you'll find.

Ryan (20:54):

Do you feel that if someone was new into the experience of doing real estate development that they should have that moment in time where this is where I'm going to pull the plug on a project if it's not going well? So that you're not so far out financially that it can really take you out.

Fred (21:18):

Well and I think this has to do with in any size development, from a single family to a large multi-family complex is that the money you put down, the earnest money as they call it or EM or deposit, some people call it deposit. Generally speaking it's 1% of the sales price. That's industry standard though sometimes a seller can ask for more, but what you want to make sure is we call them off ramps. I call them off ramps. That these are conditions that you build into the contract that allow you to get out of the deal without losing your money.

Fred (21:58):

Now, sure you would lose the time that you've invested into it, and if you did some preliminary studies you might lose some of that money, but there is a way to protect yourself and that is to put in conditions like confirmation of financing necessary to development the project at the buyers discretion. When you use buyers discretion that's taking the seller out of it, so the buyer is the one that decides whether the project goes forward or not. When you write up your purchase agreement, which we probably could do a whole podcast on just how to write a purchase agreement, a purchase sales agreement.

Ryan (22:44):

Definitely, definitely.

Fred (22:45):

I don't use LOI's by the way. LOI's are the worst thing on the planet because it gives you a level of comfort. You think you've got a deal, but somebody could come in and I don't use them, they're not strong enough.

Ryan (22:57):

I would agree with that. That's been my experience with LOI's.

Fred (23:01):

Yeah, you've got real estate.

Ryan (23:03):

Yeah, and I've had LOI's in place and you think you've got a deal and the last minute it completely falls apart.

Fred (23:08):

Right, yeah. I moved to a PSA as soon as I can, but you want to build in there confirmation of the utilities available to the site, that the existing approvals are in place to construct the project that you want to construct, and that you get a chance to also review the title report, which is something the title company... To get your business they'll generally provide you a current version of the title report so you can actually look and see... I remember buying land in Montana, it was only $25,000 an acre, that's cheap. It was like, "This is great." We got ready to close and we found out that there was a LID, a local improvement district, that the city had failed to get onto the title report or the title company had not recorded it. It was $80,000 to pay for the curb, gutter, sidewalk, asphalt, water, and sewer lines that ran by the property. So it benefited from it but it wasn't in my budget because it hadn't been picked up.

Ryan (24:14):

You'd have land you'd be sitting on for a long time.

Fred (24:18):

Right, yeah. Fortunately it wasn't a deal killer but we ended up making less because we had to pay for that. Yeah, those are some of the things I wouldn't do.

Ryan (24:30):

In that regard do you prefer to work in communities that are moderate to smaller sized or have you done large cities all the way down to small country towns?

Fred (24:44):

Yeah, the small country towns I've regretted every one of those.

Ryan (24:49):

Interesting.

Fred (24:50):

Yeah, when you're getting started though I think you go where you can get your foot in the door. The very first project that I-

Ryan (24:59):

Where the price is right.

Fred (25:00):

Oh that too, yeah. The very first project that I told you I did that was multi-family, the senior project within 45 minutes of here. I'm a pretty confident guy, I have been all my life, but I remember going in to meet with the mayor of that town. Probably 10 minutes into the conversation he said, "You've never done one of these deals before, have you?" It totally caught me flat footed and I said, "Well I've done some deals." That was my response but it was actually my first deal on my own. I'd done two others plus a subdivision before that, but this really was... He read right through me and come to find out, even though it was a small town of 8,000 people, he was a former Nestle Corporation executive and he was retired and he was bored in retirement so he ran for mayor.

Ryan (25:50):

It was something to do.

Fred (25:50):

But it was a guy that... He was obviously-

Ryan (25:52):

He knew what a contract looked like.

Fred (25:53):

Yeah, and he could read people and he could tell that I was-

Ryan (25:59):

Wet behind the ears.

Fred (26:00):

Yeah, so that was one of those uncomfortable moments but you really have to stay in the saddle even though the horse is about to throw you.

Ryan (26:08):

You got to start somewhere.

Fred (26:10):

Right, you got to start somewhere. Yeah we've done developments in towns like Omaha, Baton Rouge, we've done some stuff, consulting in Los Angeles, Seattle area, Charleston, South Carolina, Atlanta, in the 27 states. But for me I found the perfect size for me, this is just for me, and I didn't have hardly any money when I started and I didn't have hardly any experience, so for me that 50 to 100 unit project really ended up being the best. Towns in the 50,000 to 250,000 range ended up being the spots where I really found... But having done probably 10 or 15 projects in really big towns... The bigger the project, the sharper the sharks teeth are.

Ryan (27:14):

I would imagine.

Fred (27:16):

You do a $50, $75 million construction project and you're dealing with a contractor who probably has lawyers on their staff that are writing documents that are skewing everything to their favor. You've got to be mindful of that, and if you're ready to box with big boys... I remember going into one meeting, there were 20 of us in the meeting and half of them were lawyers, and only two of those lawyers were on my side, the rest were all with the contractor. That was a tough one, there's no class or podcast that can get you ready for that moment when you're... You're millions of dollars at stake. You're looking back and you're saying how, "Shoot, if I'd written the contract a little different. If we'd made sure and double checked this." You see that they're exploiting all of your weaknesses. It's like being in a really, really bad marriage that they keep hammering you.

Fred (28:19):

I've never been in a situation like that just to clarify, but where they bring up every single thing that you've done wrong from the beginning and they hammer and hammer away knowing that... Well there's a cartoon that shows a huge yacht, and then there's a little dinghy on the back. The dinghy's name is original contract and the name of the big yacht is change order.

Ryan (28:47):

That is true.

Fred (28:50):

There's people out there whose business model is to make their money on change ordering you to death because they know that usually litigation on even 100 unit complex, litigation is probably going to be in the $800 to a million range for lawyers, all the experts, and the loss of time, because it could take two or three years to even get in front of a judge or an arbitrator. They know that and so they'll think, "Well I bet I can get a half a million more out of this." They'll play it, so they're what we call oners, one-offs where they have no intention of developing a relationship with you. It's not, "Well this went really good, let's do the next one together and the next one." I've had contractors that were honest and you do 25 projects with them or 10, eight. I've had a lot that we've had that kind of relationship over time, but getting back to the dating metaphor, there's a lot of first dates and dates that you'd never have gone on.

Ryan (29:55):

True.

Fred (29:55):

But that's how I'd answer that.

Ryan (29:59):

Yeah. When you're working on a real estate project it's easy to get tunnel vision on missed opportunities. Are there ways to generate other sources of income on a deal that some people might miss?

Fred (30:12):

Wow, yeah there are and this... Let me bring this into real life because I just made an offer on a nine plex, just nine units yesterday. The reason why I made an offer on it is because I've got some cash, I'm not going to be using a bank, so I'm going to pay cash for this, and the return on it will probably be in the 12% to 15% range. It's in a great location, but what happened was with the property comes a vacant piece of ground that I'm basically getting for nothing. I'm buying this half a city block with nine units on it, but there's also a third of an acre that I can actually put probably another 10 to 12 units on it. I'm able to make money that way because I'm getting the land almost for free.

Ryan (31:17):

This sounds like a Monopoly move.

Fred (31:19):

Yeah, exactly that's right, that's right. Another way that I've done it and this was something that I probably missed on my first 40 or 50 deals, I probably missed doing this but lets say you're going to do a 75 unit project and the land that you want is let's say it's six acres. I only need four acres to do the 75 units on. What I do is I go and I structure the purchase of the six acres for the price that I'd be willing to pay for the four acres. I end up, once I build the 75 unit project on the four acres, I'm left with two acres free and clear. I have made hundreds of thousands, millions of dollars probably off of... I haven't pushed it as much because in some situations you could really... I was looking at Terry Bradshaw's net worth, it's $15 million and then you look at Joe Montana and his net worth is $100 million, then you look at Tom Brady who's $400, $500 million. These are all great NFL quarterbacks but it's the time that they were quarterbacks and how much money they made during those different eras.

Ryan (32:37):

Right.

Fred (32:37):

Well 15, 20 years ago if I made $100,000 on a land flip I was happy with it. You think, "Well $100,000 is nothing, that doesn't even cover my student loans," for example. As an example. Yeah, there's ways though to structure these deals where you can get your first phase to include the cost of that extra land, and then while you're going through and getting permitted, you go through and you subdivide that piece of ground and you separate it. In this case the six acres you'd break off two, you'd have it free and clear, and then another way you can make money is when you go to install the water and sewer lines and if you're doing street, what I do is let's say this six acres is rectangle shaped. I develop the road through the property and I develop the back four acres. I leave the two up front vacant.

Fred (33:39):

What I've done is I've had the first phase if the property can afford it, I've had the first phase pay for the road, curb, gutter, sidewalk, water, sewer, takes it right through the property back to that area that I'm going to put the 75 units on. What I've got is I've got a fully developed lot now and I will include stub outs, so I'll make sure that when the water and sewer line goes by and if there's manholes or curb cuts or those things that you want to pay attention to, that's another way to drop the cost of what your next phase could be if it's smaller. I've even done some projects where I only carved off an acre, but I was able to get three tri-plex lots out of it and you sell for $225,000 for one acre because you've stubbed it out, it's all ready to go, you got again the curb cuts are put in, the asphalt, everything's there ready to go.

Fred (34:42):

You make it easier on yourself and that $225,000 was pure profit because you didn't have to pay somebody for the stub outs, you didn't have to pay somebody to bring in all the infrastructure.

Ryan (34:57):

Everything's ready to go.

Fred (34:58):

Yeah.

Ryan (34:58):

Yeah. No that makes a lot of sense.

Fred (35:00):

But I missed that about half my career. I missed those kinds of opportunities.

Ryan (35:04):

Doing that, yeah.

Fred (35:05):

Figured it out but took me a while.

Ryan (35:07):

Well you won't be an expert on day one.

Fred (35:10):

Yeah.

Ryan (35:12):

Given the current climate of uncertainty with the global economy, would you agree that there's still opportunities out there for growth in the real estate market?

Fred (35:20):

Yeah, I think things are going to be different from here on out. I think there's going to be... It's just a different time but the thing you've got to remember is that people keep having kids and they go to school and they eventually become young adults and they need housing. Just given sheer population growth, unless we have some terrible plague that wipes out 60% of the population, which you watch enough Hollywood movies you'd realize it is possible, at least it is on the big screen. What I have found is that you take COVID, for example, the Coronavirus. There are deals happening right now regardless of it. I know of one case where a man passed away last summer and his sons are now trying to sell their father's rental properties. They don't want anything to do with real estate. They realized the Coronavirus has impacted things so they're willing to discount their stuff.

Ryan (36:29):

There's deals to be had.

Fred (36:30):

There's deals to be had at anytime. The key thing is if you have your financing lined up and we can talk about that some other time. There is a way to start and I think in the next episode of this real estate talk is I want to go back to the beginning of how I would even recommend somebody to start. If I were Fred Cornforth, knowing what I do at this point in my life, if I hit the reset button and I had to go back how would I start today? If you're out there pounding the pavement, and one of my old coaches Bill Napier, coach as we used to call him, he told me one time and I was thinking about going into one profession. I said, "Do you think there's a need for somebody in this field?" He said, "Fred I want you to remember something. There's always room in every field for one more good person." That struck me.

Fred (37:36):

I say that that's true because if you really want to get into real estate and it ends up being what your calling is that there's always going to be room for one more honest person. You want to always keep your word, do what you say you're going to do. Pay people what you promised you'd pay them, don't try to take shortcuts. I don't like guys that do that. There's some developers that are quite well known in the world, they're notorious for striking a deal and saying, "Okay, let's do the HVAC in this 20 story hotel in downtown New York," $20 million, and then when they get it done they say, "Well I'm only going to pay you $18 million." They're already trying to cut and shave. If you promise somebody to pay them something, even if it's at a cost to you, you want to pay them but that's a different subject.

Fred (38:29):

Just getting out and hitting the pavement. I remember driving through neighborhoods looking for houses that had tall grass. It was either a rental or there was something wrong with the owner and you find out, "Oh yeah, this is going into probate." "Come by at 3:00, Sheila will be here and yeah she's selling her house for her mom who they just moved into a nursing home and it's been really tough. I think she wants to sell."

Ryan (39:00):

They want to off load it.

Fred (39:00):

Right, and by the way I don't believe in negotiating somebody down and bloodying them to death. I have one friend, I won't say his name, but he says that once he's closed a deal, if the people don't hate him, he didn't get it for the right price. I totally disagree with that. That is a terrible attitude because what I find is if you come to treat people right and you give them a fair price... I had bought some land there were six or seven of us developers that were vying for land in this one area, and I ended up getting it and I paid a reasonable price for it.

Fred (39:46):

But what happened, the difference and it was that I had done a deal with the guy that had access to the sellers seven years before and I had treated him right, that we found out later on that there had been something that they had paid for that hadn't been excluded in the sales price. I didn't have to pay him, it was $37,000 or something, but I ended up paying it but seven years later, in the midst of trying to fight over this other piece of land, this guy remembered that I treated him fairly. He gave me the inside track and I'm not saying we should do it as a quid pro quo thing, but if you have a business MO of operating from paying people fairly, there's a residual benefit.

Fred (40:29):

You don't ever feel guilty about having... Some people don't feel guilty, they have an absence of feeling that and I get that, but I think if you... Even if you're a sociopath and you don't have compassion on people, the fact that in your mind... I'm appealing to the sociopaths so the people that don't feel like they have a conscience, what happens is you end up taking up brain or hard drive time, storing the fact that I got them, I got them. What I have found in life is that if the more that crap you have in your head the less productive you can be. If you're fair with everybody you don't have to remember the deal, you don't have to remember or even tell stories later on where you're bragging about it.

Ryan (41:15):

Yeah, I really got him good on this one.

Fred (41:16):

Yeah I got him, yes. You say, "Wow, I really got him." Well what you've done is you've told everybody that's listening the kind of person you are. Number two, you've also burned up precious valuable time and energy, plus it tells what you're storing on your hard drive and nobody wants to do business with a guy like that.

Ryan (41:35):

Yeah, no that's an excellent point. Well Fred thanks for sharing with us today. We look forward to hearing more insights on future episodes.

Fred (41:43):

This was fun, thank you.

Ryan (41:44):

Absolutely. Thanks for listening to There to Here. We invite you to check us out on all the various social media platforms and visit our website, CoLabInc.org. To sign up for more information on many upcoming events and the various ways we help promote the spirit of entrepreneurship. If you have comments on today's episode or know someone who would be a great guest on our show, send your suggestions to Ryan@colabinc.org. We'd love to hear from you. Special thanks to our producer, Michael Webberley, editing by Tanya Musgrave, and all the CoLab staff. Until next time, be well, God bless.

About us

We help content creators develop business plans for investors to greenlight their projects.

Contact us

208-459-8522

contact@colabinc.org

4481 N Dresden Place

Garden City, ID 83714

  • Facebook
  • Instagram
  • LinkedIn Social Icon
  • Twitter
  • YouTube Social  Icon