Rob: Hey, Vicky. How are you doing?

Vicky: Hi.

Rob: Hey, how's it going? I don't think… I accidentally made this live. Nobody's here yet, so let me just flip quickly, flip through, give you an idea. First things first, just a little intro. Talk a little bit about us and then I have a little intro slide for you. Talk about your background. A little bit about Province. I have this slide here. I don't know if there's anything that you want to talk about as it relates to this, but anyways, I do have this one as well. And then jumping into why a teardown a lot as opposed to anything else, as opposed to actually finding a move in ready house. What it means to, or how you go about trying to find some of these properties.

Factors to consider, so talk about location, trees, soil, slope, shape, utilities, taxes, all that stuff. And then get into restrictions like city zoning, setbacks. We can talk a little bit about this; height restrictions all that stuff. And then talk about also the city planning process a little bit and kind of set some expectations as far as how long potential customers might need to take to get through that process and actually start building. And then I'll talk a little bit about costs and you can talk a little bit about from your side of things, whether it's raw land or whether it’s a teardown, what sort of initial costs might be expected.

Vicky:  Okay. I mean, it seems, can you hear me?

Rob: Yeah.

Vicky: Okay. Well, I mean, it seems like a lot of these are covered by you. Right? Do I chime in whenever you just ask me questions then? Cause I…?

Rob: Yeah, I'll just ask you questions periodically throughout. Again, we'll keep it conversational if you want to say, hey Rob, how about that project we did on, I don’t know, Cyprus or whatever other projects and ask about that. You're more than welcome to, and go from there.

Vicky: Okay. I haven't done a whole lot with you guys.

Rob: What projects have we done recently? I guess there was Cyprus, there was…

Vicky: There was Cyprus. There was Campbell.

Rob: Campbell. That was a subdivision, right?

Vicky: That was a subdivision. Cyprus was also a subdivision.  I also did the one in Palo Alto, the one in Cupertino, on Johnson.

Rob: Oh, Johnson [inaudible 00:03:25].

Vicky: Yeah.

Rob: I mean, if there are any parallels, we could draw to those that might be helpful for some of the folks that are listening. But I think besides that it should be pretty straightforward.

Vicky: Well, I'm going to just have you… I don't run webinars in general, so I wouldn't know where to start with the conversation, so I'll just have you lead and ask me questions, I guess.

Rob: Okay. Yeah, that's perfect. I'll lead it. I'll ask you any questions, ask you to chime in and talk about your experiences and primarily I'll be looking for your input on like how you would help a client if they are looking for a vacant lot or a teardown house, how you'd help them through that process. And hopefully it means pitching your services and hopefully somebody listening going your way, to help.

Vicky: Now, do you want me to talk about working with other investors as well in general, or you want me to just stay focused on what you do?

Rob: Yeah. You can say that. Yeah. Either that you help both investor clients and consumers who are looking for a perfect space for their family. But unfortunately, things that are on the market might not be available, so they opt to go this route or whatever it might be.

Vicky: Yeah. And do you want me to go into… Because I know that Livio, is that how you guys pronounce it?

Rob: yeah.

Vicky: That you guys don't do any form of renovations or extension, it’s more or less like new construction.

Rob: Yeah.

Vicky: But a lot of the flip properties that I help other investors do is finding projects that already have pretty much the footprint and all we do is just go in and clean things up and make it, whether it's an end user buyer or investor, who's looking to flip.

Rob: Yeah. If we can keep it to new construction, probably it would be best. You're down vacant lots or otherwise.

Vicky: And I know you guys don't build ADUs. Now, do you build ADUs, if it's a new construction with the house?

Rob: Yes.

Vicky: Okay. Just not with the house. I mean only ADU.

Rob: Just not only ADU.  Where's your guys’ office?

Vicky: My office, there's two. I have one in San Francisco and one in Campbell.

Rob: Okay. Very cool.

Vicky: [Inaudible 00:05:47].

Rob: Nice. Well, we'll give everybody maybe just like three minutes here to join. It looks like we have maybe a couple people who are starting trickle in, so I'll probably go refill my water real quick and go on mute for a second and I'll join you back in one or two minutes. Okay?

Vicky: Okay. All right. Sounds good.

Rob: All right. Maybe we'll just give everybody maybe one more minute and then we'll jump into it. Maybe multitasking, grabbing some lunch, whatever else, getting ready for the holiday weekend. Vicky, do you have any plans for the holiday weekend?

Vicky: Not yet, but I need to book something for the kids. It's definitely a busy market though.

Rob: Yeah, no doubt.

Vicky: Yeah.

Rob: All right. Well, thank you everybody who's been able to join this far. I’m sure peoples will continue to trickle in here as we come to the top of the hour. But yeah, first of all, thanks everybody for joining us and for, it would be, I think this is episode number seven or something of our webinar series here, which hopefully you’re just finding helpful and provides then a bit of direction as you hopefully make the endeavor to build a new single-family house. We're lucky to be joined by Vicky Le who we've been fortunate enough to partner with on a few different opportunities and she's going to help us as we talk about how to choose a perfect lot for a teardown in development.

We'll talk a little bit about, hey, maybe looking just for a lot and maybe in other instances, looking for older, maybe dated homes that might be primed for building your perfect home on it. Without further ado, we'll jump into it and go from there. Just to give everybody a brief little intro and give everybody an idea of what we're planning on covering. I'll take a few minutes just to talk a little bit about Livio. I'll hand it off to Vicky to talk a little bit about her experience in Province. And we'll just do a brief overview of, when we say teardown, what does that mean? When we say vacant lot, what does that mean? And do a broader overview to start.

Then we'll go into how we actually go about identifying properties and finding them, which Vicky will certainly be really helpful to offer some insights there. Some of the factors to consider when identifying those lots or teardown opportunities. We'll talk about some of the restrictions that might be there when making the decision whether to move forward on a teardown or a vacant lot. And then lastly, we'll talk a little bit about some of the costs that might be there. Certainly, that's one motivation that I think that might be out there for some folks who are looking into this option of, hey, if I have the time and I have the resources to spend to develop property, it may be a more cost-effective venture than going out and trying to pick something up on the market that's fresh. And then lastly, we'll leave about 10 minutes at the end for Q&A.

A couple of ways to ask questions. If you're like me and forget questions as the presentation comes along, you can use the question feature up at the top and type it out at any point during this presentation, this webinar and otherwise, last 10 minutes. As an attendee, you can virtually raise your hand and I can call on you and that'll hand you the mind, so to speak and give you the opportunity to ask Vicky or I any questions you might have. I'll also add a couple different points have Vicky's contact information available on the screen as well. For anybody who's joining who maybe there’s a question you weren't able to ask her, maybe you have a particular situation that you'd love to pick Vicky’s brain on or myself, certainly jot down that contact information so you can follow up offline on that one.

Jumping into it. I think most of everybody who's joining I would imagine has some idea of Livio.  We're a custom to single family home builder, specializing in the Bay Area market. And one of our key success is making great partners along the way like Vicky, to help us. Not just build for our clients, but actually the reason why I also have the Aron Developer's logo up here is our history, this is actually a real estate developer, where we first met Vicky in identifying some of the opportunities that we're going to go through right now. And ultimately, we did the full journey from developer to general contractor and we've learned a ton along the way of what it takes to find I guess what I'll call like a prime lot for development and ultimately what it takes to see it all the way through the finish line. It's a lot of work. I can't stress on that enough. And we'll talk about some of that along the way, but looking forward to chatting about it more.

We have a unique business model. We have an office right here locally in Los Altos, and then we have an office in India. We're very vertically integrated team; anywhere from engineering to architectural services to full on 3D renderings and models, the whole gamut. I think our business model allows us to be uniquely competitive in this market and offer a lot of technological resources that otherwise may not be available to your traditional single family home general contractor here in the Bay Area. Really proud of some of the competitive advantages that we can offer and some of the unique value propositions that we can bring to you and your family. And of course, it wouldn't happen without the great team that we have working behind the scenes to make sure that materials arrive on time and decisions are made in appropriate time fashion, and everything that goes on behind the walls works just as it should. Big shout out to everybody there. And without further ado, I'll let Vicky introduce herself. And Vicky, if you wouldn't mind just telling everybody your key to success in this market and how long have you been around and all that stuff.

Vicky: Well, my key to success really, there's only two things; I don't sleep and it's all about networking. That's really what it comes down to. I've been in the business since 2006, so quite some time now, and I have been a top producing realtor in the Bay Area, top 500. I'm in the top 1%, less than that actually. And it's really about who you know and I have a large database of realtors and investors who, when you build a great relationship and build a great rapport with some of these realtors, they'll feed you deals that comes on that's off market. And that's where a lot of the opportunities comes in, is through my network. And that's how we're able to acquire some of the projects for, again, Aron Developers at the beginning stage, and also now. But that's pretty much what I do, is just a large network of realtors and investors that I work with that feed me the deals off market. And that's really where the opportunities are at

Rob: Awesome, and Vicky, where are the core markets that Province is currently serving? Is it primarily in the Bay Area or outside the Bay Area?

Vicky: It's primarily in the Bay Area. I started to… Bay Area is getting extremely expensive for some end user buyers nowadays, actually, in addition to investors who are looking to do a 1031 exchange, et cetera. There are some development opportunities as well outside of California. I have been looking into the area of Austin, Texas, where you can buy lots and build multiple properties and have a really good return turnaround ration.

Rob: Nice. Excellent.

Vicky: Here in the Bay Area, it's anywhere from Santa Clara County all the way down to San Francisco Peninsula.

Rob: Got it. This will maybe segue into the next question, but of the clients you work with who are building your construction, it sounds like you have some folks who maybe are more on the developer side of the business who are maybe more professionals.

Vicky: Correct.

Rob: But what about helping, hopefully, can you tell a little bit about your experience and your background in helping families find a lot or a teardown for them to build their home to eventually live in?

Vicky: There is actually, to be honest, there's very feel far in between because a lot of end-user consumers don't understand what it takes to really build a new construction home. It's not just working with architectures, but engineering and city planning development. Then finding a really good GC on top of that that's not going to take your check and run, right? There's a lot of play into building new constructions. And every time when I have an end-user buyer who has this big picture and big goal of like, “Hey, Vicky, find me a teardown.” And what a teardown is, a house that doesn't qualify for regular financing, conventional financing. And I always tell them, “Well, do you have the bandwidth to manage all this?” And so that's why it's really important to come to someone like Livio who has that team to manage it. Because to do it on your own, it's very time consuming. I have more end user buyers who buy home that will teardown 80% of the way and build new from there, but not too many end-user buyers who will be able to do a complete teardown for a new construction.

Rob: Yeah, I know, I mean, that makes total sense. And yeah, I think hopefully maybe not this one hour we’ll cover it and make you an expert when it comes to having everybody feel comfortable in making that endeavor and taking that leap of faith and find a prime spot. But hopefully this helps a little bit of the way in easing into it and like Vicky mentioned, I think a lot of it comes down to who you partner with, right?

Vicky: It's finding the right team to be able to manage all that, because if you don't, I mean, it can take... I mean, having the right architect, which is crucial because having the right architect who knows the city guidelines and the city specifications, and even having a good rapport with some of the city planner will help speed up the process as well. You want to work with someone like Livio who has a relationship with some of these city planners that will help speed things along. But if you're just a newbie who has no relationship with anyone and have no experience with any GCs or the process itself, it can take easy from a one-year project to a three-year project. And that's where it's eating into your cost.

Rob: Right. Yeah, no, definitely. And you mentioned a little bit about maybe some of the differences when it comes to financing and as it pertains to the difference between maybe a teardown versus a lot. But Vicky, when maybe a consumer is trying to make that decision, can you explain maybe in layman's terms, why is financing a teardown or a lot different than move-in to a ready house?

Vicky: Well, a move-in ready house, you are able to obtain conventional financing where it's your standard 20% down with a jumbo loan, especially in this market, everything's over a million dollar. A jumbo loan conventional financing will get you the best rate, anywhere between 2.75 to about 3.25, depending on your credit and your debt-to-income ratios. But when you're looking at a house that doesn't qualify for appraisal, because when you're buying a home, your lender will require you to get the house appraised. And if an appraiser comes in, and if there's no stove or there's no wall, it's not going to appraise, therefore it's not going to qualify for conventional financing. At that point, the consumer would either have to buy an all-cash purchase, or they will have to finance through a hard money lending or a private lending where the rates are significantly higher. And it can be anywhere on average between 7 to about 10% in interest rate. But those are meant for only short-term loan. There are anywhere between one to two-year fixed and they are not... But the goal is really to, once the construction of the home is complete, you do a refinance out of that hard money lending.

Rob: Got it.

Vicky: But [crosstalk 00:22:39] that money is cash purchase.

Rob: Right. Makes total sense. And for anybody who wants to go... last week actually, Vicky, we were able to bring on somebody who we've worked with on the financing side of things in the private lending space, who certainly for anybody who's listening now, who didn't get a chance to watch that webinar, I really strongly recommend you go back and watch that. Because a lot of that is circling back into exactly what Vicky's mentioning on how to most strategically finance a project like this. And ultimately it works in your favor.

Vicky: And then of course, when it's just land again, if it’s just land versus a teardown, a teardown again, would either be a cash purchase or private financing, which is a hard money lending. But if you're buying a vacant lot, then again, it's a different entity of different financing. We can go into that later if you want, but I don't know if you guys already covered that with the difference between getting financing on a vacant lot versus a teardown.

Rob: Yeah, I think we got into some of it. But certainly, maybe we can touch but not on a really high level and for anybody who's interested in maybe learning more, definitely go back and watch that one. And hopefully between these two, you'll be in a position where you know how to find it, you know how to finance it. And hopefully by watching some of the earlier ones, you will then know how to build it as well. Vicky, when it does come to, from an end consumer standpoint, in the rare instances where an owner is moving forward with, let's say an extensive remodel or something like that, what are some of the consumer's reasoning for going that route, as opposed to maybe purchasing something that's move-in ready? Where might it make sense for an end-consumer?

Vicky: Let me understand your question first, where would it make sense for consumer to do a complete renovation versus something that's already move-in?

Rob: Yeah. Either taking on a, let's say a teardown, if maybe it's not a complete teardown [crosstalk 00:24:59], but yeah. Is it primarily just because there’s scarcity in the market or maybe because they really want to live in a really particular location and there's not…? I guess, in what instances have you found that it actually works well for customers of yours?

Vicky: Honestly, it's a loaded question.

Rob: Yeah, I know.

Vicky: It’s only because, I mean it is a scarcity in the market. There's really no inventory. We have inventories for the past few years, that's where it's only two weeks’ worth. As soon as it goes to market, it gets sold within a week. And so, the scarcity in the market is what's driving a lot of end consumers to consider other options other than a move-in ready home. Because a move-in ready home right now, and I don't know if our audience here is savvy in the market, but the real estate market right now is extremely, it's on fire. It's definitely a seller's market. Sellers are getting everything they want in this market. They're getting premium for the house. And so, when I home bar starts off at like 2 million, they quickly learn within two months now they got to push up to 2.5 and then 2.8 and close to 3 million, depending on the neighborhood. And at that point, a lot of my end-user buyer comes back and say, “You know what, at this point we're spending $3.5 million on this purchase that's move-in, but we still got to spend like $30,000 to clean things up, like remodel. I mean, putting new floors and new paint because we don't like what the seller did.” At that point they're looking at the numbers. They're like, “We might as well just find something that's a little bit of fixer at about 2.8, put in $500,000 and make it our own.” That's what it comes down to. It's a scarcity and also the price, the budget, at what point does it make sense to them?

But I also try to educate my clients that when you look at that number, let's just say they bought a move-in ready at $3 million versus buying something that's somewhat of a fixer at $2.5. Well, you're paying $2.5, but to get to that 3 million price point, now you're spending about $500,000 out of pocket money. And that's out-of-pocket money that you have to put on top of your 20% down payment. Versus if you buy a house that's 3 million that's somewhat move-in ready, at least most of that is coming from your mortgage over a 30-year course. In terms of the payment and what's coming out of pocket, what makes more sense to them financially? I try to educate them on that too, as well. Financially, they need to factor in all the costs.

Rob: Sure. Yeah. I mean, everything comes down to budget ultimately [inaudible 00:27:49].

Vicky: Right, and the bandwidth.

Rob: For sure. No doubt. Awesome. Well, that certainly helps. Thank you. Thank you for that, Vicky. Maybe we’ll will try to go at a more or less go in chronological order, but let's say for example, maybe it's a developer, maybe it's an end consumer who says, “Hey, I really have a passion for…” Maybe they've been watching a lot of HGTV or something, but they really want to build their own house. How do you go about finding the perfect teardown or perfect lot for those folks?

Vicky: Well, I would just sit down with the clients and identify what is their wish list. And I always tell all the clients, there is a must wish list and there's a nice to have wish list. Don't try to combine them. Like the must wish list is, I got to be in the school district or I got to be in this neighborhood. And then the nice to have wish list is, can I have that extra bedroom? Were that can always be expanded. And then once I get that criteria down and also the budget, at the end of the day, it's budget. You can't have a $2 million house in Saratoga or Los Altos. It's like, okay, well, let's come down to reality here and tell me, realistically, this is what the market is supporting. Even for a fixer upper or teardown, this is what the markets is supporting. Can you support this with your budget? And then once I understand all that, then I go out and I seek for off market opportunities for them. Because I understand right now the market is brutal for buyers if they buy on MLS.

Rob: Yeah, no doubt. I think you were just touching on it a little bit, so I flipped over to this slide. But I think when it comes to somebody helping clients out, can you talk a little bit about maybe a couple of these topics that you see here, maybe how to target, let's say a client comes to you and they have a location identified, but there isn't anything that’s maybe on market at that time that satisfies their needs for, let's say building their dream house. How can you help somebody in that in that situation?

Vicky: Once I know what their criteria are, and also their budget, I do, and they're very serious. Again, they're very serious and say, “Hey, Vicky, we're ready to move forward at the right opportunity that comes along.” And then that's when I go in with either door knocking, of course the market right now is a little bit sensitive due to COVID situation. Not everyone is friendly about someone knocking on their door during COVID right. We stopped that a little bit. But the direct mail, we can still do that. And I also work with title specialists to pull data, like for an example, they want a certain neighborhood and some of these neighborhoods still have older homes that are three-bedroom, one bath or two-bedroom, one bath, but they're sitting on a very nice piece of land in a really good neighborhood, that's at least 8,000 square feet.

Well, I door knock those. Not door knock. I'm sorry. I used to, but now it's more or less I have title, pull up all those data in that specific neighborhood of homes that has substantial equity and that hasn't been sold in the past 10 to 15 years. We send letters to them and say, “Hey, well, I have a buyer who’s interested. This is their situation. We're happy to give you rent back if necessary.” That way they don't feel like they're forced to move out right away after close of escrow. Offering the free rent back really does help on some of these families because at least they have the money upfront after close of escrow. And then they're still able to live in this home for at least three to six months to help with their transitions into a new house. But the opportunity is there. Again, I work with title specialists to pull these data for them. And then we send out letters. And also, some of them, again, it comes down to rapport and relationship with other realtors.

Rob: Yeah, no, I think that's it. That's obviously a big one as well. I didn't really think of the door knocking complication with COVID. How you could imagine that kind of [crosstalk 0:32:10] back a little bit. How do you, give us a sneak peek inside of, the importance of, I guess being well-networked within the industry and how that might help in finding some of these opportunities?

Vicky: Extremely important. There's one that I just did recently. I had a network of... one of the colleagues sent it to me because he was just like, “Hey Vicky, I know you have a lot of buyers. I know you have a lot of end-use buyers that are looking for teardowns and stuff like that.” He sent me an off-market opportunity that's a $2 million teardown. I mean, it's fixer, but for some people it's like, “Well, I could easily tear this down.” And maybe that's one thing we may touch on, is what's the difference between a fixer versus a teardown? Because sometimes with a fixer, you go in there and you try to clean things up. Once you start opening up the walls, it's like opening can of worms. It ends up being cheaper if you just tear it down versus trying to fix it up.

Rob: You are covering all of our webinar topics. We had a, if I didn't know any better, I thought you had done some research or something. But we did a webinar versus, where's that tipping point between extensive remodel versus, “Hey, let's just tear the thing down”?

Vicky: Right. And sometimes it is cheaper to just teardown than to try to save the house.

Rob: Yeah, no doubt.

Vicky: But to go back, we ended up… I got a property that's off-market, 2-million-dollar teardown in Palo Alto and that was a steal because everything around that neighborhood was selling 4 plus million.

Rob: Wow. And you mentioned, I mean, obviously you mentioned how competitive the market here, obviously. I mean, from a consumer standpoint, by having one of these off market deals, it's just you and the seller at that point, right?

Vicky: It's just me and the seller or it's just me and the listing agent that I have a good relationship with. And then there was another one that I did in Willow Glen that's completely off-market. I was in Japan at that time and I reached out to my buyer. We got in contract in two days while I was negotiating in Japan. And we closed it for 1.1 and that neighborhood for a new construction is selling for 3.5.

Rob: Oh wow. That's huge. Yeah. I mean, that's why it's so important to…

Vicky: To have a network.

Rob: to have a great partner like Vicky to help you out and hopefully find that perfect opportunity for you and your family. Thanks for drawing those examples. Jumping over to the next topic that I was hoping to discuss a little bit is, what are some of the factors to consider when choosing either a teardown or a vacant lot? Vicky, you already mentioned some of the challenges or differences that might be there of course and choosing to go that route when it comes to financing of course. But let's say once you've cleared that hurdle, let's say you found the opportunity via the help of an experienced savvy broker like yourself, what are some of the things to look at? And I have a list here that will maybe spark some further conversation, but we can talk about it. I think the biggest one is one that you already mentioned, which I guess is the case with every market, but location, right?

Vicky: Right, it really is. I mean, location is so important. And then of course, depending on, like let's just say you're trying to build a house on a hillside. Well, there's a lot of challenges to be on the hillside. And a lot of these lots, sometimes they call out for half an acre lot or 1.2-acre lot, but really what's the buildable or usable lot that you can build on it? You can't build a 10,000 square feet house on a half an acre lot if 10,000 of it is only flat. We have someone like Livio who will have to go, or myself, go to the city and look at the topography or we pay for someone, a surveyor, to come out and say, “Okay, well, what can we really do with this lot? Just because it's showing us half an acre lot, it doesn't mean all half an acre of it is usable.” And then we’d have to factor in the slope. We'd have to factor in…  And can we draw utility if there's no utility there from the city? Can we use the sewer line from the city? All that factors in and all that cost will factor in if there's no sewage line. Finding a premium lot, it's difficult, especially on a hillside.

Rob: Yeah. No doubt. Especially I think some of the reasons why folks choose to maybe go out and build this is because they want maybe more of a rural sort of environment. But as soon as you do that, then all of a sudden, you are dealing with things like slope and utility challenges. That's definitely a part of the challenge which maybe could be mitigated if you're looking at maybe more of a teardown as opposed to a vacant lot where you're kind of doing an urban infill sort of. Yeah, detach it. To kind of piggyback off of Vicky what you've already mentioned. I mean, one thing we've experienced as a developer as well, where we're trying to do projects of our own is certainly trees. Are there mature trees onsite? Where are they located in proximity to the buildable area? That's a really important one that we've seen. Soil condition is another. Is it adjacent to…?

Vicky: Especially a prime lot?

Rob: Yeah, no doubt. It's a big one. And also, creeks. We've done a couple of projects where it backs up to some sort of riparian area and automatically you are setback against that creek or riparian area is significantly maybe more than what it might look like on paper, which is really an important one.

Vicky: Just to add onto that, again, some of the cities like Los Altos and Saratoga, where some of the trees are protected. And if it's in the middle of a lot that's supposedly buildable, now you can't tear that down. You can't chop that tree down, unless the city may require you to remove it, but you're going to have to plant another tree elsewhere on the same lot. There are definitely challenges on some of the trees. And then when it comes to creeks, what some people don't think about outside of what can we build on the setbacks for a new construction near creek is, well, when it comes to insurance and you're trying to refinance it, this insurance company might come back and say, “You know what, because you're right by a creek now you have to pay for flood insurance,” which is a negative when it comes to resell value. A lot of home owners don't want to have to pay the additional insurance if they don't need to.

Rob: Absolutely. Yeah, I’ll piggyback off of what Vicky, what you just said also. Some of the restrictions that are out there for basement and flood plains as well, being permitted to build basements is certainly a big one too. With land as expensive as it is, I'm trying to squeeze out every last inch. Vicky, how about identifying easements early on in the process and before it gets too hairy? I mean, we've dealt with a couple of projects where we've thought that there was access to a property or we thought there was land that there wasn't. Can you talk about from your side of things, how you can help consumers in that regard?

Vicky: Really the easements, what it comes down to is looking at the preliminary report. Every time when the property is listed or on market or whether it's off market, there's always titles that's involved. And the title will provide a preliminary report. And that's where I come in and take a look at the parcel map and see what are some of the restrictions and if you're right by a pole or if you're right by. If you're sharing a driveway with an adjacent house, now there's easement you have to factor in. That's where it comes in, is just I would provide the detail or explanation to the client of like, what are some of the restrictions on this lot, or teardown due to the easement restrictions on the prelim that's showing up on the parcel map.

Rob: That makes sense and Vicky, I know we talked a little bit about off-market versus on-market and some of this question might differ based on the opportunity, but how many of these factors to consider are you able to actually flush out before you get into contract, versus maybe it's a contingency in the contract? When you are approaching, and I understand this might be a tough one to answer, because it definitely varies circumstance to circumstance, but how do you best check off these risk factors for consumers and what are some strategies out there from a negotiation standpoint for timing?

Vicky: I mean, I do my research pretty much upfront before. Usually, if there's an opportunity that arises, I would take a look at it before I share it with the client. And then once I share with the clients, I'm like, “Well, this is what the potentials are, and here are some of the restrictions, are you okay with that?” And again, sometimes it depends on the listing side as well. We do have some realtors that are a bit challenging to work with on the listing side. Either they're not cooperative or they don't know enough. But yet they still have the opportunity to share. So, I do run into a lot of issues with some of the listing agents not knowing enough. I end up taking over that role of doing the research for them on the prelim or with the city on what some of the restrictions are.

Rob: Yeah. It definitely, it takes somebody who's been around the block to know all those ins and outs of the [crosstalk 00:42:38]. That's huge. And getting somebody involved who, I can't stress it enough, getting somebody on your team who can look at all of those things is critical. Shape of lot. That was another thing that we have on the list. I guess the biggest thing from our perspective, I think, and where it's come back and maybe early on in the process, you can learn from some mistakes that we've made along the way and avoid those. But shape of lots. Something might look like just to the square footage alone, can be a little deceiving if the shape of the lot doesn't permit. Maybe the front edge along the property, maybe it's in a pie shape or a cul-de-sac, or there's a bunch of different considerations, but also, I definitely stress shape a lot.

Vicky: Yeah, and then the shape of the lot. I mean, they all factor into the shape of the lot, the slope of lot. They all factor in including, I mean, even if you have a perfectly rectangular shape lot that's flat, but if you have like a sewage line underneath, that's part of your easement and you can't build on top of that, then again, your 10,000 square feet now becomes 6,000 square feet. It's like all that comes into play when you're building a new construction.

Rob: No doubt.

Vicky: It's not just looking at the size or the lot size. It really comes down to looking at all the restrictions on each lot.

Rob: Hopefully, we're not scaring anybody off. There's [inaudible 00:44:05].

Vicky: That’s why you need a good team who will do all the homework for you.

Rob: Exactly. This is a good segue into I think some of the restrictions that you spoke about before. But Vicky, you briefly spoke about it, but can you tell everybody, what is FAR, I guess? And you mentioned the buildable area, but how is FAR an important piece of when looking at let's say a teardown or a vacant lot?

Vicky: FAR is just basically like the maps of what you can build on that specific lot. That's really pretty much the layman terms. And if it’s like for an example, an 8,000 square feet lot, the city will allow you to build up to, like city of San Jose up to 40% of that lot. Granted, if there's… You have to still factor in whatever setbacks or easement that they have on that specific lot. The zoning is whether for a single development home, it would be R1, which means residential one, so you can only build one house. If the zone is R2, you can build two homes, ideally those two homes, or most of the time when we see R2, it's on a duplex on multi-units. But if you see a lot that's R2 and it's not a duplex, there's a potential that you can go in and build two homes without having to subdivide it, which is another step in itself. Zoning is, and also the zoning, if it's a huge lot, but it at zone R1 by 40 or whatever, which means you can only be at one house for every 1,000 square feet, which means you're very limited to what you can build on that lot.

Rob: Got it. Yeah. No, that makes sense. I think some of the trickier zoning stuff probably comes more into effect on some of the more rural lots that someone's looking at.

Vicky: Yeah, like if it's agricultural, then that's a whole new ball game. If it's commercial again, that's completely different as well. But what we're looking for is just a very simple standard R1 for a new construction.

Rob: Yeah, definitely. And some of that, we'll talk a little bit about the city planning process, I think, but one of the challenges whenever you can stick, Vicky mentioned it, but whenever let's say your ultimate goal is to build a single-family home, it's always best from our perspective, in a scenario that we find something that already has that zoning. As soon as you go off and you're trying to change the zoning and there's a can of worms there, it's manageable. You can do it with the right team, but it definitely adds time and time is money.

Vicky: Time is money. It really is. I mean, it's going to eat into your costs for absorbing, for purchasing the home. And now you can't build because you're trying to rezone and rezoning can take up to two years, so now you're just paying on that lot and it's just sitting there because you're trying to rezone it.

Rob: Right. Yeah. No, definitely. Certainly not everybody has the stomach and maybe the pockets for that. It’s definitely a big endeavor. And when it comes to, certainly I think the other important piece here when it comes to zoning is ultimately the goal is to try to get through the approval process as quickly as possible. We'll talk about, I shall jump over to the next slide, but as a part of that, the city for each zoning district that Vicky was mentioning has these criteria and rules that are there for each lot. From our perspective as a developer, this was always our strategy and also what we advise our clients to do, is to try to minimize the number of variances that are there and try to as best as possible, anyways, if time is a strong consideration, to try to stick within the city's rules. Essentially follow up all the rules that are already placed whenever possible. And ultimately that will lead to a much faster process. But Vicky, I'm sure, I don't know if you have anything else to add on that?

Vicky: No. I think you touched on the point, basically you want to limit your variables as much as possible. That way your construction process goes through as smoothly and as fast as possible.

Rob: Yeah. And then just some terminology things here. Buildable area, that's defined by the setbacks that are there, setbacks being distance between you and maybe your rear neighbor distance between maybe your…

Vicky: Yeah, your side neighbors.  This one shows even some considerations to make, and this one's a complicated one, the example that I showed because it's a corner lot. You could see even the minute details like that where you have two frontages and you're just up against one neighbor. Even things like that can affect your buildable area. What else? Did I miss anything?

Vicky: And then, when you talk about, so right there you put maximum coverage, that's basically your FAR. That's how much the city will allow you to build on that lot based on the setbacks.

Rob: Yep. And that's a function of the square footage of the lot.

Vicky: Correct.

Rob: Awesome. There's certainly a lot of information here that the city puts into the zoning code. And ultimately, it's our job to try to advise whoever is taking the step to build here, to try to educate as best as possible some of the options that are out there and implications that might be there as a result of timing.

Vicky: You did a good job with depicting that chart there. But a lot of this, I mean, the information is on like the setbacks and the max FAR, those are information that you can find on the city website as well, depending on what city. But most of them does have it on there. It's just navigating through the city website to find exactly where those setbacks are and limitations.

Rob: Yeah. And the added complication that Vicky mentioned of, slope of the lot as well. If it's a 20,000 square foot lot, you can't count all 20,000 square feet of that [inaudible 00:51:12]. It’s a real challenge. But we'll just quickly… I'll give maybe a high-level overview of the steps that are there. And then Vicky, I might ask you maybe some pointed questions about your experience through some of these different aspects, but there's a lot of terminology. Hopefully we've gone a little bit chronologically, maybe jumped around a little bit, but we've found a lot. We're moving forward. We've done our due diligence, checking off the boxes. We're now moving forward to, hopefully submitting the plans and getting all of that approved. And we talked about zoning changes. Ultimately, the planning phase of a project in the city planning, what they're looking for are, are you generally conforming to the exterior envelope of the structure? That's really what they're looking at in that phase. And occasionally let's say you're proposing a two-story design versus a one-story design. You may have different thresholds of approval levels that are there. And Vicky, I don't know, have you, you probably have seen it, but projects going to maybe a planning commission hearing, or let's say maybe a community hearing of some sort?

Vicky: Neighborhood hearing.

Rob: Yeah, neighborhood hearings.

Vicky: Which is very common in city of Los Gatos.

Rob: Yeah. As soon as you throw those variables in, inevitably there's some…

Vicky: Challenges.

Rob: Yeah, definitely. And then, ultimately, once you get through that planning process, then there's the building process, which is, hey, you've gotten permission to build, generally speaking, the square footage and the shape of the structure that you want, think of it as the skin. And then the building process is, hey, let's put all the bones in place and get that approval process. I think from our perspective, Vicky, and I don't know if this is the case with you, but the biggest area of variability and risks is they're on the forefront of the planning process and where we've seen some projects take a little bit longer, or maybe having to work more closely with neighbors, city staff.

Vicky: Yep. That is correct.

Rob: Ultimately, I think one thing we didn't talk about also, but I think that's important. I don't know. Vicky, have you ever come across a historic property?

Vicky: Yes. Most of the time.

Rob: Can you tell anybody about how that might factor into this conversation?

Vicky: Well, with historic properties, depending on the city. I know for city of Fremont, if it's considered as a historic property, they do require you to work with their city historian specialists to go out there and inspect the property and to basically determine what can be done and what cannot be done to it. And so, you get this little certificate that says, “Well, we vetted through this property, this is what's going to happen and if you were to buy this, this is what you can do and cannot do to it.” Depending on the city, they will require you to have a historian specialist report. Then there's other, actually, I think that's true as well for city of San Jose because I was working on one in Downtown where it was a historian property. The roof got burned down, but an investor was going to pick that up and try to do renovation on it. And so, I also got the report on a historian inspection report on it from a specialist. And basically, if it was a historian property the city is not going to let you tear it down. What they allow you to do is keeping the frontal facade, but you can do pretty much extension or remodeling in the inside of the home, but the frontal facade, you have to keep it the way it is.

Rob: Yeah. That's a good point. I probably should have added that one to the factors to consider, but that's an important risk to check off the box for sure.

Vicky: Yeah. You can't build a new construction if it’s a historian. That's basically what it comes down to it.

Rob: Yep. Lastly, we'll jump into costs. Cost is obviously a motivating factor and the basis of how everybody makes their decisions. It's probably the biggest financial decision somebody will make in their life. It's an important one. Vicky, you mentioned your Willow Glen property, I think earlier on where it’s something up off-market and ultimately when you're looking at the value creation that's there potentially. I don't know if you have any other examples or anything you want to elaborate on there, but certainly I think that's one motivation factor for going this route.

Vicky: Well, I don't know if you want me to go into the details of costs, what that…?

Rob: Yeah. And just kind of when you're looking at it from, hey, if you're picking up a lot for, let's say that 1.5 example, and you're building a new construction or you're putting in maybe a million dollars into a building and all of a sudden, you're able to… The neighboring properties that are new construction or something for 3, 3.25, there is a potential equity, immediate equity that's there. I don’t know if you want…?

Vicky: Can I just give an example? Like that Willow Glen one, it was off market. It wasn't even a complete teardown. It was just a smaller home. It was a three-bedroom, one bath, sitting on a suite, a little bit over 7,000 square feet lot right by downtown Willow Glen, but it's in the quieter street. Picked it up off market for 1.1. And construction cost is about 900,000 ish, so now you're looking at about $2 million in total costs. That process took about, from teardown to permits to new constructions, January, about a year and a half to complete. And now that home is worth, I mean, instant equity it’s about 3.2 for that house. For one and a half year worth of work.

Rob: Yeah. I mean, that's huge. Some things, you mentioned it, but the timing aspect of it is also… I know that this isn't necessarily… This is a cost slide, but definitely it goes one and of the same like we mentioned before. That whole process is really important.

Vicky: Right. And then the same thing with the Palo Alto one. The projected completion date is also going to take about a year and a half, from teardown to permits to the plan approval and all that. And picked it up for 2 million, but after completion, the value of that home is at least 3.8 to about 4.2.

Rob: Yeah. I mean, that's huge. For folks who have the have the ability and time is not necessarily of the absolute essence and you're able to partner with somebody early on, definitely. I think there's definitely some value creation there that may otherwise for those who are a little bit more scared to venture into that, you can have some immediate value creation. And some of that too, it's hard to put a price tag on some of it too. Because building a house also, I think it's a bit of a personal experience that you're being able to actually design it to specifically your family's needs. And that element that would not be there if you were to go out and buy a cookie cutter [inaudible 00:59:33].

Vicky: Yeah. And I can't stress enough to having the right team. That's from acquisition, which is identifying the right property, the right lot, the right fixer upper, the right teardown, to working with the right architect to the right engineering, to the right team construction team that has rapport and has relationship with some of these cities. I can't stress enough. When you're working with the wrong team and I've had some in consumer who felt like they can go on and tackle it themselves. It took them almost three years because they felt like they can do it themselves instead of hiring our team. And I felt bad for them because I'm like, “Let me help you.” “No, no, we got it.” I'm like, “Okay.” And I trust them that they can do it and we're still three years in, and this is a house in Los Gatos. They're three years in, they're still not done yet. And it is projected that they're going to finish by end of the summer. And I hope to God that they do because it's eating in their costs. And I felt really bad that the architect that was working with them, she failed to communicate a lot of the setbacks. And so, it went back and forth with the city for a year and a half. And even to the very end when they started putting foundation, now it turns off that the setback was moved. And so, they had to go back to engineering. They had to go back to the architect and the architect a year and a half in, she's not as communicative anymore. She felt like she's done with her job, but she's not, so I can't stress enough that finding the right team that you can trust makes a huge difference in cost saving and stress and just everything.

Rob: Yeah, no, absolutely. I think I can't stress that one enough. Jumping into, since we have about seven minutes or so here, I'll jump into maybe just some questions that have come from the crowd thus far. And again, just as a reminder, you have the ability to ask questions on the top of bar there by typing into the Q and A. Or alternatively you can virtually raise your hand and I'll get a little notification, I think, somewhere and I'll be able to call on you and you'll have the ability to ask a question to either Vicky or myself directly. With that said, I'll go to this next slide so that in the meantime you can jot down either our information or Vicky's information in case you don't have the opportunity to ask in this forum, but something you still want to probe about. First question, Vicky, and maybe we can tackle this one together is, how do you set the FAR for an irregular lot, i.e., not rectangle? Do you want to take the first stab at this and I'll try to elaborate it where I can?

Vicky: The first step is really going and checking with the city and checking with the prelim. I mean, that's really your only two answers; is the city in their preliminary report. The first step is, the preliminary report will tell you exactly where the easements are at. Then from there you go to the city and identify what are additional setbacks that's not on the preliminary report.

Rob: Sometimes they'll put together a title or put together a colored map. I don't know if Vicky, if you…

Vicky: A color coded parcel map. That’s the easement.

Rob: Do you want to [crosstalk 01:03:22] what that's about and how that might help?

Vicky: I'm sorry, repeat the question.

Rob: I was just going to mention, at least from my perspective, as opposed to trying to understand the boundaries on these crazy long paragraphs, at least from my perspective, I see a color-coded easement map. Which essentially just spells out in layman's terms, here are the easements on any sort of land or constructions that might be there as a result that are recorded. You see it, so if you don't have [crosstalk 01:03:58].

Vicky: Yeah. What it comes down to, the first step is really through the preliminary report and depending on the title company, most of them will provide a color-coded parcel map that will tell you exactly wh1he setbacks, not setbacks, but the easements are at. And then from the easement, we work with the city to identify what the setbacks are.

Rob: Yeah, absolutely. Vicky, just asking a question about the acquisition of properties and you mentioned that door knocking is a little bit of a challenge right now. But are you finding that in the current market that…? How is that off market? Things have changed so much. But are you finding that homeowners are responsive at this time to knowing how hot the real estate market is? Are they trying to get a piece of it right now or?

Vicky: They are.

Rob: Okay.

Vicky: And we, when I work with the title specialist, we target those homes that are more senior level. We have seniors who’s been in there for God, knows who long, 20, 30 years, that they haven't had the funds to upgrade themselves, or they're too old to do it themselves. They just don't want that kind of hassle. They're comfortable in their little tiny home or we have, a lot of these homes also, unfortunately, we have probate and trustee sell because a lot of the grandparents are laying down and they're passing onto their trustee. We identify those properties through as well title specialists. They pull those reports for us as well, to identify, and then we reach out to the heirs and we go from there.

Rob: Got it. I think it's always a tricky one, but I'm glad to hear that there's… The market is so tough right now that you're still able to help out. And I think by broadening your vision to like, hey, I'm only looking at brand new homes, all of a sudden, it's opening up and being like, okay, well now I can go out if I have a team. I can go out and I can look for maybe some different opportunities that otherwise I may be a little bit hesitant at the time.

Vicky: Yeah. And I actually have some of my end consumer do some homework for me. Some, they're like, “Well, where should I buy?” And so, what I do is, and of course I sit down and I do a consultation with them to understand exactly what is it that they want and what their family needs are. And then I send them, whether it's an on market or a home that's already pending or so, just so they can drive by those neighborhoods and understand, well, we'd like this neighborhood. Well, let's focus in that neighborhood if you like it. And at that point, I tell them to drive around. And especially if they're looking for a fix upper where they can get more of a discounted price or a new construction or a tear down to build something. I tell them, “We'll drive around that neighborhood. See if there's anything that you like or that street that you like.” And that's where I can pretty much narrow down the search for them. And then if there's a house that they like, then they send me the address and I just send the letters out for them. I do that too. Sometimes I have the consumer or the end consumer to do that homework, because that way, when we're identifying the property, they already know that neighborhood. They already know that street that they fall in love with. It's a lot easier, so when the opportunity does come, we can jump on it right away because they already know that neighborhood. They already know that street that they are in love with.

Rob: That's a huge advantage. No doubt. One question that came is, what's the biggest factor when it comes to the construction costs? This is a tricky one. And the reason why is because a lot of the… I'll say everything from the foundation up is pretty predictable. But when it comes to understanding the excavation and foundation type, even just the improvements that might be there even just to get to the property, like the driveway. If there's any, we talked about it a little bit, but Vicky mentioned utilities. Do we have to extend any utilities? Do we have to…? There's a lot of different factors there.

Vicky: When you're dealing with utility, now you're dealing with some people outside of an entity that we can control and we can't control utility. We can't control PG&E. And you know how difficult it is to get PG&E inspector out to schedule anything. It can take months. It can take six months. And that's what's going to eat in your costs. That's what's going to delay the construction process.

Rob: Yeah, no doubt. Just to reiterate what Vicky said is I would say the biggest at a high level to answer the question short is the biggest costs that are there are going to be, or the biggest factor is going to be your improvements, which would include like your utility, your grading, your foundation. And then beyond that, it's pretty predictable. And we can work directly with you to identify budget and make some assumptions based on also some maybe more challenging mods that we've come across. Vicky, this next one's probably going to you. How do you find the contact information for an owner of an empty lot? And if you have an APN, how do you go about that? Maybe you can…?

Vicky: I pay for different resources that will give me those contact, whether it's through emails or through the phone numbers and that's how I go about it. And sometimes if I can't find it for whatever reasons, I have my title specialists pull it up for me.

Rob: Got it. Well, I think that we covered most of the questions. If there were any questions that I wasn't able to get to, or let's say for example, you're watching this on a recording. Definitely reach out to Vicky with any questions you might have. She's been a really trusted partner for us. Helps us identify some awesome opportunities and hopefully if you're on the fence about taking the next step to building a new custom single-family home for your family hopefully between Vicky and us, Livio, we can help you out. Vicky, thank you again for taking the time to help us out this lunch hour.

Vicky: Yeah. Thanks for inviting me. Thanks for having me.

Rob: All right. Thanks so much, Vicky, take care.

Vicky: Okay, you too.

Rob: Bye.

Vicky: Bye.